GM Readers! ☀️

Welcome to the 13th issue of Evolving Internet Insights’ 🧠 Brainfood — a weekly deep dive into a relevant emerging tech topic.

Recently, in ⚡Insights 17, we covered the announcement of Poe’s strategy shift towards enabling creators of chatbots to monetize their chatbots on Poe’s platform (á la Apple’s App Store marketplace). Poe’s strategy is different compared to most other AI-first companies we have covered to date.

Today, we want to dive deeper into Poe’s “app store for chatbots” strategy.

Thanks for reading!

Liang and Dan 🙌

🧠 Brain Food

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Quora launched Poe, the “Platform for Open Exploration (and we think a double entendre for Edgar Allen Poe 🐦‍⬛),” in December 2022 as a service that allowed users to access multiple large language models (LLMs) and chatbots through one single interface. For example, a user can ask Poe a question and, before providing an answer to the prompt, one can decide which LLMs Poe should use to answer the question. For users, this aggregation of chatbot providers means that they do not have to access a variety of different models themselves across different websites to test the quality of answers. 

Adam D'Angelo, the co-founder and CEO of Quora, stated “we foresee a large number of models available in the near future. Different models will be optimized for different tasks, they will represent different points of view, or they will have access to different knowledge.” In a world where there are a plethora of models, having a single user interface with Poe facilitating access to them is a strategic advantage for Quora.

As of October 2023, Poe’s mobile app has 18M+ installs with ~1.2M monthly active users (MAUs).

There’s an Chatbot for That

Recently, Quora announced that Poe is enabling creator monetization for those building chatbots in the Poe ecosystem. This is akin to the “app store” strategy popularized by Apple and Google. Poe is incentivizing creators in two ways:

• Referral Fee: if a creator’s chatbot leads a user to subscribe to Poe, the company will share a percentage of the revenue with the chatbot’s creator.

• Pay-per-Use: chatbot creators can set a per-message fee within their chatbots.

Quora's strategy with Poe mirrors Apple's approach with their App Store, in which the value lies not just in the products and services themselves, but in the ecosystem flywheel that is cultivated. By creating an "app store" for chatbots, Quora becomes a marketplace that connects users with a diverse array of gen AI-powered solutions, much like Apple connects users with a myriad of valuable apps. This marketplace approach and the opportunity for monetization provides Quora with the opportunity to capitalize on network effects, where the value of the platform increases as more users and creators join and contribute. 

It also allows Quora to fight a battle worth fighting (read: with the most notable players in AI space building at the infrastructure and consumer app points of the value chain, this is an area that Quora feels it can win in a world of well capitalized giants). Apple’s success has demonstrated that owning the distribution platform (the App Store) can be far more profitable and sustainable than focusing on trying to create the killer app themselves.

For Quora, this means: 

1. It does not have to invest time and resources into creating a better AI model, a feat which has proven to be difficult, expensive, and more competitive by the day.

2. It avoids playing the game of “finding and picking” the winning AI model to align itself to in such a nascent field that is quickly evolving.

Gen AI-powered chatbots are increasingly becoming commoditized due to the sheer number of models and chatbots being created. On Hugging Face, one of the leading open source AI model repositories, there are 300,000+ models. As gen AI technologies become more accessible, it becomes harder for any single player to maintain a competitive edge purely through their product’s technological superiority. Also, since AI is a rapidly evolving field and it is too early to tell who the winners will be over the long term, the question that Quora is likely answering with Poe is “why not serve them all?”

With Poe, Quora is playing off the economics of aggregation where the focus is to own the customer relationship and aggregate demand rather than just owning the supply (the AI chatbots). If successful, Poe generates network effects through controlling the platform where customers access various chatbots and creators are incentivized to build new/more chatbots.

App Store Ecosystem Strategy

Like any strategy, there are tradeoffs, benefits and drawbacks. In this instance, it is important to understand the benefits and drawbacks to each stakeholder in the ecosystem.

Creators

Poe’s strategy creates a competitive environment where the best chatbots will rise to the top, driven by meeting users’ needs and preferences. The marketplace opens doors for creators at all levels—from individuals to small businesses—to showcase their work on a global stage. 

Creators are financially incentivized to innovate and create the best chatbot that meets evolving user needs. Developers can focus on what they are good at, which is developing technology and outsource the front end work to Poe. Adam D’Angelo (co-founder and CEO of Quora) said “ … most people and even most companies who are capable of training or fine-tuning these models are not well suited to create these interfaces [user friendly front ends].”

However, financial incentivization might prioritize profitability over quality, pushing creators to focus on marketing strategies to prop up their offerings instead of substantive user interaction. For creators, particularly the smaller entities, the competition may be daunting, with the larger, more established chatbots dominating the landscape.

Users

By focusing on user experience, Poe aligns their platform with the quintessential demand of technology consumers today: seamless and convenient interaction. Quora’s positioning of Poe democratizes the use of AI and gives users more choice in which models they want to use as they adopt AI tools for regular use in their daily lives. 

Though, on the other hand, there are risks of oversaturation and overwhelming users. With an overabundance of chatbots, users may find it difficult to navigate through the masses and pinpoint those that are truly beneficial to their specific use cases. We see this play out in app stores, where there are a handful of popular apps and a long tail of applications that users never discover.

Leveraging Existing Power

Instead of competing with AI chatbot and model developers, Quora is offering them access to its vast user base of ~400M MAUs. Over time, this marketplace might present a low-cost go-to-market strategy for chatbot creators, while Quora benefits from increased and sustained engagement on its platform. By allowing chatbot creators to develop and monetize their bots, Quora is distributing the risks associated with AI development (read: developers bear the development costs and risks of building a chatbot and Quora bears the risk of customer acquisition). 

And Quora not alone in this thinking.

Recently OpenAI announced that it's allowing creators to create their own GPTs and will introduce a GPTs store as well. Character.ai and Instagram’s AI friends are also allowing users to create their own AI Chatbots.

While it is too early to tell whether Quora’s app store strategy with Poe works over the long term, Poe is an example of an existing tech company looking to compete in generative (gen) AI without going head on with leading competitors that are often more well capitalized and have more resources. Instead, Quora has chosen to position Poe to benefit from the rise of gen AI chatbots without having to pick the winners themselves, with their marketplace deciding that fate.

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DISCLAIMER: This post is provided strictly for educational and informational purposes only. Nothing written in this post should be taken as financial advice or advice of any kind. The content of this post are the opinions of the authors and not representative of other parties. Empower yourself, DYOR (do your own research).