OpenAI’s First-Mover Advantage
How OpenAI’s position as a first-mover has helped establish their early dominance in chatbot AI
In business, the common wisdom is that the first-mover generally wins. When it comes to launching a product, entering a new market, or even recruiting top talent, being the first to act can help to establish market position and gain credibility. These benefits, known collectively as the first-mover advantage, explain the dominance of several of Silicon Valley’s largest tech giants, from Apple in their release of the smartphone to Facebook in their launch of the social network.
For the release of generative AI chatbots, the first-mover advantage is significant. Generative AI is a type of artificial intelligence that can produce unique outputs like text or images, without relying on preset instructions. Effectively, the AI creates content on its own. In November 2022, OpenAI launched a free version of ChatGPT, a chatbot powered by generative AI that can comprehend user inputs and generate corresponding responses. Immediately ChatGPT captured the world’s interest, becoming the fastest product to hit a million users in a record five days. OpenAI has quickly seized on ChatGPT’s momentum, releasing a premium version of ChatGPT which can produce more diverse responses, features enhanced accuracy, and uses more sophisticated language models to create more tailored responses. They also have plans to integrate ChatGPT into browser-plugins, providing it access to live internet data. By the end of this year, they are expected to hit one billion users.
In this attention-grabbing launch of generative AI, OpenAI has capitalized on several facets of first-mover advantage. With the launch of ChatGPT, OpenAI became the leader in generative AI chatbots, setting the standard for others to follow. They’ve established their consumer brand, with “ChatGPT” already becoming the go-to term for using generative AI to search for something (ask any morally dubious kid how they’re doing their homework and they’ll tell you they’re “ChatGPTing” it)
Moreover, by releasing a free version of ChatGPT, OpenAI has positioned itself as a thought leader in the AI community, gaining usage by AI researchers and practitioners alike. This benefit cannot be understated. As practitioners become more familiar with ChatGPT’s interface and technology, they are less likely to switch to another programming interface due to the increased cost of learning a new system. As a result, even if competitors enter the market, it is likely that practitioners will remain loyal to ChatGPT’s interface.
The benefits of first-mover advantage are particularly salient for companies using generative AI, whose algorithms are enhanced by having access to lots of user data. The more user data the generative AI algorithms are fed, the better their performance will be. By gaining users quickly and collecting their data, OpenAI raised the barrier to entry in the chatbot space. If a company were to challenge OpenAI’s chatbot they would need access to millions of users’ responses over the course of several months, a seemingly impossible feat.
Due to their successful launch of ChatGPT, OpenAI has substantially shrunk its competition space. The only chatbot companies which can compete with its data access are but a handful of big tech companies (chiefly Google). As more competition in the generative AI space emerges, the benefits of first-mover advantage will become more significant. Other companies will find it difficult to become synonymous with AI, as ChatGPT has. Moreover, AI practitioners will be hesitant to switch to new chatbot programming interfaces unless they offer true advantages. The data moat established by ChatGPT will expand too, raising the bar for smaller competitors to stay competitive. Though it may seem the generative AI chatbot space has already consolidated around OpenAI, this view may be tested as Google releases more generative AI technologies. Not to mention, Google will likely benefit from second-mover advantage too.
For more analysis on Google’s impact in generative AI, make sure to follow Byte-Sized Insights — in next week’s article, we will dissect Google’s position as second-mover in releasing their version of ChatGPT, Bard.
