ARK • Disrupt

Despite their superior performance, consumer AI applications using large language models (LLMs) monetize users at a fraction of their mature counterparts. In research on this topic, we studied direct monetization rates—like subscriptions or microtransactions—per engaged hour and subtracted any human-related content costs—like royalties or cash content spending—on various consumer platforms. According to our analysis, Character AI, an AI chatbot entertainment platform, currently monetizes its user base at 5% the rate at which Roblox did in 2022, as shown below. Similarly in 2022, AI companion and romance app Replika monetized its users at 22% the rate of the adult entertainment platform OnlyFans.

Several factors appear to be driving the pricing disparity, among them 1) market maturity, 2) a premium for human content, 3) technology-related deflation, and 4) a premium for audiovisual content. The audiovisual premium seems important, reminding us of the shift from text-based adventure and other spreadsheet games to console and PC gaming from the mid-1970s to the early 1980s. As the console and PC gaming market grew nearly five-fold from $6 billion in 1975 to $29 billion in 2000, the market share of text and spreadsheet games plummeted from ~60% to 1%, as shown below.²

While text-based chatbot platforms dominate the consumer AI space today, generative AI companions complete with voice, vision, and 3D could catalyze much more significant adoption.

US healthcare spending as a percent of Gross Domestic Product (GDP) seems on track to rise from 8.2% in 1980 to 20% by 2030, as shown below. Compared to other countries, US spending relative to GDP is much higher, an outlier.

While therapeutics account for only ~16%⁶ of the $4.3⁷ trillion spent on US healthcare, innovative prescription drugs could increase their share and reduce other healthcare costs.

Glucagon-like peptide-1 receptor agonists (GLP-1s) are a good case in point. GLP-1 medications⁸ treat Type 2 diabetes by stimulating the release of insulin and lowering blood sugar levels. In the process, they slow the movement⁹ of food from the stomach to the small intestine, satiating patients much more quickly

If they do lower weight and lessen weight gain safely over the long term, GLP-1s could shift healthcare spending away from weight loss procedures like bariatric surgery toward prescription drugs. They also could lower food purchases: Walmart recently reported¹⁰ both a drop in food sales and an increase in prescription sales. Moreover, Jefferies airline analyst, Sheila Kahyaoglu, has calculated that United Airlines could save $80¹¹ million on fuel annually if each of its passengers were to lose 10 pounds on drugs like GLP-1. 

Year-to-date, Tesla has cut the price of its Long-Range Model Y by ~$17,500, or 26.5%, leading some investors to fret about underlying demand and margins. A survey of recent history, however, suggests that prices are settling back to pre-COVID levels now that supply chain bottlenecks are diminishing, as shown below.

Importantly, Tesla has offset the drastic 57% jump in auto loan interest rates since 2019 with lower prices, as shown below, underscoring its commitment to the affordability necessary to accelerate the transition to sustainable energy.

Tesla’s move could be a leading indicator of a broader decline in auto prices, spelling more trouble for parts of the industry facing strikes and higher wage gains. According to Wright’s Law¹⁴, electric vehicle prices should continue to decline in tandem with battery and other input costs.