OpenAI has four fundamental strategic challenges
OpenAI is a pioneering AI company that has attracted significant investment and is developing products. However, there are doubts as to whether OpenAI can invent something better than other companies. Analyst Benedict Evans pointed out that 'OpenAI has four fundamental strategic challenges.'
How will OpenAI compete? — Benedict Evans
The first challenge OpenAI faces is that its current business lacks a strong, clear competitive lead. While OpenAI pioneered conversational generative AI tools with ChatGPT, Evans said, 'Engagement and retention are very shallow, and at this point, the company doesn't offer a clear path to converting that user base into a sustainable one.' Furthermore, OpenAI doesn't have a consumer product that has achieved ' product-market fit, ' which refers to a state in which the product is accepted and established in the right market.
As of 2026, the capabilities of competitive cutting-edge models will be roughly equal, with rankings changing every few weeks. While there will be cases where the competition is fragmented, such as Meta temporarily dropping out, Apple and Amazon not yet at the cutting edge, and Chinese companies six months behind the cutting edge, it is inevitable that they will eventually all be on the same playing field, and there is no visible mechanism by which one company can build a lead that others will never be able to catch up to.
Second, over the next few years, as the market evolves, AI experiences, products, value capture, and strategic leverage are expected to change dramatically. Major companies and thousands of entrepreneurs are stepping up their game, creating new capabilities, experiences, and business models—and in the process, turning the underlying models themselves into products. 'OpenAI, which sparked the LLM boom, now has to invent something entirely new—or at least fend off, co-opt, or absorb the thousands of players trying to do so,' Evans said.
The only area where OpenAI has a clear lead is in user base, which is estimated at 800-900 million, but ChatGPT is not yet generating user engagement, with only 5% of users said to be paying subscribers and 2025 usage data showing 80% of users sending less than 1,000 messages per year.
Third, and this is true across industries, OpenAI, like other companies, must compete in one of the most capital-intensive industries in history without relying on cash flow from existing businesses.
The fourth problem is that technological innovation is meaningless if it cannot be turned into a product. OpenAI is trying to outdo other companies with its proprietary browser, advertising integrated into chat interfaces, and a new AI device that it is planning to create with the help of iPhone designer Jony Ive, but Evans doubts whether such products have the power to attract users. In the end, no company has yet secured a 'product that can maintain its advantage' like Windows, Google Search, iOS, or Instagram.
Evans pointed out, 'In the future, AI infrastructure may become an oligopolistic industry like aviation or semiconductors. Fixed costs may increase and the number of companies entering the market may be limited. However, this does not lead to companies gaining unique advantages.'
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