A new report in the Wall Street Journal highlights the stratospheric costs that Big Tech faces delivering AI capabilities to their customers. And it seems that even the paid services are losing money.
“Microsoft used AI from its partner OpenAI to launch GitHub Copilot, a service that helps programmers create, fix, and translate code,”
the publication notes. “It has been popular with coders—more than 1.5 million people have used it and it is helping build nearly half of Copilot users’ code—because it slashes the time and effort needed to program. It has also been a money loser because it is so expensive to run.”
As the WSJ notes, individuals pay $10 per month for GitHub Copilot, but multiple sources told it that the service loses an average of $20 per user per month, with some users costing Microsoft as much as $80 per month. So it’s likely that this situation played a role in the company’s decision to charge a lot more for the AI capabilities it will soon provide via Microsoft 365 Copilot. That service will cost customers $30 per user per month on top of the normal monthly Microsoft 365 subscription fee (which varies by tier). It’s not coincidental that
Google will charge an identical additional per-user fee for
its similar Duet AI offering.
The extravagant cost of AI also explains why
Microsoft is working to develop its own in-house AI chipsets for use in its datacenters and is pushing the PC industry to adopt what it calls NPUs—Neural Processing Units that accelerate AI operations independently of the CPU—that will usher in
the new era of PC computing that HP discussed last week: These coming PCs will be able to offload some AI tasks from the cloud and process them locally, reducing the expenses on the backend.
Microsoft is also looking at shorter-term solutions for the costs of AI, especially for services like Bing Chat, Bing Image Creator, and Microsoft Copilot which are free to users. One possible solution is to use less powerful backend services that don’t cost as much to run, according to some reports.
Interestingly, it appears that Adobe—which charges Creative Cloud customers astonishing sums each month for its suite of artistic tools—has solved this problem with its Firefly generative AI tools, which are profitable: It simply slows down the service’s performance on a per-user basis once that user has gone over their monthly credit allotment, an allotment that is no doubt based on the price they pay Adobe each month. “We are trying to protect ourselves on the cost side,” Adobe CEO Shantanu Narayen told the WSJ.
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