Artists, writers, and singers are challenging the legitimacy of machine-generated intellectual property. Debates about ethics, regulation, and the coming of superintelligence are swirling in Washington. Perhaps most worryingly, word is starting to spread in Silicon Valley that generative AI isn’t actually useful. Products are falling far short of expectations, as evidenced by poor user retention rates. End-user demand for many apps is beginning to plateau. Is this just another false cycle?
AI’s lost summer has critics doing a smug tomb dance reminiscent of the early days of the internet, when, in 1998, a prominent economist declared: “By 2005, it will be clear that the Internet will have no greater impact on the economy than the fax machine.”
There is no doubt that despite the noise, hysteria and south korea mobile database atmosphere of uncertainty and discontent, generative AI has already had a more successful start than SaaS , with over $1 billion in revenue from startups alone (the SaaS market took years, not months, to reach the same scale). Some apps have become household names: ChatGPT has become the fastest growing app with strong market fit among students and developers; Midjourney has become our collective creative muse, reportedly achieving hundreds of millions of dollars in revenue with a team of just 11 people; and Character has popularized AI entertainment and companionship, creating the consumer “social” app we most desire—users spend an average of two hours in the app.
Still, these initial signs of success do not change the fact that many AI companies simply do not have product-market fit or sustainable competitive advantage, and that the over-exuberance of the entire AI ecosystem is unsustainable.