Dylan Patel

Two is if you are a SaaS business and your customer acquisition cost remains the same, and most businesses in AI and in SaaS are going to remain having a high customer acquisition cost.

Sales is hard.

Breaking into a company is hard.

But now you add this AI part of it

you've now added a humongous COGS.

Your cost of goods sold in any AI software is really hard and really big.

And this is partially why I think Google also has an advantage.

They have the lowest cost of goods sold for any token of any company because they have their own vertical stack on TPUs.

But anyways, coming back to this, because you have this high customer acquisition cost and you have this high COGS,

And then the cost of anyone developing it themselves or competitors in the market means you're going to have a very fragmented SaaS market or they're just going to build it themselves.

And therefore, you never hit the escape velocity where your customer acquisition costs and your R&D get amortized.

And because you have such a high COGS, the amortization point means your net profitability is actually much worse.

And so I think the era of like software-only businesses is really, really tough in the age of AI.

Now, already scaled businesses can do great.

I think YouTube is going to have its glory days.

And I'm sure it'll always be amazing.

But with the cost of generation of content falling and falling and creating content, he who controls the platform is going to win and win and win and win.

The functionality you build within Salesforce is actually going to be like way less.

or like what you can build on your own, like, or whatever it is.

I'm not saying it's a take on Salesforce itself specifically, but I think many software businesses will have a reckoning with the fact that their COGS is going to soar, their customer acquisition cost isn't going to fall, and they have a lot more competitors.