Microsoft puts a price on AI
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talio.
There were two big events in the generative AI world the week of July 17.
Microsoft revealed its pricing for Copilot, its application of Open.ai’s GPT to MS365.
Meta released Llama 2.0, the next generation of its open source model.
I think the second is the more important announcement, and we will look at the implications in the future, but for now let’s look at Microsoft’s pricing for Copilot. Note that Microsoft is also participating in Llama … Google needs to up its game.
What do you think about Microsoft’s pricing for Copilot?
Please take three minutes to let us know.
How much would you pay for an AI assistant for MS 365 or Google Workplace?
The form of these questions is what is known as a Van Westendorp study. Open.ai did one of these through their Discord server before pricing GPT access at US$20 per month. In doing this, Open.ai set a reference price for Microsoft.
Is Copilot worth more than ChatGPT?
I am not generally a fan of Van Westendorp, or any survey that focus on price rather than value. If I need to get direct willingness to pay insights I find a conjoint survey much more informative. I would not make a pricing decision based on a Van Westendorp survey (and definitely not on a Gabor-Granger study). That said, Van Westendorp surveys can be interesting (so please go back up and take the AI assistant survey.
You will basically be asked four questions,
At what price would you consider Copilot to be so expensive that you would not consider buying it? (Too expensive)
At what price would you consider Copilot to be priced so low that you would feel the quality couldn’t be very good? (Too cheap)
At what price would you consider Copilot starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive/High Side)
At what price would you consider Copilot to be a bargain—a great buy for the money? (Cheap/Good Value)
In fact, Copilot has been priced at a premium. Here is the Canadian pricing for 365. Copilot is more expensive than any of the plans offered in Canada.
For reference, here is the Google Workspace pricing in Canadian dollars.
Google seems to price slightly below Microsoft.
Microsoft Copilot pricing got a lot of press. Here are some of the more interesting articles.
The Financial Times Microsoft to charge $30 per month for generative AI features
The Verge Microsoft puts a steep price on Copilot, its AI-powered future of Office documents
Ars Technica Microsoft 365’s Copilot assistant for businesses comes with a hefty price tag
And to get a broader reaction (which is often negative) check out Reddit Microsoft Announced "Microsoft 365 Copilot" Monthly Pricing Now!
I also asked people in the Professional Pricing Society what they thought about Copilot pricing. There were some interesting responses.
“I think generative AI is getting terribly underpriced because Chatgpt set a bad precedent with little research with the $20 off the gates. The value some industries are deriving is off the charts and paying very nominal amount.”
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“Generative AI is underpriced because potential users had no reference whatsoever on the value it could provide them, now they have a reference, but users are unsure of their own willingness to pay, so Microsoft is making a cautious step forward, because they aren’t sure either. An instance of adjustment heuristic.”
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“Depends... the issue is that there is a learning curve to using AI well and have it be actually a net productivity gain. I don't know if your average joe new to LLM and AI tools will be willing to fork out that kind of money for something this new. Feels like more price discrimination and segmentation is necessary.”
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“It really depends on what it can do I think. Microsoft Office has a history of "smart" features that ended up not very useful. I will definitely try it before deciding whether to buy or not.”
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“This could be a “value for the user” question.
And a sustainability question.
Value : one would pay more because of the time saved, the comfort of “not doing doing that boring task”, etc… all worth for that person more than 360 $
A Sustainability question too.
True, Microsoft could easily charge more.
For those clients able to afford paying more.
But …
Those technologies are not for elites anymore.
They are so ready, so well designed now that anyone can use it.
Whatever level of education, work etc…
I just dream that the price was set low, so that it makes it accessible for most.
Instead of increasing inequality in efficiency across humans.
I want to call out two points here.
“Feels like more price discrimination and segmentation is necessary.”
I kind of agree with this. There are many different use cases for this AI Chatbot and many different user persona. Pushing too much functionality in will …
overwhelm many users who just want some basic help. These people will get frustrated when exposed to too much functionality. They will not appreciate the value offered and not be able to realise it.
frame the value of advanced functionality at a low level (what some people think Open.ai has already done with ChatGPT)
make it much more difficult to price innovations (both for Microsoft and for other companies).
That said, Microsoft needs to serve a broad market, it cannot afford to have too much nuance. The pricing is definitely at a premium compared to other parts of Microsoft Office.
“I just dream that the price was set low, so that it makes it accessible for most. Instead of increasing inequality in efficiency across humans.”
This is perhaps one of the most important questions facing the technology industry, and society generally.
Will Generative AI and AI generally contribute to further wealth concentration?
What design, ownership and pricing choices do we need to make to ensure that Generative AI is of benefit to all?
How can we make available the ability to train Large Language Models in the hands of everyone who wants to engage?
These questions are far more important than the per user price of Copilot ot ChatGPT. And this is why I think the Llama 2 and Hugging Face theme is more important than GPT and Microsoft.
A few weeks ago I asked the Design Thinking Group the following question.
I find the vision of a personalized foundation model fascinating, especially for people who do creative work. It is something I am exploring myself, and Llama 2 will help me do this.