Why ChatGPT 4 will make $1 billion in 2023?💰

Key lessons for SaaS companies solving for free → paid journey.

Mar 15, 2023

Welcome to the 134th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 95,300+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more

2022: Chat GPT is free to use 🤯
2023: The plus option costs $20 /month 💰
The biggest free → paid customer experiment ⬇️

Quick context 🗓
Launched as beta in november 2022, OpenAI's ChatGPT has constantly made news. It first created a free product for everyone to use and get addicted to and then went on a to launch a paid subscription plan with additional feature.

But, the masterstroke was yesterday ✨
With launch of GPT4 (the newer version of GPT3), it created exclusivity. Only customers with "Plus" subscription get access to this Chat GPT4.

For the record, Chat GPT is huge 🏔
With 616 million website visitors every month & 13 million daily visitors, it's growing exponentially in under few months.

Core lessons from ChatGPT's freemium strategy ⬇️

And lessons for SaaS founder building incremental products.

1/ A huge delta product 🎯
Let's admit - ChatGPT's UI changed the ballgame for the generative AI world. The core technology isn't new & was built by Google few years ago. Chat GPT gave easy UI for every user who has a internet connection - something no one could at the time.

2/ It's a free "wow" experience 🤩
Ask anyone from your life partner, friend, parents who has even tried ChatGPT for even a day. They will tell you how cool it is. The free experience does not restrict you from reaching that "aha" moment.

3/ It created a limitation on the "wow" 🚪
The free experience allowed you to get most of the stuff done but it wasn't enough for power users who were spending hours on ChatGPT. The limit of use & API access created a virtual barrier for most power user to signup for "Plus" plan.

4/ Plus plan users were made into "evangelist" 😇
Go to Twitter / Reddit and see how many "Plus" users brag about their premium experience. I mean it's impossible to not buy into the fear of missing out.

5/ Copying the strategy from Apple 🍎
Apple stops software updates for older phones - the strategy forces most users to upgrade their iPhones every few years. ChatGPT 4 essentially did that by creating a walled garden around itself. Only "Plus" users can even try Chat GPT4 & to a limit.

6/ Making money from APIs 🏆
You will soon start seeing thousands of companies building products on top of ChatGPT through it’s API plan and that’s just the Microsoft of enterprise cash cow.

So what can SaaS founders learn from it? 💡
First, are you helping users experience an aha moment when you allow them a free experience? Second, Do you build the right perceived value about your product when they use it for few instance? Third, How many instances do you need to really play this perception game well? Fourth, Is there exponential reward to use the paid plan and more importantly do you really have a delta product or just "good to have SaaS"? - Think harder, get a lot more clarity.