Tech giants' dreams of AI price hikes meet resistance
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Illustration: Sarah Grillo/Axios
Recent moves by Microsoft and Google show many business customers are balking at forking over a separate fee each month to give employees access to a work-friendly AI chatbot.
Why it matters: Both companies previously expressed high hopes that businesses would be willing to pay an extra $20 or $30 per employee per month for access to AI tools alongside everyday productivity apps.
Driving the news: Google announced last week that it will include its Gemini Advanced chatbot for subscribers to Workspace, the bundle that includes Gmail and productivity apps like Google Docs and Sheets.
- At the same time, Google is hiking the price of its enterprise and business Workspace subscriptions by $2 per month.
Microsoft, meanwhile, announced a free AI option for businesses — Copilot Chat — that offers limited access to Copilot and access to AI-powered agents on a pay-as-you-go basis.
- Microsoft continues to offer its more full-featured and unlimited option — Microsoft 365 Copilot — for $30 per worker per month.
- Microsoft is also bundling Copilot into the home and family versions of its Office subscription product, while raising the price of that by $3 per month. The company had been testing that approach in Australia, New Zealand and parts of Asia.
Between the lines: For business leaders, the cost-benefit analysis for this kind of AI deployment is still tricky.
- You don't need to get a lot of extra productivity per worker to justify an additional $30 a month, considering how much the average worker is paid.
- On the other hand, without knowing for certain the benefits, $30 per employee per month is a significant expense — in the millions of dollars a year for companies with tens of thousands of employees
Running a small test to see what a department or team might gain from a specific use case is simple, but we don't yet know how to measure an entire company's gains from widely offering such tools.
- Rodney Zemmel, global head of McKinsey Digital, says that it often takes a long time to assess the impact of generalized productivity technologies, the category into which such AI tools fall.
- "It's really hard to measure the benefits from them," Zemmel said in an interview with Axios at the DLD Conference in Munich.
What they're saying: Jared Spataro, Microsoft's chief marketing officer for AI at work, told Axios that while some companies are willing to commit to full-scale deployments, others say they need to know ahead of time they can make it pay off.
- "Overall we are seeing increasing momentum," Spataro said. But, he added, "the response has been uneven."
- Spataro declined to offer specific numbers, noting Microsoft is in a quiet period ahead of its earnings report, slated for Jan. 29.
- "We believe AI isn't just an add-on — it's central to how work gets done," Google said in the blog post announcing its move. "Now, with AI seamlessly integrated into our product and pricing, we're excited to help everyone unlock their next chapter of innovation."
The big picture: Microsoft's suite of office tools is a mature product that brings in enormous revenue, and Google's is not far behind. Both companies are looking to AI as a lever to grow their income in this otherwise more static market. Investors have been excited, too.
What to watch: The key question is whether these companies have to abandon their hopes of revenue boosts from business chatbots.
- Spataro said he is optimistic, suggesting that companies are balking not over the cost but because they want to see tangible impact to the bottom line before committing.
- He pointed to the coming wave of AI agents as a new opportunity for revenue that isn't tied to the size of a company's human workforce.
- "We expect those agents are going to be consumption-based," he said, meaning that companies will pay for the work being done. "They will be doing work that people aren't."
