An age old question frames the quandary over the future of the rapidly evolving Artificial Intelligence industry: Can David slay Goliath?
It's natural to think that the likes of Google, Microsoft, and Apple will dominate the tech sector's AI revolution. While these behemoths have seemingly limitless financial resources and armies of Ivy League engineers, they can also buckle under their own weight. These publicly held companies face increased regulatory scrutiny, obsess over their quarterly earnings performance, and struggle to maintain lean product development cycles because of the complex operating dynamics of their hierarchical, matrixed organizations.
We need not look further than the pandemic powerhouse Zoom for a compelling example of a smaller player that well, zoomed past the big tech titans in the video conferencing category. In a blink, the company exponentially increased its new customer acquisition to capture the highest share of users in the US (nearly 50%, dwarfing that of all others). Zoom's soaring popularity also launched it into the ultra exclusive club of companies whose brand name has been universally adopted as a household noun for "virtual meeting." Smaller companies that focus on perfecting their offering in a single product category can often deliver greater customer value than companies that spread their attention more broadly.
On the other hand, big tech companies hold unique advantages that will make them hard to catch. They have large installed customer bases across a broad array of services and are often seen as more trustworthy than unknown brands. Existing customers of these brands will likely enjoy a better customer experience in adopting new services on the platform. The brand can leverage these customers' existing profiles and other data to tailor AI offerings to better meet their needs with less intervention needed from users.
Like with most emerging industries, the AI landscape will likely remain fragmented for a long time to come. We've seen this in the streaming services industry, occupied by category innovators (Netflix), category defenders (HBO, Disney), and new category entrants (Apple, Amazon). A diverse range of motivations drove these players to enter this category and the same will be true in the AI services industry. However, the streaming services industry commands much higher cost of entry given the tremendous expense of content production. OpenAI's usage-based pricing model makes the technology accessible to small companies and independent developers. For this reason, the proliferation of AI services might more closely mirror that of Apple and Google's app marketplaces with a greater number of players and more frequent entry and exit from the space.
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