Economist Steve Hanke argued that paid consumer adoption of leading AI assistants remains limited, challenging the sector’s widespread growth narrative.
Hanke took to X on Tuesday and said, “Only 2.9% of US consumers pay for ChatGPT, Claude, Gemini, or Grok.”
He added that as many as 80% of paying users cancel within one year, concluding, “AI = LOTS OF HYPE THAT THE PUBLIC IS NOT BUYING.”
AI Apps Struggle to Turn Users Into Subscribers
Hanke’s post highlighted data from the NBER working paper “Competition in Generative AI: Evidence from Consumer Demand” released in October, which highlighted that as of April 2026, only 2.9% of U.S. consumers pay for at least one major generative AI service, with subscriptions concentrated among younger and higher-income users and mostly limited to plans costing $30 or less per month.
Low differentiation and switching costs remain challenges, with annual retention rates of just 20%–45% and switching increasing around major model releases, although using multiple AI services has become less common as their capabilities improve.
The report further highlighted that OpenAI has the highest paid-user retention among the AI products studied, retaining 77% of paying users after one month, 65% after three months and 55% after six months. Anthropic and Space Exploration Technologies Corp.‘s (NASDAQ: SPCX) xAI are lower, but similar to each other: around 65%, 50%, and 40% after one, three, and six months, respectively. Alphabet Inc‘s (NASDAQ: GOOG)(NASDAQ: GOOGL) Google has the lowest retention.
However, according to exclusive AppMagic estimates provided to Benzinga in August, Anthropic’s Claude mobile revenue surged nearly 1,200% to $97.2 million in July from January, narrowing the gap with ChatGPT, whose revenue grew 28% to $312.2 million. Despite fewer downloads, rising AI app revenue suggests competition is shifting toward monetizing existing users.
AI Firms Expand Revenue Beyond Subscriptions
Some AI services don’t just depend on user subscriptions for revenue. In August, OpenAI’s advertising business reached a $1 billion annualized revenue run rate within 200 days, adding to its subscription, enterprise, and API revenue streams. The company plans to expand ChatGPT ads into more markets and introduce new formats and targeting options.
In September, Anthropic launched Claude Opus 5.5, claiming near top-tier performance with 40% lower costs and faster responses than Opus 5. The company also removed five-hour usage caps for several paid plans and added a rate-limit reset feature.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
Recent Comments