The way they work, you get a preferred price for various services at a substantial discount to list rate, but you commit to a guaranteed spend level for that period. The guaranteed spend is typically account-wide, but you have to pay a true-up at the end of the period if you fail to hit it.
It's a bit of calculus: will your growth increase enough such that, especially with the discount, you'll reach the minimum?
You can see these agreements littering 10-Qs, or similar, like when Snapchat filed their S-1 and revealed:
>When Snap originally filed for its IPO in 2017, it revealed a massive $2 billion commitment over five years ($400 million annually) with Google Cloud.
Is it really gcp hosting openai in their cloud? Afaik is a third party marketplace so it looks like you're buying openai saas via gcp but not hosted in gcp. That's key difference with azure specially for egress costs if your data leaves gcp to openai right?
Yes but does it's not clear for me. It could be just a private interconnect to openai infrastructure. My guess is that is not hosted in gcp... That's why I'm asking
Enterprise* customers are overwhelmingly more likely to primarily host on Azure than GCP, m365 runs the corporate world top to bottom. OpenAI doesn't care where the customers come from, more platforms == more reach, they have zero reason to be preferential to any single hosting platform.
* By "enterprise" here I mean "big company that is not a tech company". If most of your userbase is carrying a mac, you're probably a tech company. If you're mostly making widgets in factories, chances are high Windows and the ecosystem around it is involved.
The strategy that I’ve heard said out loud now by all the major technology companies is “we’re all doing it (AI) together”
In my view this was more or less the political result of the White House summit
So I think we’re seeing what is basically going to be a giant amorphous set of collaborations such that nobody gets taken down, and the whole market doesn’t collapse
If Alphabet, OAI, MSFT, AMZ…etc all agree to be interoperable then they will be acting more or less as a single body in tension.
Whether that’s good or not is a question of your worldview but I think that’s the strategy
Giant companies working together isn’t an AI-age phenomenon. Go back 10, 20, 30 years and you’ll see that despite all public perception of competitiveness all the largest tech companies (Apple, Microsoft, Google, Samsung, Amazon) buy/sell to each other, sign partnerships and have tight economic interdependencies.
This is speculation, but funnily enough Gemini models show the least evidence of being distilled from OAI or Anthropic compared to everything else in the market.
I feel this is correct. Google has probably the most data of any company in the world. For better or worse, they don't need to train on the outputs of other models.
You are vastly overestimating the power of publishers. The top book publisher in the US is worth $5 billion. All publishers together are about $50 billion. The New York Times is $11 billion. Fox is about $15-25 billion. Add together every single book publisher, newspaper, magazine, TV/radio, digital publisher and really every print and broadcasting platform in the country and you’d reach about $100-$150 billion. That is roughly 3% of Google.
These companies have a ton of cultural capital, sure, but in American capitalism that means nothing.
I don't believe threat of litigation alone explains the extent of it.
The way an American company, esp a reputable one like Google, conducts itself internally is different. There will be much more internal backlash to do the wrong thing way before litigation.
At a org like Google Cloud barring rogue L5/6/7s acting on their own any sniffing of distillation will get leaked. Too many chaos exist at a org size of Google to systematically do it given the contract at hand. This is a company where every spicy memo or mild gossip will risk leaks.
They overlap but are positioned differently, Gemini fills a different niche. In any case it would be a pretty dumb idea to ditch your own models, optimized for your own hardware, just because you’re also offering a competitor. Google can learn usage patterns for GPT models while continuing to work on their own models. No reasons to believe they will just stop developing Gemini
Why would it? The point of Gemini is provide user facing services cheaper than if they were paying OpenAI, make some money on the side with API credits and position themselves as a leader when investors want to see AI everywhere.
Google Cloud is competing with AWS. Amazon has Bedrock so Google needs to keep up with them by serving both Claude and GPT, along with Gemini and open models.
I don't understand all the wild speculation and question here - openai is selling a shit ton of inference through third parties. these third parties want to provide inference to their customers who use gcp (and don't want to also inference through bedrock or azure ai foundary.
these are all zdr engagements and thus "enterprise" contracts.
basically it boils down to - anthropic already provides inference direct through GCP, Azure, and AWS - so to compete openai is doing the same.
> Enterprises with Google Cloud spend commitments will be able to draw down their GCP commitments for these purchases.
This is a fairly big move by Google... It means revenue they have already booked and reported to shareholders they now might have to give away - potentially all of it. Bean counters hate that!
