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The Emergence and Influence of Open-Source and Proprietary Generative AI Models

GOOVER DAILY REPORT June 25, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Current Landscape of Generative AI
  3. Market Trends and Corporate Adoption
  4. Notable Developments in AI Technology
  5. Conclusion

1. Summary

  • This report provides an in-depth analysis of the competitive landscape between open-source and proprietary generative AI models, focusing on major tech companies like Microsoft, Google, Meta, and Amazon. The report outlines the approaches taken by these companies, with Meta and Amazon championing open-source models and Microsoft heavily investing in proprietary models such as OpenAI’s GPT-4. Key events include the significant 'Woodstock of AI' event by Hugging Face and the rapid adoption of open-source models by corporations. Additionally, the report discusses Meta's advancements in ad technology, including new features that have been integrated into Instagram and Facebook, as well as Sheryl Sandberg’s departure and subsequent initiatives.

2. Current Landscape of Generative AI

  • 2-1. Open-Source vs. Proprietary Generative AI

  • The battle between open-source and proprietary generative AI models is intensifying. Open-source systems, backed by companies like Meta and Amazon, are considered to foster democratized access to AI, making it cheaper and easier for researchers and developers to build new models. Proprietary models, such as OpenAI’s ChatGPT, supported by Microsoft, are currently seen as more advanced but face the risk of commoditization. According to Investor's Business Daily, proprietary assets like ChatGPT are seen as having a significant technological edge, which helps maintain their market value. On the other hand, open-source AI models have seen increasing adoption and are gradually narrowing performance gaps with proprietary models, as highlighted by Databricks, Cerebras, AI21, and Cohere's new releases.

  • 2-2. Key Players: Microsoft, Google, Meta, and Amazon

  • Major tech companies are taking differing stances in the AI landscape. Microsoft, with its heavy investment in OpenAI, supports proprietary models and offers substantial integration services via Azure. Google is also developing a next-generation proprietary model named Gemini. Meanwhile, Meta and Amazon are strong proponents of open-source AI. Meta has made significant contributions by launching its open-source model, Llama, available to researchers and developers. Amazon Web Services collaborates with numerous open-source AI startups, including Hugging Face and Stability.ai, aiming to leverage the potential of commoditized AI and offer foundational models to customers.

  • 2-3. The Woodstock of AI Event

  • The 'Woodstock of AI' event, hosted by Hugging Face in San Francisco, marked a significant milestone for open-source AI. This gathering attracted around 5,000 attendees and showcased the surge in open-source AI development. This movement has led to numerous startups like Mistral and Together AI entering the scene, providing competitive alternatives to proprietary models. The event underlined the rapid progress in open-source AI, with many new models coming close to matching the performance of OpenAI's GPT-4. However, corporate adoption still seems to favor proprietary models, though this trend is starting to shift as more organizations experiment with open-source options for better customization and data security.

3. Market Trends and Corporate Adoption

  • 3-1. Popularity of Closed-Source Models Among Large Companies

  • A recent survey by venture capital firm a16z revealed that large companies predominantly prefer closed-source, proprietary generative AI models, particularly those from OpenAI. The survey estimated that, in 2023, the market share for closed-source models was between 80% to 90%, with OpenAI holding the majority of this share. This widespread adoption is largely driven by OpenAI's first-mover advantage and the ease of integration through APIs and platforms like Microsoft Azure. Despite increasing exploration of different AI models, many organizations stick to OpenAI for established use cases in marketing, coding, and customer support.

  • 3-2. Surge in Open-Source AI Models

  • The open-source AI field has seen exponential growth since an event dubbed the 'Woodstock of AI' in San Francisco, which was hosted by Hugging Face and marked the start of a significant movement. Several startups, including Mistral and Together AI, have emerged as notable players, consistently releasing models that challenge the benchmarks set by OpenAI’s GPT-4. Popular companies such as Databricks, Cerebras, AI21, and Cohere have recently contributed to the open-source landscape with new large language model releases. While OpenAI continues to lead in corporate settings, about 46% of respondents from the a16z survey expressed a preference for open-source models, indicating a growing trend towards diversified AI solutions.

