Is It Worth Pivoting to Generative AI Products?
- By Anton Volovyk, Reface
- July 24, 2023
The dynamic of the events unfolding in the global tech market is overwhelming. In 2022, generative AI had the potential to be over-hyped and passed like many other tech trends, but just a year later, it is reshaping the app economy and the way products engage with their users. Generative AI is expected to achieve ~30% share of the overall AI market by 2025—around USD60B. This new branch of technology already generates high incomes in the mobile application industry.
As of this year, the technology race is going on against the background of a big-tech AI battle, and the role of AI startups is more significant than ever. Soon after GPT-4, new tools powered by OpenAI's next-generation AI language model began to arise. But even more exciting, generative AI is becoming the next revolutionary platform that helps businesses build category-defining products with unlimited use cases and growing interest within the user community.
As more eyes are drawn to this technology’s rise, I assume critical upcoming events in the industry that will help us define if generative AI does mark a new generation of mobile tools and highlight its touchpoints with users.
The battle for innovative products
Although 2022 was a bad year for venture capital, AI startups raised eye-popping investments that will undoubtedly lead to new technologies and products. For instance, generative AI platform Jasper raised USD125 million at a USD1.5 billion valuation in the fall of 2022 and released a new product in May 2023 that lets businesses create on-brand content at scale, along with new API capabilities.
However, AI-first startups are not the only ones entering the race to develop innovative products. Established companies that are successful in their niches are also exploring AI tools and integrating them into their user flows.
For example, Canva, a design platform that has existed for a decade longer than Jasper, is integrating AI into its product to streamline the process of creating brand visuals. And this is not the only example of newly established AI startups competing in the same niche as industry veterans for innovation and speedy adoption of gen AI technologies.
One more example is Speak, a language learning platform recently backed by the OpenAI Startup Fund, and Duolingo, which introduced a new AI chatbot that enables users to practice real-world conversation skills with characters within the app.
The question is, who will develop faster in this market? Will it be AI-first startups incorporating GenAI from inception or established companies integrating GenAI into existing products? The flexibility and dynamism of the former play to their advantage, but they will require resources and the known reputation of the latter to succeed in the emerging market.
One thing is certain: breakthrough AI tools will continue to be launched in 2023, providing even more opportunities for professional users and ordinary smartphone owners. As companies compete to provide the best AI features, the market will be driven by usability and higher-quality results generation in fewer steps.
AI as a bonus feature for enhanced paid user experience
Like traditional digital products, AI products can be monetized through subscription, usage-based, licensing, ad-based models, and more. However, to make them accessible to the mass market and better suited for B2C scenarios, the monetization method should be easily understood and familiar to the average user.
Fortunately, Gen AI offers several technological advantages that can be utilized to convert users into longer or paid subscriptions. When comparing a regular paid service, like access to a photo editing platform, to a paid AI service that allows users to remove a photo’s background in seconds, replace the subject in the photo, or change the photo's style, purchasing access to innovative technologies competing for uniqueness appears to be more valuable and easier for users to understand. The perceived value of an AI service is greater than that of a classic digital product. In addition, as new AI technologies emerge, products can sell new experiences more efficiently, increasing cash flow.
If using AI products sounds unreasonably expensive, it is essential to understand that substantial costs are associated with developing and maintaining AI products. This includes the hours of work by ML teams and thousands of hours of server loads required to produce ready-made quick solutions for users. However, as AI technology advances and becomes more prevalent in various industries, the cost of using AI products may decrease over time.
It is easier to build a community around AI products
Generative AI has already contributed to creating an AI community of millions, increasing the organic installs of AI-based mobile applications. Seeing this impact, progressive startups are swapping traditional approaches to product marketing and interacting with their audiences through new platforms and influencers to increase customer loyalty.
Massive communities of generative AI enthusiasts are pushing the trend further, and this is where brands can effectively communicate. TikTok has proven itself as the go-to platform for the organic promotion of AI effects and built-in beautifying tools, allowing millions of users worldwide to try on an AI mask, shoot a video and share it to the feed. Some filters are so refined that they don't even glitch when your face moves.
The second annual Metaverse Fashion Week, which ran from March 28-31, is powered by top brands to multiply virtual communities by experimenting with generative AI and presenting NFT fashion and virtual design contests. The largest stock platforms, Adobe and Shutterstock, actually became ambassadors of generative AI art on their way to monetizing synthetic content. Find a niche, share your product within the AI community, and see how it becomes a canvas for improving your technology.
The app economy is a big chunk of the industry, projected to hit USD614 billion in a few years. And Generative AI is the best space for executing huge ambitions, both on the creator and the business side. While the big tech companies are winning back the lead on major product lines, emerging apps powered by generative AI can help us understand the real value of user-driven innovation.
Anton Volovyk, co-CEO of startup Reface, wrote this article.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/maxsattana