“Reported to shareholders” doesn’t really mean anything. There are thousands of such line items on financial reports. The ones that matter, such as recognized revenue, don’t count future bookings. It is understood that customers renege on these commitments all the time.
Google is simply telling customers - there’s a new Google Cloud service, and you can use it under your existing account.
RPO remaining performance obligations (not on balance sheet) unless prepaid then its deferred revenue (balance sheet). When it’s consumed it is recognized as revenue.
GAAP does not permit booking contracted future revenue onto the balance sheet or income statement, because the spend is not actually an unconditional debt until the service has been rendered.
It doesn't matter if it's committed or not, it still won't be recognized on the formal financial statements.
That’s not the way it works. Google still recognizes the revenue. The cost of goods sold and gross profit are what get hit here but it’s no different than any other partner than can sell their product through the Google marketplace and take advantage of committed spend.
No. It means customers can turn booked revenues into billed revenue by consuming OAI models on GCP (pass-through contracting). OAI will get their money, too, but Google will charge the customer for actual platform consumption. This was previously missing and GCP customers who wanted ChatGPT or Codex were limited to just making API calls from their GCP projects .
Prediction: google cloud will pivot to being a hyperscaler versus a model + hyperscaler. Kind of like how xAI started hosting anthropic workloads with colossus cluster.
bc the alpha is not the model, the alpha is having the physical infra (chips, power, etc).
>Kind of like how xAI started hosting anthropic workloads with colossus cluster.
Google has been hosting part of Anthropic's load long before that deal. They had a big degradation due to compiler bug for TPUs in an optimization they made to work around TPUs not being able sample from the logits efficiently.
Sergey better really go into "founder mode" or else Thomas Kurian (head of GCP) will continue to eat Deepmind's lunch.
Between selling TPUs to external companies and now hosting competitor models, Gemini just doesnt have the full faith of the Alphabet capital allocators, and I can't really blame them. A mature company like google would rather just expand their extremely profitable cloud business rather than dump billions into a black hole on the off chance they achieve RSI or superintelligence or whatever.
Google uses Gemini for its AI Overview on Google Search results, though. And it seems to me that this is an area where they really have a big incentive to run their own AI that they completely control. AI Overview sits at the top of the Google Search results first page, so when it comes to marketing it's sitting in the most coveted place on the entire Internet.
It's also marketing that their AI is hilariously terrible because AI Overview is the biggest posterchild for AI slop and often used as an example of how bad Google is at AI. Gemini proper isn't that bad, just the ultra cost cutting version on search is.
Yes, I'm realistic about it too. For simple queries it nails it more often than not. It's only asking it more complex technology related questions that it falls apart for me, and in those cases I already know I should be talking to one of the big boi models for certain lines of questioning.
Google certainly ain't gonna run a several T model for every search that's for sure (well, not yet).
What does “capital allocators” mean here? If your implication is that the Gemini org is resource starved and a few extra dollars will put their model in the lead that is 100% incorrect. If anything it’s the bloat and bureaucracy keeping it behind.
Signing partnerships and hosting third party models costs Google nothing, and in fact brings in a ton of revenue that will eventually go back into Gemini.
Infra might very well be the right play. Over the past year, it seems like the evidence is on the side that there's no "secret sauce" in AI, and models will all converge towards similar capabilities. Not much margin to be had for having the best model for a month or less until another lab leapfrogs you by 3%.
If there's no point in having the best model, there's also no point in leapfrogging the current best model. Conversely, labs trying to leapfrog each other indicates that they consider the advantages of having the best model (or at least a better one than they had before) worth it, even taking the competition into account.
I mean the labs are in a tricky spot where they have to justify massive valuations. "We're going to stay where we are and focus on inference" isn't the growth story you need when you're trying to justify a 2T valuation on 80B in revenue (unless you dress it up as a safety concern).
Google can afford to take their foot off the gas without killing their business.
> Our cloud business is at any given moment in time forgoing short-term revenues because we are making compute trade-offs to support frontier AI development
> Our frontier AI business is at any given moment in time forgoing short-term development because we are making compute trade-offs to support our cloud business revenues.
Infact all companies, at all times are doing tradeoffs. You and I can be doing something else right now but I'm here on HN replying to you - and that's a tradeoff.
If someone suggests -just do X then you don't have to do a tradeoff, that just sounds wrong to me.
