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Comment by an0malous | Hacker News Reader

> The general fallacy of the “but inference is profitable” argument is that it tends to ignore all the costs of building and training the model. Given the fact that 1) that’s not trivial, and 2) the arms race underway means one can’t stop training, then it ruins the financial picture.

Or that it’s all hearsay and no one has released financials yet?

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xAI financials are public, and OpenAI financials leaked a short while ago.

That's the best possible interpretation of them.

The other possible interpretation is that they are manipulating the numbers (that they have to show to investors) and inference isn't actually profitable either. If they are not manipulating the numbers right now, both companies have a serious case of uncontrolled operational costs that they have to solve too.

> That's the best possible interpretation of them.

Correct. Because a less charitable interpretation will squint at their marketing spend and wonder if they are just sweeping a lot of their expenses on categories they don't belong to make their business look less bonkers to those that prefer to not ask the ugly questions.

That.

I'm personally on the team that think it's honest. But then they have to explain why their marketing numbers are so weird.

I don’t know how $5B+ in marketing for OpenAI is actually possible.

To put it in perspective, that’s about the combined campaign budget of the Trump and Harris campaigns.

I would expect to be seeing a lot more openAI ads than I’m seeing right now. And they would be everywhere.

My charitable guess is that they lump the compute expense for free users as "Marketing".

My less than charitable guess is that the leaked financials is a piece of fiction intended to make inference not look unprofitable.

I see what you mean. If they are using it for customer acquisition, it could fall under sales and marketing.

What about retention though? Or upselling to higher tiers?

I would question where they decided to draw the line… because it’s a grey area.

“Marketing” typically includes all the people in solutions architecture, developer advocacy, compute credits, and many other things. It’s a ton more than just advertising spend, which is often a minority of what appears on that line item. Given that it’s very plausible those sort of sums are realistic.

SA is sales. DevRel is usually technical marketing.

That probably includes things like bonus for signing up or recommending people, or discounts for new users.

Also, that certainly includes a lot of money for making all of the media and management training and consulting talking about them. Teams to talk about it on social media, agreements to increase its impact on visibility algorithms...

> And they would be everywhere

How are you not seeing LLM companies ads everywhere?

Well there is clearly also a lot of non-GAAP style “trust us bro” things going on too which generally boil down to “if you ignore all the reasons why we’re not profitable then we’re profitable.” It’s WeWork’s “community adjusted EBITDA” messaging repackaged.

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