This analysis is by Bloomberg Intelligence Senior Industry Analyst Mandeep Singh and Bloomberg Intelligence Associate Analyst. It appeared first on the Bloomberg Terminal.
Consumers age 16-34 say ChatGPT results are better than Google search, suggesting adoption of the tool is poised to expand, a Bloomberg Intelligence survey found, though a vast majority aren’t willing to pay more than $10 a month for a subscription.
Younger demographic early adopters
The use of generative AI tools is skewed toward 16-34 year olds vs. older age groups. The category with the highest adoption so far is for studies, followed by conversational interfaces, suggesting to us that the younger age group may help drive a permanent shift in how search is used online. Generating text and images is another popular use that’s likely to help boost spending around the use of personalized digital assistants.
Though the percentages were lower for work-related research and computer coding, we believe that’s probably due to the lower adoption of generative AI among users 35 and older.
Generative AI search quality vs. Google
Though 80% of the 650 participants in BI’s generative AI survey still prefer Google for search across form factors, including mobile and desktop, about 54% of the respondents felt the quality of ChatGPT results is better than Google. That could be partially due to the conversational and in-page paragraph summary for ChatGPT, which doesn’t require a user to click on links. We believe it is also suggestive of the improved quality of responses driven by deep learning and increased personalized context for enhancing the search results.
Conversion of freemium to paid users low
About 93% of the participants in the BIoomberg Intelligence survey aren’t willing to pay more than $10 a month for a generative AI subscription, suggesting to us that a lower price with an ad-based model could help boost adoption. Though a freemium version of ChatGPT helped it reach 100 million monthly active users faster than any consumer app, the conversion to paid subscribers remains in the low-single digits.
Alphabet’s Bard is free given the company faces competitive risk from ChatGPT, which has partnered with Microsoft’s Bing to bolster adoption.
Sponsored ads still best way to monetize
Only 13% of the survey respondents are willing to pay for a separate subscription for using generative AI tools such as ChatGPT. This shows that an ad-supported model may remain the main form of monetization for online search and other new tools that leverage deep learning and generative AI capabilities. Only 1% of the respondents are willing to pay a subscription of $20 a month for ChatGPT, with about 12% amenable to $6-$10, suggesting a lower price could help boost adoption by 10x.
Though we expect search volume may be pressured in the near term, the follow-up button that Google showed at its I/O 2023 event is likely the way ChatGPT and other search-based business models could exhibit sponsored ads and clickable links.
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