The primary trade off amounts to CEOs enriching themselves by sucking resources out of the company they control. They trade the company's future and their employee's incomes for personal wealth. Investors are the bag holders for CEOs and their insiders.
We’ve been seeing compute allocation failures in GCP us-central1 for about a month now- that can’t be related can it? These aren’t TPUs, this is normal compute for dataflow/etc jobs.
I think it makes sense for them to separate the application/productivity layer from the model layer. And offer models from many model providers, including OpenAI.
AI hosting currently generates revenue, so the choice is trivial. Building an LLM model is company PR, while hosting another’s model provides immediate income.
Google should just spin out DeepMind as an independent company and get out of the model building business: just sell tents and shovels as they say, and leave the actual (gold) mining to others.
Google Search is still a large fraction of Alphabet's revenue, and Alphabet needs to be able to deliver AI results for people's searches if it wants to stay relevant in the search game.
I imagine it's much easier to have fine grained control over AI search results if you develop and own the AI yourself.
I was thinking about them fine-tuning the results for marketing purposes. But I just did a bit of research and it seems that would probably actually be illegal. So never mind, maybe?
Can you give an example of a search query with a terrible AI Overview? Or even better, a class of search queries that produce terrible AI Overviews? Would really appreciate it!
Does anyone still remember OpenAI’s founding? I had thought that OpenAI didn’t want to give the weights to Google because the original reason for its existence is to prevent Google from achieving AGI.
My work experience with trying to access AI models from GCP has been rather spotty. Gemini works great for work we need it to do, but dynamic usage limits are hitting us hard. And while we tried to use Anthropic models on there, we could not get them fully enabled, for one reason or another.
Google doesn't have enough compute to serve there own customers.
I have AI pro via a promo offer with my phone and Antigravity has been almost unusable the past week, exceptionaly slow and they completely nerfed the promo accounts by not giving access to Argon or the new claude models as well as making Flash 3.8 much worse.
Complete bait and switch from the company that advertises that the phone comes with $227 worth of a subscription, then later turns on a flag that marks these accounts as promo and cut access to it because of it. But i understand why, because they simply don't have compute to handle it, but they are still giving out these accounts.
Now two companies get to steal your work instead of one.
Listen to people like Buckmaster who admits he will never put anything meaningful into codex again.
If you are an academic, figure out why your university is not running local AI models in house for academics and students to use. It's absurd that any college would want their entire student body datamined by a corporation who will use that data to destroy job prospects so a billionaire CEO can become a trillionaire.
Colleges should be running caches you can set your browser to use when doing research so all the pages are stored. All the info should be used to improve in house llms. It is no different than when universities funded super computers, computing labs, web host space, academic journals/resources, and everything else. It is like all universities stopped being universities. They charge students more than ever and provide none of the resources they used to.
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[ 0.28 ms ] story [ 34.4 ms ] threadOpenAI sells and reaches enterprise customers via GCP.
Enterprises want zero data retention guarantees and they're already on AWS or GCP, so this is how OpenAI reaches those customers and makes more money.
> Enterprises with Google Cloud spend commitments will be able to draw down their GCP commitments for these purchases.
Thanks for you reply, it was very enlightening
It's a bit of calculus: will your growth increase enough such that, especially with the discount, you'll reach the minimum?
You can see these agreements littering 10-Qs, or similar, like when Snapchat filed their S-1 and revealed:
>When Snap originally filed for its IPO in 2017, it revealed a massive $2 billion commitment over five years ($400 million annually) with Google Cloud.
* By "enterprise" here I mean "big company that is not a tech company". If most of your userbase is carrying a mac, you're probably a tech company. If you're mostly making widgets in factories, chances are high Windows and the ecosystem around it is involved.
If you have a Thinkpad, you have a real job. And if you have a MacBook, you have a fake job.
I also don’t care if someone thinks my job is fake; I cash every paycheck they ever sent. And those dollars are quite real.
These are the companies running SAP and Oracle. It can run anywhere, including GCP and AWS.
Google, NVIDIA, OpenAI, MSFT…
GNOM…oh wait no
The strategy that I’ve heard said out loud now by all the major technology companies is “we’re all doing it (AI) together”
In my view this was more or less the political result of the White House summit
So I think we’re seeing what is basically going to be a giant amorphous set of collaborations such that nobody gets taken down, and the whole market doesn’t collapse
If Alphabet, OAI, MSFT, AMZ…etc all agree to be interoperable then they will be acting more or less as a single body in tension.
