Many tech companies are investing heavily into artificial intelligence (AI) chatbots, which can help address customer queries efficiently and allow businesses to reduce their staffing levels. Grok, Claude, ChatGPT, Gemini, Perplexity, and Copilot are just some of the names you've probably encountered by now. And those are just some of the more popular chatbots.
The excitement around chatbots and their ability to collect, analyze, and summarize data has many people excited about their potential. But there are three words that could derail that potential and significantly increase the costs for the companies that are betting on chatbots: pay per crawl.
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Cloudflare to offer pay per crawl
Cloudflare (NET 2.88%) helps people and companies create websites and make them both faster and more secure. And it has recently announced a new feature that could stifle chatbots: pay per crawl. What this means is that content owners could ensure that they are compensated when AI chatbots access their sites, collect data, and use it in a response to a user's query.
This is what I expect to be the norm going forward. That's because the danger for content owners is that if a chatbot can simply scrape information from a website, without compensating the owner for it, that results in less traffic and fewer ad dollars. Restricting access is one option, but forcing AI chatbots to pay for access is another one. And it's crucial for chatbots because if they don't have access to the latest information, their answers can quickly become outdated and less useful to the end user.
Given how common it is these days to see a company having its own chatbot, I believe the future will be that chatbots are all operating within their own silos and pull only company-specific information. Being able to scour and scrape the internet for all the best content seems improbable, given the costs that could be incurred from doing so, especially if sites deploy pay per crawl.
Earlier this year, OpenAI's CEO Sam Altman said that even on a $200-per-month pro subscription for ChatGPT, the company was losing money. And that's without having to worry about the costs if pay per crawl were initiated at a large scale. Under that scenario, it can be much more difficult for a company running an AI chatbot to turn a profit.
Investing in AI chatbots may not be a recipe for success
Many big tech companies can afford to invest heavily into tech, and they have indeed done so. One of the best examples of that is Meta Platforms (META 0.37%), which owns popular social media applications such as WhatsApp and Facebook.
It recently announced the launch of a new AI division, as it spends heavily on AI-related growth. Last month, it also announced a $14 billion investment into Scale AI and hired its co-founder, Alex Wang, to help lead Meta's AI efforts.
The company has its own chatbot, Meta AI, which it is offering as a stand-alone app, as it looks to compete with others, including ChatGPT. Meta, with billions in monthly active users, has a ton of user data it can tap into. But in building up strong AI capabilities for its business and chatbot, it could result in more significant expenditures in the future, making it difficult for this to be a profitable venture down the road.
While Meta has deep pockets and has generated free cash flow of over $52 billion in the trailing 12 months, investors will want to keep a close eye on the company's AI efforts, to ensure the new division doesn't just become another money pit like Reality Labs.
Investors should tread carefully with stocks spending big on AI
AI is the new buzz term in tech, and while companies are falling over themselves spending heavily on these next-gen technologies, it's unclear just how big of a payoff there might be from such efforts -- if there will even be one at all. Some companies will undoubtedly become more efficient and profitable by improving their operations. But in other cases, especially when the focus is on chatbots, that may not be the case.
The prudent thing for investors to do when looking at tech stocks is to see what their plans are for AI, and how they believe their investments will lead to improved financials down the road. If there isn't a clear plan and if it's just about investing heavily into AI and into chatbots, that can be a sign that the company may be going down a spending spree that could end up doing more harm than good.
There's a lot of excitement around AI these days, but it's important to keep it in check. Hype can help a stock rally in the short term, but it's strong fundamentals that will ensure its value remains high over the long haul.
