Google got to where it is mostly by offering free services stuffed with ads, but it has increasingly experimented with a different business model: selling subscriptions for extra perks. Its first subscription offering, debuted in 2006, provided additional photo storage for users who didn’t want to have to hit the delete button. You can now pay Google for extra space for emails and documents, too, or to keep recordings from Nest security cameras and remove ads from YouTube. Today the company added a major new pitch to its subscription slate—it’s asking people to pay extra to access a smarter AI chatbot and more capable productivity helpers.
Gemini Advanced, Google’s most powerful chatbot yet, launched today behind a paywall. It costs $19.99 a month in a new tier of the Google One subscription plan known as AI Premium. It combines access to the new chatbot with existing Google One offerings like 2 terabytes of extra storage, a VPN, and other perks.
AI Premium is similar in price to OpenAI’s $20 a month ChatGPT Plus, but includes Google One benefits that otherwise cost $9.99 a month. Subscribers already on pricier Google One tiers will get the new Gemini Advanced features through July 31 at no extra cost; it’s unclear what happens after then.
Google has said Gemini is at the heart of its plans for an AI-enhanced future. If AI Premium finds an audience, that future could also include Google drawing a significant new revenue stream from subscriptions, as people pay to access more powerful AI tools much as gamers shell out for more powerful hardware.
Convincing consumers to cough up for AI could also be imperative for Google. Though hard drive costs generally keep falling, prices for powerful chips such as the Nvidia GPUs and Google TPUs needed for cutting-edge generative AI projects are shockingly high as demand outpaces supply.
Shimrit Ben-Yair, vice president and general manager for the Google One business, tells WIRED that defraying the costs of the computing power behind Gemini is “definitely part of the thinking” in requiring a subscription to access the most advanced version. And it won’t be the last time Google launches an AI feature behind a paywall. “It’s just the first step in many more of these generative AI features coming to the market through Google One,” she says.
Google announced last week that Google One was about to cross 100 million subscribers. Ben-Yair says that AI Premium is central to how Google expects to land its next 100 million.
The generative AI chip crunch also explains why AI Premium comes with a significant restriction despite being an expansion of Google One: While established Google One benefits such as storage can be split among six Google accounts without additional fees, only the plan manager will have access to Gemini Advanced. “We want to build a really sustainable long-term business here,” Shimrit Ben-Yair says.
In an interview with WIRED about Google’s AI strategy in the Gemini era, CEO Sundar Pichai says the company projected costs and potential efficiencies 25 years out when determining pricing for the AI Premium plan. The aim was to keep fees, in the company’s view, compelling, while also providing cash to support new development. “We’re building it in a way so that over time it’s what will allow us to invest more in the models and create that virtuous cycle,” Pichai says.
Expanding its subscription empire that is generating $15 billion in sales on an annual basis from Google One and other offerings would help Google make up for the stalling fortunes of one part of its ad business. The unit that sells ads on partner apps and websites brings in annual revenue of about $30 billion, but has been squeezed by rivals and new rules on data collection imposed by mobile platforms such as Apple and lawmakers in Europe. Google parent Alphabet generated 77 percent of its revenue through ad sales last year, down from 79 percent in 2022, extending a years-long slide.
It’s possible that ads could become standard in chatbots or virtual assistants across the tech industry and lessen the drive to sell subscriptions. Google might also do both and target subscribers with ads, too. Both Google and Microsoft are experimenting with including ads into shopping tips and product advice generated by chatbots or other AI systems.
Google and other giants might also feel that the ads business is increasingly outdated and overregulated, especially when some companies are managing to persuade consumers to load up on subscriptions that offer providers healthy profit margins.
Apple has grown its own services business aggressively in recent years, and last year introduced and found customers for an eye-watering $60 a month plan for 12 terabytes of iCloud storage. OpenAI had so many people willing to pay for its $20 a month ChatGPT Plus offering that it had to temporarily halt sales last year until its computing capacity caught up. Microsoft’s coding assistant GitHub Copilot ended 2023 with more than 1.3 million subscribers, the company says, up 30 percent over the previous quarter.
Google has found it can draw new signups by adding advanced photo-editing features to Google One, like the ability to edit out pesky photobombers. “Those were really well received in the market and drove a lot of usage of Google One as well,” Ben-Yair says.
Charging for features is proving to work so well for Google that the company now wants to make the potential for a new idea to draw subscribers a key factor in deciding what to develop in the first place. “If it’s good enough for them to pay for, then that puts together a really great way for us to say, ‘Great, let’s build more of what is exciting to people and [what] they’re willing to pay for,’” Ben-Yair says. “It kind of aligns incentives really well.”
Billions of people use Google products without paying anything and the company is still committed to keeping basic versions of its services freely available. “It’s about offering users that choice,” Ben-Yair says.
But over time she expects Google One subscriptions to become more enticing as her team looks to collaborate with outside partners and the other Google units that offer their own subscriptions. “Up until now, we’ve mostly focused on offering them separately,” she says of the offerings across Google. “But I could totally see us doing more of those cross-products collaborations for the people who want to enjoy more than just one of these subscriptions.”
Source : Wired