Whether that’s good or not is a question of your worldview but I think that’s the strategy
MOM-NG GNOMM NGMOM MGNOM MGMNO MGMON ONMGM NOMGM NOMMG
However if you look at the trust busting era what preceded it was this exact kind of private “cooperation” to prevent government involvement
These companies have a ton of cultural capital, sure, but in American capitalism that means nothing.
The way an American company, esp a reputable one like Google, conducts itself internally is different. There will be much more internal backlash to do the wrong thing way before litigation.
Google Cloud is competing with AWS. Amazon has Bedrock so Google needs to keep up with them by serving both Claude and GPT, along with Gemini and open models.
these are all zdr engagements and thus "enterprise" contracts.
basically it boils down to - anthropic already provides inference direct through GCP, Azure, and AWS - so to compete openai is doing the same.
They definitely need to have a better name if they're going to use 3p models
This is a fairly big move by Google... It means revenue they have already booked and reported to shareholders they now might have to give away - potentially all of it. Bean counters hate that!
Google is simply telling customers - there’s a new Google Cloud service, and you can use it under your existing account.
It doesn't matter if it's committed or not, it still won't be recognized on the formal financial statements.
bc the alpha is not the model, the alpha is having the physical infra (chips, power, etc).
Google has been hosting part of Anthropic's load long before that deal. They had a big degradation due to compiler bug for TPUs in an optimization they made to work around TPUs not being able sample from the logits efficiently.
Between selling TPUs to external companies and now hosting competitor models, Gemini just doesnt have the full faith of the Alphabet capital allocators, and I can't really blame them. A mature company like google would rather just expand their extremely profitable cloud business rather than dump billions into a black hole on the off chance they achieve RSI or superintelligence or whatever.
Google certainly ain't gonna run a several T model for every search that's for sure (well, not yet).
For a lot of folks, something low cost and low intelligence is what they want. And for a few that needs high intelligence, there's stronger models.
Google has both bases covered. It is brilliant.
Signing partnerships and hosting third party models costs Google nothing, and in fact brings in a ton of revenue that will eventually go back into Gemini.
Wouldn't they keep spending anyway because they need to hype things up before IPO?
"4 out of 5 dentists prefer DentifreshAI"
Google can afford to take their foot off the gas without killing their business.
Sundar Pichai just this week.
https://finance.yahoo.com/technology/ai/articles/google-ceo-...
> Our frontier AI business is at any given moment in time forgoing short-term development because we are making compute trade-offs to support our cloud business revenues.
Infact all companies, at all times are doing tradeoffs. You and I can be doing something else right now but I'm here on HN replying to you - and that's a tradeoff.
If someone suggests -just do X then you don't have to do a tradeoff, that just sounds wrong to me.
The investors are the ones whose net worth is measured in trillions, and most of the individuals are invested through 401k and pension accounts.
I think it makes sense for them to separate the application/productivity layer from the model layer. And offer models from many model providers, including OpenAI.
Opus 4.6 was "good enough." Having a frontier model is no longer a requirement to print cash with a GPU.
I imagine it's much easier to have fine grained control over AI search results if you develop and own the AI yourself.
If I were google there's no way I'd leave their AI overviews in place as-is.
AI overview result: images of Chris Elliot as Hanson and an AI summary of the band Hanson.
https://imgur.com/a/IVhuAUE
I have AI pro via a promo offer with my phone and Antigravity has been almost unusable the past week, exceptionaly slow and they completely nerfed the promo accounts by not giving access to Argon or the new claude models as well as making Flash 3.8 much worse.
Complete bait and switch from the company that advertises that the phone comes with $227 worth of a subscription, then later turns on a flag that marks these accounts as promo and cut access to it because of it. But i understand why, because they simply don't have compute to handle it, but they are still giving out these accounts.
Listen to people like Buckmaster who admits he will never put anything meaningful into codex again.
If you are an academic, figure out why your university is not running local AI models in house for academics and students to use. It's absurd that any college would want their entire student body datamined by a corporation who will use that data to destroy job prospects so a billionaire CEO can become a trillionaire.
Colleges should be running caches you can set your browser to use when doing research so all the pages are stored. All the info should be used to improve in house llms. It is no different than when universities funded super computers, computing labs, web host space, academic journals/resources, and everything else. It is like all universities stopped being universities. They charge students more than ever and provide none of the resources they used to.