Tech giants like Google and Meta are positioned to offer their premium AI models for free, leveraging their massive ad-based business models. This strategy aims to cut off OpenAI's primary revenue stream from $20/month subscriptions. For incumbents, subsidizing AI is a strategic play to acquire users and boost market capitalization.

While competitors focus on subscription models for their AI tools, Google's primary strategy is to leverage its core advertising business. By integrating sponsored results into its AI-powered search summaries, Google is the first to turn on an ad-based revenue model for generative AI at scale, posing a significant threat to subscription-reliant players like OpenAI.

While other AI companies are hesitant, Google is expected to lead LLM ad integration. As a company built on ads, it is culturally positioned to implement monetization quickly and effectively, unlike competitors that may view ads as a necessary evil rather than a core competency.

Contrary to popular narrative, Google's AI products have likely surpassed OpenAI in monthly users. By bundling AI into its existing ecosystem (2B users for AI Overviews, 650M for the Gemini app), Google leverages its massive distribution to win consumer adoption, even if user intent is less direct than visiting ChatGPT.

While OpenAI has strong brand recognition with ChatGPT, it's strategically vulnerable. Giants like Google and Microsoft can embed superior or equivalent AI into existing products with massive user bases and established monetization channels. OpenAI lacks these, making its long-term dominance questionable as technical differentiation erodes.

OpenAI has a strategic conflict: its public narrative aligns with Apple's model of selling a high-value tool directly to users. However, its internal metrics and push for engagement suggest a pivot towards Meta's attention-based model to justify its massive valuation and compute costs.

As competitors like Google's Gemini close the quality gap with ChatGPT, OpenAI loses its unique product advantage. This commoditization will force them to adopt advertising sooner than planned to sustain their massive operational costs and offer a competitive free product, despite claims of pausing such efforts.

The long-term monetization model for consumer LLMs is unlikely to be paid subscriptions. Instead, the market will probably shift toward free, ad- and commerce-supported models. OpenAI's challenge is to build these complex new revenue streams before its current subscription growth inevitably slows.

Despite its massive user base, OpenAI's position is precarious. It lacks true network effects, strong feature lock-in, and control over its cost base since it relies on Microsoft's infrastructure. Its long-term defensibility depends on rapidly building product ecosystems and its own infrastructure advantages.