Analysis: Did the Demand for ChatGPT Plunge Because Students Left for Summer Break?
Traffic to the artificial intelligence chatbot ChatGPT’s website and downloads of its mobile app plummeted in June for the first time since the platform’s explosive November 2022 launch. That surprising news about the fastest-growing technology platform in history is based on shocking new data released in July by several internet marketing research firms.
The internet data analytics firm Similarweb announced that worldwide traffic to ChatGPT’s website (chat.openai.com) from all mobile devices and desktop computers plunged by 9.7 percent compared with totals from only a month earlier. In the United States, the 30-day drop was even more substantial, at 10.3 percent. Meanwhile, worldwide unique visitors to the website also fell by 5.7 percent.
What’s more, visitors’ engagement with the website, measured in minutes spent per visit, declined by 8.5 percent. Plus, Bernstein Research also reported that the proportion of ChatGPT users that month who quit engaging with the platform—known as the churn rate—had climbed into the 20 percent range.
As if all this bad news wasn’t enough, data analysis firm Sensor Tower also revealed that the bot’s app downloads on Apple’s App Store had declined steadily since their apex in early June, off approximately 38 percent month over month. A Bank of America Securities analysis quoting ST’s data also reported that downloads of Microsoft’s ChatGPT-powered Bing app fell by 38 percent as well.
Ignoring Students’ AI Market Impact
Interest in artificial intelligence exploded after OpenAI released ChatGPT. But this abrupt drop in demand has prompted a variety of news outlets to suggest that consumers across the board may have lost interest in AI, even though some of those publications’ writers and editors appear to have ignored the role of a key market segment: students on summer vacation.
The hypothesis that the drop in demand for ChatGPT resulted from millions of students who went on summer break first gained traction on Twitter. By comparing Google AdWords data for United States searches, author and data scientist Sam Gilbert reported that homework is actually the second most popular application for ChatGPT. By categorizing the 100 most popular searches containing the character string “chatgpt” he found that the top usage was for job applications, characterized by searches like “chatgpt resume” and “chatgpt cover letter.” But homework finished in second place, identified by searches like “chatgpt essay,” “chatgpt history,” and “chatgpt math.”
Another data scientist, Google engineer Francois Chollet, told Fortune that he believed that summer break amounted to the reason for ChatGPT’s sudden Wile E. Coyote-style demand cliff. For evidence, Chollet had plotted the Google Trends search interest data across time between April and June, comparing interest levels for ChatGPT’s website against comparable levels for Minecraft—the best-selling video game in history.
Thorough as usual, The Register replicated Chollet’s Google Trends graph. One can observe a lockstep inverse correlation in the chart between the interest levels for the two platforms. During the academic year, we observe a consistent sawtooth pattern where the Minecraft traffic spikes every weekend, while the ChatGPT traffic sinks—and the pattern reverses during weekdays.
But on June 2, the ChatGPT traffic plunges suddenly at the same time Minecraft’s traffic shoots way up. From that point, the two plots completely diverge. The Minecraft trend line gains and maintains altitude while ChatGPT’s line descends—and Minecraft’s interest level cruises way above ChatGPT’s for the balance of the chart.
Moreover, Chollet theorized that ChatGPT’s adoption may be languishing because its usage is starting to appear seasonal. He explained that Google’s data shows professional app usage for work or school typically tends to trend lower during the summer months and on weekends, with leisure-related apps trending higher during those periods. But since adoption ramp-ups override seasonal trends, that pattern only exists for fully mature apps. He points out that the adoption of hot innovations such as the internet, the iPhone and Facebook kept rolling along without pausing during summer breaks.
“All in all, this suggests that ChatGPT adoption is now stagnating,” Chollet explained to Fortune. “One thing is sure: it’s not booming anymore.”
However, bear in mind that Chollet draws a paycheck from Google, an OpenAI competitor that has also introduced Bard—a rival artificial intelligence platform positioned to compete with ChatGPT. Chollet might be right in his evaluation about ChatGPT, but he certainly works under significant incentives to slant any assessments he provides to the media—and that’s especially been the case ever since Bard’s arrival in March 2023 to reviews that have been mixed at best.
