A16z report says consumer AI needs new ways to make money

In short: A new report from Andreessen Horowitz says consumer AI can still be a big market, but many apps will need business models beyond paid subscriptions.

What's going on

Olivia Moore, a partner at venture capital firm Andreessen Horowitz (also called a16z), released a report ranking the top 100 consumer AI apps. The list shows ChatGPT is still far ahead, but smaller apps like Suno and ElevenLabs are holding on over time.

Moore argues the bigger story is what is missing. Her report says several everyday categories have little or no presence on the top-100 list, including social apps, dating, shopping, travel, finance, and health. In other words, AI has shown up strongly in some places, but it has not yet spread into many parts of daily life.

In an interview with TechCrunch, Moore said most AI revenue so far comes from subscriptions and “token usage.” Token usage is a pay-by-the-meter system for AI, like paying for electricity based on how much you use. She said this money is often coming from workplaces and power users, not typical households.

Moore also said she is not sure the answer is getting more people to pay out of pocket. She thinks many consumers may prefer free access with ads, then choose to pay later to remove the ads.

What to watch

Moore expects more consumer-focused AI apps to use cheaper AI systems for simpler tasks, and for more companies to build on open-source models (publicly shared AI building blocks). Watch whether new AI apps appear in the “missing” categories over the next six months, and whether ad-supported plans become more common.

Source: TechCrunch AI