Time and again, ChatGPT proves itself to be a complicated tool to get a handle on – commercially of course – since the language modelling tool’s user interface is straightforward enough for even a novice to understand and use. Since its arrival, the tool quite simply revolutionised how business is carried out. On the surface, Chat GPT allows companies to save time and money, elevate consumer interaction experiences, sift through vast reams of data, and even delegate certain aspects of the decision-making process for better results.
Often overlooked in the conversation are the wrapper companies built around ChatGPT – these companies provide a product or service based on the core services that the tool provides. These companies essentially capitalise on services that ChatGPT cannot provide on its own, creating UX that caters to extremely specific needs. The only issue? These companies are apt to collapse the moment the open AI product starts to provide the same feature itself.
The conversation of course is not a new one, just one that is once again making headlines with the latest feature that ChatGPT just rolled out.
The latest update to the language modelling tool allows its users to upload entire documents in PDF format and ask the AI to interact with it. This means that you can now upload any PDF – even a book – and ask questions relevant to the material from the AI. The new feature is still in its beta phase and is still only available to ChatGPT Plus users, meaning that you have to be a paying customer to access the latest function. The function makes life easier than before for the people who are tasked with sifting through reams of information in going about their daily business. It also promises to make life that much harder for teachers grading book reports. Most of all, it will be a big hit for companies whose entire gimmick was based on the tool’s inability to interact with PDFs.
It’s important to understand that companies that utilize ChatGPT’s core technology to provide the services that it is (or in this case, once was) incapable of offering are not exploiting the tool in an unethical manner. In March of this year OpenAI, the company behind the tool, made the ChatGPT and Whisper models available on their API. This allowed developers free access to integrate the models into their own apps. In a way, this will only increase the impact on the very legitimate businesses affected. A developer capitalising on a loophole or weakness in any other web tool for example would have been better prepared to be shut out of their niche at any moment.
The wrapper companies built around ChatGPT are not limited to products and services that offer PDF reading capabilities, they’re just the latest to be affected. Wrapper companies aren’t minor players in the market either: Jasper AI is a prominent wrapper company based on ChatGPT 4 that was valued at $1.5 billion at the beginning of this year. Jasper AI offers an AI ‘copilot’ that caters to the specific needs of commercial marketing teams. Even now, the company is struggling to maintain this same valuation, given the increasingly innovative updates being rolled out by Open AI. While numbers were never formally announced, the company is believed to have reassessed its valuation internally, and several layoffs have occurred since July.
Wrapper companies such as Jasper AI have a certain inherent vulnerability that exposes them to these risks – the lack of a moat. A moat is whatever sets a company or business apart from the rest of its competition. This term for competitive advantages was first popularized by American business tycoon Warren Buffet. Microsoft’s initial product offering is one of the most famous examples of a moat in big tech. When the tech company first rolled out its operating system, it was bundled together with several software products that several generations of users would grow up using, such as the Office Suite and Microsoft games. This gave Microsoft an advantage that would only be challenged when Google rolled out its free offerings decades later. Wrapper companies find it even harder to retain their competitive advantage, as they depend on a core technology to remain incapable of providing the service that they do.
To be sustainable, a wrapper company needs to have a unique selling point of its own, to which the resource they depend upon is an additional benefit. As with any other company therefore wrapper companies need to have human resources who are experts in their respective fields and have a thorough understanding of the pain points they address. Fortunately for wrapper companies built around the resources offered by Open AI, investors tend to be eager to offer financial backing for companies built around the AI industry. The ever-mounting valuations offered for the market for the years to come play a not-insignificant role in directing investor interest toward the market.
However, investors can also be very responsive to sudden changes in the market – changes such as the original owner of a technology rolling out an update that addresses the need that your company tries to provide for. And if there is something any investor in any business, especially in technology, is keenly aware of it’s the fact that there is very little ownership to be had of the Open AI technology itself. New users of Open AI will now never have to look elsewhere to have their PDFs read, and the businesses that bloomed around offering these services will only be able to retain those of their customers who remain unaware of the new development, which is unlikely to remain so for very long.
There’s a lesson that the latest update to ChatGPT serves to reinforce – companies need to provide tangible values that go beyond mere add-ons to their clients to last any length of time. For the business to prove to be a sustainable one, a wrapper business should also work closely with domain experts to better tailor the services they provide. Wrapper companies often fail to do so, which is why investor companies aren’t on the receiving end of the billions of dollars that the industry attracts. For example, Venture Intelligence reported that AI startups are benefitting from less and less funding this year, with a decline totalling $510 million in the first part of this year compared to 2022. With Open AI’s newest feature, these figures are likely to decline even further.
(Theruni Liyanage)