The ugly economics of consumer AI
Despite a resurgence in consumer-facing AI assistants, the underlying economics remain challenging due to high costs and limited consumer willingness to pay. Many companies are shifting their focus toward enterprise contracts to ensure long-term profitability.
Why it matters
It highlights the financial instability of the current consumer AI boom and the potential shift toward B2B models as the primary revenue driver.
After this week, you could argue that consumer AI is making a comeback.
Meta’s personal AI assistant, Muse, and its plush-like mascot Jolly, has been a surprise hit . OpenAI’s Dots , released just yesterday, appears to be chasing the same cartoony personal assistant idea. And the up-and-coming Instinct assistant reached a $10 billion valuation on the strength of its agentic errand-running, focused on booking travel, making restaurant reservations or cancelling subscriptions.
The bull case is easy to make. Agentic AI has finally gotten reliable enough to handle everyday tasks. Companies are increasingly pitching that service to everyday people, who are getting genuine value out of it. If you’re an investor, that looks an awful lot like the ChatGPT launch in 2022 — the raw power of AI opening up a product category that was never possible before. Who wouldn’t want a piece of the action?
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