AI and Pricing in 2023
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talio.
“If software is eating the world (Marc Andreessen in 2011) then AI is eating software.”
In November 2022 Open.ai released ChatGPT, changing how people understand and apply Artificial Intelligence, specifically Generative AI.
One result was a wave of investment in AI, with more than 70% of B2B SaaS companies saying they are investing in AI while only 15% are monetizing these investments (OpenView SaaS Benchmarks Report).
Generative AI is the use of Large Language Models (LLMs) and increasingly Small Language Models (SLMs) built using transformer architectures to generate content.
‘Generate content’ covers many possibilities. It goes well beyond generating text, images or video to include
Categorizing information
Making recommendations
Predicting outcomes
Generating ideas
One of the assets being generated is software code. AI has become a companion used by many developers to create, debug, analyze, and document code. This set of actions is spreading quickly beyond software code to all sorts of analytical tools. 2024 will see more and more people using generative AIs in different ways. Here is Google’s take on AI for code generation. And here is what is happening on GitHub.
Ibbaka uses this framework to help understand how an AI application is creating value and how to price that value.
Monetization of AI follows a strategic cascade beginning with the overall AI strategy, which guides the product strategy, which frames decisions on how to implement AI for a specific product.
Once one has developed an AI product strategy on needs to decide is one is trying to create a new category, disrupt an existing category, or to sustain a position in an existing category.
These sets of decisions are critical to how AI based innovations will get monetized.
Ibbaka has published a series of posts on AI Pricing that will help to guide you through this.
AI Pricing posts from Ibbaka
AI Pricing: Questions Boards Need to Ask
More than 70% of B2B SaaS companies are investing in AI but only 15% have begun to monetize. This is not sustainable. What questions should boards be asking about AI in 2024 planning?
AI Pricing: Some Alternative Large Language Models
Not everyone is using Open.ai’s GPT models. There are other alternatives. What are they? How are they priced?
AI Pricing: Early insights from the AI Monetization in 2024 research
AI Pricing: Early insights from the AI Monetization in 2024 research. Here are some early insights that are emerging: How people view AI, Level of Investment; Percentage of Revenues that will come from AI.
AI Pricing: Some Alternative Large Language Models
Not everyone is using Open.ai’s GPT models. There are other alternatives. What are they? How are they priced?
AI Pricing: Value and Pricing of Digital Twins
Digital twins have emerged as a key application of AI. How do these applications create value? How should they be packaged? How should they be priced?
Digital Twins are transforming manufacturing - an interview with Servitly’s Stefano Butti
Digital twins are a core technology for transforming manufacturing. Ibbaka interviewed Stefano Butti, CEO of our client Servitly on his vision for digital twins and the impact they can have on manufacturing.
AI Pricing: AI as extension or platform
ChatGPT was launched less than one year ago but it is already upending SaaS product architectures. Initially we saw many generative AI extensions but we are now seeing the AI as the platform. How will this impact pricing?
AI Pricing: Market acceptance of ChatGPT Pro pricing
Open.ai’s ChatGPT has become one of the anchor points for Generative AI pricing. How are people responding to the current pricing? What should Open.ai do next?
AI Pricing: Has Microsoft Copilot set a reference price for other Generative AI Applications?
Copilot for Microsoft 365 pricing has been out for a few weeks now. Some buyers seem to have locked onto this as a reference price for any generative AI product. How should people marketing and pricing generative AI solutions position themselves relative to or away from Copilot?
Figma is a key application for software applications, apps, and website designers. It has recently introduced Figma AI. How is this priced compared to the other packages?
Pricing AI assistants for productivity suites: survey results
The results are in for our survey on price acceptance of generative AI productivity applications. See how much people are willing to pay.
Microsoft put a price on the AI option for Microsoft 365. US$30 per user per month for Copilot. This has triggered much comment and discussion. And it sent Microsoft’s share price up. We look at the reaction to this pricing and invite you to share your thoughts.
AI pricing studies: Cohere LLM
Cohere offers an alternative Large Language Model and has a nice, clear pricing page. Let’s look at what Cohere’s pricing says about their offer and compare it with Open.ai’s published pricing for GPT.
We are being swamped by generative AI content. This is one of the early use cases for generative AI and both large, well established, companies and start-ups like Jasper and Copy.ai are jumping in. Let’s look at how companies are innovating in this space and capturing the value of their innovations.
If software is eating the world (Mark Andreessen) then Artificial Intelligence is eating software. AI has come of age and over the past few years, we have seen a blossoming of real-world applications. There is still a lot of confusion about how to price and monetize this innovation. Ibbaka proposes a general framework for pricing AI.
What ChatGPT has to say about pricing for product-led growth (PLG)
Chat GPT from Open AI has been getting a lot of attention recently. It is a window into the future of AI and how we will work with AIs. Ibbaka asked Chat GPT about pricing and product-led growth. See what an AI has to say.
In the summer of 2022, long years of work on AI content generation exploded into the mainstream. In 2023, billions of images will likely be produced by systems like Dall-E and Stable Diffusion. How will AI content generation deliver value? Is this category creation or disruptive innovation? How will these systems and the images they generate be priced? The 3rd part is Ibbaka’s series on Pricing and Innovation.
When to price predictive analytics
Many companies are adding predictive analytics capabilities to their offers. We all want to know more about the future, there is more and more data available and deep learning-style AIs have been described as prediction machines. How should this new functionality be priced? There is no one answer, but by following the basic value-based pricing process one can get to an answer.
