Why AI Tools Like ChatGPT Are Free: The Smart Business Model Behind the AI Boom
Why AI Tools Like ChatGPT Are Free: The Smart Business Model Behind the AI Boom
AI is everywhere in India—from students using it to complete assignments to professionals using it to boost productivity. But if AI tools are so powerful, why are most of them free?
Not long ago, Artificial Intelligence (AI) felt like something only big tech companies could afford. But today, AI tools like ChatGPT, Gemini, and Perplexity AI are being used by millions of Indians—for free. From school kids in Jaipur to entrepreneurs in Bengaluru, AI has become a daily assistant.
So, the big question is—how are these companies offering such premium tools at zero cost?
The answer lies in a very smart business plan: the freemium model.
What Is the Freemium Model?
The freemium model combines two words: “free” + “premium.” The idea is to:
Take ChatGPT for example. Anyone in India can use ChatGPT’s free version, which runs on GPT-3.5. But to access GPT-4o (which is faster, smarter, and supports image input), users need to upgrade to ChatGPT Plus by paying around ₹1,700/month.
This model works brilliantly in a price-sensitive country like India:
According to William Blair’s 2025 report, OpenAI already earns nearly ₹2,500 crore a month through ChatGPT Plus subscriptions worldwide.
Indian Startups Are Using AI the Smart Way
Most companies today don’t build their own AI models. Instead, they use tools developed by tech giants like OpenAI and Google and wrap them in their own interfaces. These are known as AI wrappers—apps built on top of existing engines.
Examples:
These platforms also use the freemium path: free for light users, paid plans for professionals and heavy users. This lets startups grow fast without spending crores on building their own AI.
Free Isn’t Really Free—Big Tech Is Investing Big
Even though users don’t pay at first, running AI platforms is extremely expensive:
According to Gartner, global IT spending will cross $5.4 trillion in 2025, with a big chunk going to AI infrastructure.
Companies are ok with these costs because their plan is long-term: build a habit, earn later. It’s the same model Jio used in India—offer services for free, gain users, then turn profitable over time.
Other Revenue Streams: Not Just Subscriptions
Besides premium plans, AI companies are exploring more ways to earn:
Yes, ads inside tools like ChatGPT are coming soon. A Financial Times report revealed that OpenAI is already planning to insert sponsored messages for free users. In the future, if you use AI for free, you might see ads—just like Google Search today.
Open-Source Models: Free, But Not Easy
AI companies like Meta (LLaMA), Mistral, and DeepSeek are releasing open-source AI tools. While these are free, they’re not simple for regular users. You still need:
That’s why many Indian businesses and creators still prefer user-friendly platforms like ChatGPT—even if they have to pay a little.
The AI Hype Is Settling, but Freemium Wins
AI took the world by storm in 2023–24, but now, people are realizing that AI has limits. Experts call this the “Trough of Disillusionment” (Gartner Hype Cycle). Here, people are cautious, which makes freemium models more effective.
Locking You In: The Real Goal of Free AI
The final aim of offering AI for free is to create user loyalty. Once you start using ChatGPT daily—for emails, writing, research, or coding—you become comfortable with it. Over time, switching to another tool feels like starting over. This is called platform lock-in.
That’s why companies invest so much upfront: they want you to build a habit, so you stay for the long haul.
Final Thoughts: Free AI Is Not a Gift—It’s Strategy
So, the next time you’re using ChatGPT, Bard, or any other AI tool for free—remember this: You are part of a smart business model. The shift from “premium to free” in AI isn’t about generosity—it’s a clever strategy that helps:
In India, where people love value for money, the freemium model is a perfect match. And it's powering a digital revolution like never before.
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Talk n Knock Team