How Does ChatGPT Make Money?

ChatGPT leverages a freemium model, with a free version with limited capability and a premium version (starting at $20/mo), which also comprises access in peak times, faster response times, and early access to new features and improvements. In addition, ChatGPT might also make money via API access.

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ChatGPT Pricing Model

ChatGPT gained popularity, reaching over a million users in a few days.

And by January 2023, ChatGPT reached a hundred million users, and it keeps growing.

On the OpenAI website, as of December 2022, over 300 million visitors landed, a staggering growth in traffic compared to 18 million visitors in November.

By January, thanks to ChatGPT, more than 660 million visitors jumped on OpenAI’s website.

By early January, the team at OpenAI started to look into pricing options for its free tool, thus opening up a waitlist with a few very simple questions.

This pricing model is known as Van Westendorp Pricing Model.

By early February, OpenAI announced the official release of the pricing, starting at $20/mo.

The new plan provided.

General access to ChatGPT, even during peak times
Faster response times
Priority access to new features and improvements

This first pricing model is quite interesting, as it shows, OpenAI wants to try to bring in a wide user base, not only in the B2B space but also in the consumer space (meaning the pricing is as low as almost a Netflix plan).

Over time, we might see OpenAI release new pricing tiers for B2B.

ChatGPT API Access

Another revenue generation for ChatGPT might be the access to its API, which will give a chance to developers to integrate ChatGPT into any kind of tools they are building.

Another way the API access to ChatGPT might be working is via so-called tooling.

Meaning that developers might be able to build applications on top of ChatGPT through its APIs to make it more effective at specific tasks.

In both ways, the API part of ChatGPT is critical to transforming ChatGPT from a breakthrough product to a business platform and ecosystem able to rival companies like Apple and Google.

ChatGPT Premium

ChatGPT is available as a premium version that can be accessed for $20/mo, enabling the user to get a faster version that performs better.

The functionalities are the same as the free version; what changes is speed, performance, and ability to have tasks completed with more tokens, compared to the free version, which might stop after a specific token request.

For instance, in the free version, if you ask ChatGPT to formulate a very long essay, that might stop at a certain point, whereas in the premium one, it should have no specific limits.

ChatGPT APIs

ChatGPT was also launched as an API endpoint.

Meaning it can be integrated via its APIs into any web application.

As OpenAI explained:

The ChatGPT model family we are releasing today, gpt-3.5-turbo, is the same model used in the ChatGPT product. It is priced at $0.002 per 1k tokens, which is 10x cheaper than our existing GPT-3.5 models. It’s also our best model for many non-chat use cases—we’ve seen early testers migrate from text-davinci-003 to gpt-3.5-turbo with only a small amount of adjustment needed to their prompts.

As OpenAI explains in its documentation, ChatGPT is powered by gpt-3.5-turbo, OpenAI’s most advanced language model.

Using the OpenAI API, you can build your applications with gpt-3.5-turbo to do things like:

Draft an email or other piece of writing
Write Python code
Answer questions about a set of documents
Create conversational agents
Give your software a natural language interface
Tutor in a range of subjects
Translate languages
Simulate characters for video games and much more

Read Next: History of OpenAI, AI Business Models, AI Economy.

ChatGPT APIs within Microsoft Azure

Another way ChatGPT will be monetized is through Microsoft’s Azure platform. Indeed, Azure is one of the most successful cloud providers in the world.

And it’s also the underlying infrastructure for OpenAI’s pre-training, as Azure has built an AI Supercomputer supporting the development of large language models from OpenAI.

The interesting part is that each time OpenAI releases a new product via APIs, this will get integrated also within the Azure cloud platform, thanks to the exclusive commercial partnership between Microsoft and OpenAI.

In this way, Microsoft Azure can leverage the success of the OpenAI APIs to expand the adoption of its cloud infrastructure further, as developers will be incentivized to host their applications on top of Azure, thanks to the integrations of ChatGPT’s APIs.

Key highlights

Freemium Model: ChatGPT offers both a free version with limited capabilities and a premium version starting at $20/mo. The premium version provides general access to ChatGPT during peak times, faster response times, and priority access to new features and improvements.
Van Westendorp Pricing Model: OpenAI conducted pricing research and opened a waitlist for the premium version before officially releasing it in early February 2023.
API Access: Developers can access ChatGPT’s API to integrate it into their applications or build specific tooling to enhance its effectiveness for various tasks. API access serves as a revenue generation opportunity for OpenAI.
ChatGPT Premium: The premium version of ChatGPT offers the same functionalities as the free version but with increased speed, performance, and the ability to complete tasks with more tokens.
ChatGPT APIs: ChatGPT is also available as an API endpoint, enabling integration into web applications. The model used in the ChatGPT product, called gpt-3.5-turbo, is priced at $0.002 per 1k tokens.
Monetization through Microsoft Azure: Microsoft’s Azure cloud platform, with its exclusive commercial partnership with OpenAI, enables the integration of ChatGPT’s APIs within the Azure infrastructure. This expands the adoption of Azure as developers are incentivized to host their applications on the platform.