About a month ago, in a ‘part 1’ Sunday post, I described about OpenAI and Anthropic, ‘birds of a feather’ with common co-founders, have evolved into two separate, very competitive companies, that are today laser focused on the enterprise market for AI software and services globally.
Key software companies in every major tech wave, OpenAI in particular, go through a period when their core product or service have massive consumer and enterprise market opportunities. Consider Microsoft in the early 1980s, to Netscape in the mid 1990s, to OpenAI today. Mentioned above, in its fourth year of ChatGPT.
All three of those companies saw early eruption of demand of its core products from both mainstream end users and enterprises looking to rapidly integrate and adopt their products into their operations. The Bigger Picture I’d like to unpack today is how blurry those markets are in those early periods, both in their operational and financial characteristics. And how tumultuous it is for both tne vendors and end customers.
“BECKY QUICK: But when Dario [Amodei, CEO of Anthropic] was here, he was talking about the advantages that they have at Anthropic. One of them is that he is 80/20 enterprise versus consumer, and he thinks that enterprise is a more reliable source of money. “
“And it’s also a place where you see higher margins. What are you doing besides this healthcare initiative, to try and make sure that you lock your consumers in that, and that they’re more willing to not only use it more, but also pay more for it?”
“FRIAR: Yeah. So maybe just talking about our business. At the end of last year, sitting right here, I would have said our business was 70/30 consumer enterprise [sic].”
“Today that number is 60/40. I think we’ll end the year closer to 50/50.”
“So again, while the consumer business has been growing at an extraordinary rate, right, literally the largest growing consumer platform the world has ever seen, our enterprise business is also the fastest and largest in AI the world has ever seen. One million businesses using the platform today.”
It’s an enlightening discussion, full of nuance of the operational and financial challenges of growing both types of businesses through a rapidly growing organization. With opportunities only available to first movers fortunate enough to rapidly grow into ‘overnight’ global brands by virtue of the tech wave they happen to lead.
“While OpenAI’s younger rival Anthropic is winning over business customers, OpenAI is trying to convince companies it’s more than a consumer chatbot.”
“Anthropic last year projected it would generate more money from selling AI models to businesses through an API than OpenAI, according to both companies’ financial disclosures. That’s a notable result, given that OpenAI had a head start of several years in that market.”
“That said, OpenAI’s enterprise business is likely bigger than Anthropic’s because many businesses pay for ChatGPT, in addition to paying for its AI models through an API. But Anthropic has gained a reputation among corporate executives as the go-to provider of AI for businesses, say some large customers. That’s in large part because it hasn’t aggressively pursued many new consumer features.”
It’s a long, detailed piece with vivid examples of the business challenges for both companies to steer their way through the enterprise opportunities. Worth a full read.
“Anthropiclast month projected it would generate a 40% gross profit margin from selling AI to businesses and application developers in 2025, according to two people with knowledge of its financials. That margin was 10 percentage points lower than its earlier optimistic expectations, though it’s still a big improvement from the year before.”
“The lower-than-expected gross profit margin resulted from the costs of running Anthropic models for paying customers, in a process known as inference, on servers from Google and Amazon. Those inference costs were 23% higher than the company had anticipated, the projections showed. Anthropic calculates gross margins by subtracting inference costs and other costs of selling its products.”
“The expected 2025 result suggests Anthropic, maker of the Claude chatbot and coding agent, which has generated tremendous buzz in recent weeks, may be operating less efficiently than archrival OpenAI as measured by gross margin. Still, Anthropic’s gross margin has improved significantly from negative 94% in 2024.”
“The data show how both companies’ reliance on renting specialized servers from cloud providers makes it harder to generate a net profit, which is why they are taking steps to create or control server hardware themselves and are in the process of raising tens of billions of dollars to shore up their balance sheets. OpenAI just announced it would launch ads to subsidize nonpaying users of its chatbot.”
But the Bigger Picture remains that the early phases of major tech wave remain fraught with complicated executional nd financial challenges for management team of fast growing startups in those tech waves.
Especially as the underlying technologies continue to morph both pre and post product form. For both the software vendors, and end users consumer and business.
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