The Real Reason Your ₹17,000 AI Subscription Is Suddenly Free

Author(s): Sanskar Gupta

Originally published on Towards AI.

Airtel just started giving away Perplexity Pro subscriptions worth ₹17,000 per year to all their users. Google is handing out Gemini AI Pro worth ₹19,5000 for free to Indian students.

These aren’t small amounts. We’re talking about premium AI services that normally cost thousands of rupees, just being handed out for free.

But, Why?

After reading way too many articles and getting deep into this, I think I’ve figured out what’s really going on. And it’s way more calculated than it appears.

These Companies Aren’t Trying to Sell AI Models

Here’s what I found out: these companies aren’t trying to sell AI models. They’re trying to become the foundation that everything else gets built on top of.

I read somewhere that Microsoft’s CEO compared this to the shift from desktop computers to mobile phones. When that happened, whoever controlled the platform (Apple with iOS, Google with Android) made way more money than the companies just selling apps.

The same thing is happening with AI. OpenAI, Microsoft, Google — they’re not really competing to have the best chatbot. They’re competing to become the platform that every other company has to use for AI features.

Think about it this way: if you’re a startup and you want to add AI to your product, you’re probably going to use OpenAI’s API or Google’s AI services. You’re not going to build your own AI model from scratch. That’s incredibly expensive and time-consuming.

AI Models Are Going to Get Commoditized

Sam Altman said something that really stuck with me. He basically asked: what’s going to be more valuable in five years — having the best AI model, or having a billion people using your platform every day?

His answer? The billion users.

This completely changed how I think about this. AI models are going to get commoditized. In a few years, there will be dozens of really good AI models, and they’ll all be pretty similar. But if you have a billion people who are used to coming to your platform for AI help, that’s incredibly valuable.

It’s like how Google became so dominant in search. There are other search engines, but everyone just goes to Google out of habit. These AI companies are trying to create the same kind of habit with AI.

When Airtel gives away Perplexity Pro to 360 million customers, they’re not just being generous. They’re helping Perplexity build that massive user base that becomes impossible for competitors to replicate.

Google Is Collecting Data on How Young People Interact with AI

This is probably the most important part.

Every time you use ChatGPT or Claude or any of these free AI services, you’re training them. Your conversations, your questions, the way you interact with the AI — all of that becomes data that makes the AI better.

But here’s the thing: your competitors can’t get that data. If I’m OpenAI and I have millions of people using my AI every day, I’m getting training data that Google can’t access. And vice versa.

This creates what I think of as a snowball effect. The more people use your AI, the better it gets. The better it gets, the more people use it. Your competitors fall further behind because they don’t have access to the same data.

When Google gives free Gemini Pro to Indian students, they’re not just helping with education. They’re collecting data on how young people interact with AI, which will be incredibly valuable as this generation becomes the primary workforce and consumer base.

How Can These Companies Afford to Give Away Such Expensive Services?

I was confused about this for a long time, and it took me a while to understand it.

Then I realized they’re not actually giving away expensive services. They’re giving away what feels expensive to us, but costs them much less than we think.

First, they’ve gotten really good at making AI cheaper to run. I’ve read that they can reduce costs by 75% through various technical optimizations. When you’re running AI at the scale these companies operate, those savings add up fast.

Second, they’re not trying to make money directly from the free AI services. They’re trying to make money from everything else that comes after.

Take the Airtel-Perplexity deal. Airtel probably isn’t paying the full ₹17,000 per user. They’re likely getting bulk pricing that’s much lower, while Perplexity gets access to hundreds of millions of potential users they could never reach through traditional marketing.

Giving Away AI Services for Free Is Marketing for Enterprise Sales

Here’s what I think is really happening: the free consumer AI services are basically marketing for enterprise sales.

If you’re a business and you want to use AI for your company, you’re going to go with the AI provider that you and your employees already know and trust. If everyone at your company is already using ChatGPT for personal stuff, you’re probably going to choose OpenAI for your business AI needs too.

And business customers pay way more than consumers ever would. I’ve seen some estimates that enterprise AI contracts can be worth hundreds of thousands or even millions of dollars per year.

So the free consumer services are like a massive, expensive marketing campaign to win enterprise customers.

Losing Their Incredibly Profitable Business

I think there’s also a defensive element here that people don’t talk about enough.

Google dominates search and makes most of their money from search ads. But AI could completely change how people find information. Instead of searching Google and clicking on links, people might just ask an AI and get their answer directly.

That’s terrifying for Google. So they have to offer free AI services to keep people in their ecosystem. Even if AI search doesn’t directly make them money, it prevents them from losing their incredibly profitable search business.

Microsoft is in a similar position with their productivity software. They can’t let Google or someone else become the dominant AI platform, because that could threaten their entire Office business.

The Psychological Difference Between Free and Cheap Is Huge

I’ve noticed this in my own behavior. When something costs lets say less than a few hundred rupees, I think twice about whether I really need it. But when something is free, I don’t hesitate at all.

The psychological difference between free and cheap is huge. By making their AI services free, these companies eliminate all the friction that would prevent people from trying them out.

Once you start using something regularly, it becomes part of your routine. You develop preferences and habits. You invest time in learning how to use it effectively. All of that makes it much harder to switch to a competitor later, even if that competitor might be slightly better.

Think about those Indian students getting free Gemini Pro. They’ll spend years learning how to use Google’s AI effectively, building their workflows around it. When they graduate and start working, which AI platform do you think they’ll recommend to their employers?

Whoever Controls the Underlying AI Platform Will Be Incredibly Powerful

I think these companies are also betting on what the world will look like in five or ten years.

Right now, most people think of AI as a separate thing — you go to ChatGPT or Claude when you need AI help. But I think AI is going to become integrated into everything we do, just like the internet did.

In the future, AI might be built into every app, every website, every device. When that happens, whoever controls the underlying AI platform will be incredibly powerful.

By getting people used to their AI services now, these companies are positioning themselves to be the infrastructure that powers that AI-integrated future.

The Bottom Line

These tech companies aren’t giving away expensive AI models out of generosity. They’re making calculated investments in platform dominance.

They understand that we’re at the beginning of a major technology transition, similar to the shift to mobile or the early days of the internet. In those transitions, the companies that built the platforms everyone else had to use became incredibly valuable.

By offering free AI services now, they’re trying to ensure they become those platform companies for the age of AI.

I think that’s pretty fascinating.

A lot of Twitter threads, Reddit discussions, and random articles I came across actually led me to these conclusions. And obviously, opinions are mine, ironically, written using an AI service I got for free:

• Mark Zuckerberg in this article admitted that giving away AI for free makes them more money than charging for it because it improves their ad targeting. Wild.
• The US government here investigated Microsoft’s $13+ billion OpenAI deal and found it’s basically a way to control the AI market.
• Perplexity’s CEO in this one confessed that they didn’t realize their free service would destroy Google’s business model, and said they would’ve been even more excited if they knew.
• Reddit charges $60 million per year for access to user conversations. That’s what your “free” AI chats are actually worth.

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Published via Towards AI