"She didn't spell out what she meant by ARR. One meaning, annual recurring revenue, can be a reliable, if hard-to-calculate, indicator of a company's future fortunes, measuring present (and likely future) spend from committed customers. But the abbreviation can also have a much looser sense, annual run rate, which is typically calculated as the best or most-recent month's revenue multiplied by 12 - an easily inflated measure of performance for fast-growing companies like OpenAI, or those with more volatile month-to-month performance."
"Most notably, Friar did not say whether OpenAI's ARR, by either definition, matched or exceeded its costs, key for the company's long-term survival. The bottom line If OpenAI is counting on advertising to bolster its bottom line, the bottom line is exactly where they will appear during the test phase, as the company intends to add them at the end of answers in ChatGPT, clearly labelled as "Sponsored" and separated from what it calls the "organic" answer written by its AI model."
ARR has two meanings: annual recurring revenue and annual run rate. Annual recurring revenue measures present and likely future spend from committed customers and can indicate future fortunes, though it is hard to calculate. Annual run rate is typically calculated as the best or most-recent month's revenue multiplied by 12, which can be easily inflated for fast-growing or month-to-month volatile companies. Whether OpenAI's ARR, by either definition, matches or exceeds its costs remains unspecified, which is key for long-term survival. OpenAI plans to test advertising appended to ChatGPT answers, labeled "Sponsored" and separated from "organic" responses.
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