  • 3-3. Factors Driving Open-Source Adoption: Cost, Control, Customization

  • The adoption of open-source AI models is driven by factors such as cost, control, and customization. Open-source models, like Meta's Llama 2, have proven to be significantly cheaper—up to 10 to 20 times less—for generating a million tokens compared to OpenAI’s GPT-4. Furthermore, enterprises value the control offered by open-source models, as they allow for self-hosting and fine-tuning on proprietary data, ensuring data security and output transparency. Customization capabilities are also a key attraction, enabling companies to tailor models specifically to their business needs and to own the intellectual property. Ali Ghodsi, CEO of Databricks, emphasized that the trend towards open-source AI is likely to continue as enterprises seek to maintain competitive advantage through bespoke AI solutions.

4. Notable Developments in AI Technology

  • 4-1. Meta's Ad Updates and eCommerce Innovations

  • Meta has introduced several significant ad updates aimed primarily at retailers and users of its automated Advantage+ campaigns. This includes optimizations for video ads on Reels and mobile Facebook and Instagram apps, with viewings of Reels growing by over 25% year-over-year in Q4. Meta has also updated its Advantage+ catalogue ads to support branded videos and customer demonstration videos, enhancing personalized product recommendations. Additionally, Meta has simplified the creation of Shops ads within management systems like Magento and Salesforce Commerce Cloud and integrated Shopping ads and branded content ads, which enable direct purchases from collaborative campaigns. New ad options, such as Reminder Ads and Promo Codes, enhance the ad offerings within Facebook and Instagram platforms.

  • 4-2. Impact of Instagram's Copycat Strategy

  • Instagram's strategy of incorporating features from other apps has proven effective, despite initial resistance from users. For example, the launch and subsequent success of Reels, a TikTok-like feature, has been instrumental in driving Instagram's downloads past TikTok's for the first time since 2020. Data from Sensor Tower suggests that Instagram downloads grew by 20% while TikTok's grew only by 4% in 2023. This strategy has helped Instagram become the most downloaded app globally in 2023, reinforcing its dominance over competitors like TikTok and Snapchat.

  • 4-3. Sheryl Sandberg's Departure and Initiatives

  • Sheryl Sandberg has announced her departure from Meta's board, marking the end of her transformative tenure at the company. Sandberg, who served as COO for 14 and a half years and as a board member for 12 years, played a pivotal role in establishing Facebook as a leading digital advertising platform. Although she stepped down as COO in 2022, she will continue to serve as an advisor. Sandberg has also announced the launch of a girls' leadership program through her foundation to address gender inequities, including a middle-school curriculum and resources for adults.

5. Conclusion

  • This report has illuminated the critical dynamics shaping the generative AI landscape, particularly the rivalry between open-source and proprietary models. Key findings underscore the significant rise of open-source AI, driven by cost, customization, and control factors, and the continued dominance of OpenAI’s GPT-4 in corporate settings, indicating a diversified yet competitive market. Meta’s innovative ad updates signal a strategic enhancement of its ad ecosystem, proving its resilience and adaptability. Sheryl Sandberg’s departure marks a pivotal change, highlighting the ongoing evolution within Meta’s leadership. Despite the momentum of open-source AI, proprietary models remain powerful, suggesting a future where both will play crucial roles. Moving forward, stakeholders should watch trends in AI customization and the strategic movements of tech giants to fully leverage generative AI technologies’ potential.

6. Glossary

  • 6-1. Generative AI [Technology]

  • Generative AI refers to algorithms that can produce content such as text, images, and audio. Its importance lies in its applications across various domains, including digital content creation, automation, and innovation in artificial intelligence.

  • 6-2. OpenAI's GPT-4 [Product]

  • GPT-4 is a state-of-the-art generative AI model developed by OpenAI. It has achieved significant traction among corporate clients due to its advanced features and capabilities in natural language processing and generation.

  • 6-3. Meta [Company]

  • Meta, formerly known as Facebook, is a leading technology company focusing on creating social media platforms and related technologies. It has made notable advancements in the AI-driven ad space and remains influential in digital advertising and AI development.

  • 6-4. Sheryl Sandberg [Person]

  • Sheryl Sandberg is the former COO of Meta. She has played a pivotal role in the company's growth and strategic direction. Her departure from Meta and subsequent leadership initiatives are significant for industry observers.

7. Source Documents