A Narrower Audience for AI?
Nevertheless, the probability that ChatGPT’s sinking demand might stem from students away on summer vacation concerns observers like Bernstein’s analyst Mark Shmulik. He told Business Insider that such an effect would imply that a more limited range of use cases would exist for artificial intelligence applications such as ChatGPT than previously thought. Shmulik continues:
If it’s school kids, that’s a real yellow-red flag on the size of the prize. This idea that if the ChatGPT drop-off is due to students on summer break—that implies a narrower audience and fewer use cases.
What he appears to be saying is that if student demand is actually driving a large portion of ChatGPT’s growth, that would imply that this technology might never turn into the future’s dominant computing platform. And the surging churn data also concerns Shmulik: “The ChatGPT chart shows what happens when you run out of new users, and existing users churn out.”
Impacts on OpenAI’s Future Growth
Similarweb’s manager David Carr also offers an interesting analysis of the impacts of ChatGPT’s traffic situation on OpenAI, based on additional observations that the media has so far largely ignored.
For one thing, Carr points out that OpenAI’s leadership might wish to rethink the two-pronged strategy underlying its business models. First, he notes that the mostly free ChatGPT website mainly provides OpenAI with value by providing a wide-open promotional demonstration service targeting potential corporate customers. That’s because the site generates sales leads from enterprises and tech firms who want to license the platform’s application programming interface (API). Licensing the API enables potential corporate customers to embed more customizable versions of Open AI’s technology in their websites and apps.
Currently, the firm’s top licensing customer appears to be Microsoft, which has incorporated OpenAI’s newest GPT-4 language model into its AI chatbot offered within the Bing search engine. Microsoft is also using GPT-4 to drive downloads for its Edge browser, since users who want access to this new language model through a browser find that Microsoft only allows such access through Edge.
Incidentally, ChatGPT could very well amount to the most costly free demonstration website in history. Some estimates of its operating costs run as high as $700,000 daily. If this April 2023 analysis proves accurate, that would work out to about $22 million per month—and roughly a quarter of a billion dollars per year.
The second way that OpenAI makes money is through subscription revenue. Subscribers pay $20 each month to access the latest and more capable GPT-4 language model version through the ChatGPT website. At the same time, free users are relegated to the older and much more limited GPT-3.5 version originally introduced with the launch of ChatGPT in November 2022.
However—although most people aren’t aware of this functionality loophole—folks can access the same GPT-4 technology for free through the Bing search engine’s AI function with its “More Creative” mode turned on. This fact leads Carr to argue that the sustainability of OpenAI’s selling the latest version through subscriptions seems questionable as a business model—so long as Microsoft continues to license newer versions with superior functionality and, in turn, offers those updates for free through Bing.
Moreover, Carr also points out that ChatGPT isn’t the only AI platform that suffered a drop in traffic over the summer of 2023. For example, a year-old novelty website most of us have never heard of that calls itself Character.ai enables chatbots to imitate the personalities of celebrities like Elon Musk; it also emulates fictional characters, figures from history, and “helpers” in conversational roles like English tutors and dating coaches.
Character.ai’s beta platform also lost significant amounts of traffic in June. Carr interprets this drop in interest for both ChatGPT and one of its competitors “as a sign that the novelty has worn off for AI chat. Chatbots will have to prove their worth, rather than taking it for granted, from here on out.”
Curiously enough, Carr doesn’t even acknowledge the possibility that students on summer break were responsible for driving the simultaneous traffic declines affecting both ChatGPT and Character.ai. But he does point out that not all of OpenAI’s recent traffic news was unfavorable. For example, the firm’s platform.openai.com website for developers saw a 3.1 percent increase in traffic from May to June. And visits to Bing—with its OpenAI technology—slightly increased over the same period.
Carr summed things up this way:
ChatGPT no longer looks like it will keep growing until it’s the most trafficked website in the world. In other words, Google is in no danger of being eclipsed by the OpenAI tech demo site that turned into a cultural phenomenon.
That might eventually turn out to be a correct prediction. Meanwhile, we can all look forward to obtaining a better sense of students’ role in these market dynamics when the web traffic analysts release their updated reports.