The world’s biggest tech firms are potentially missing out on billions in revenue, with fresh research finding that while around 1.8 billion global consumers now use AI tools every month, 97% of people use them for free.

Menlo Ventures’ latest The State of Consumer AI report estimates that in the two and a half years since ChatGPT first hit the tech scene, more than half a billion people around the world now use AI every day, but while no one can argue with it’s rapid adoption, so far not many users feel the need to go beyond free services.

The study found that since late 2022, a $12 billion (£8.7bn) global AI market has formed. While that looks to be a stratospheric ascension for a technology that until then was mostly relegated to sci-fi movies, it is still far short of the sum that might be expected considering how many people use AI on a regular basis and the sheer amount that’s already been invested in its success.

Extrapolating data from a survey of more than 5,000 US adults to find out where value is leaking, Menlo’s report found that AI firms are missing out on huge opportunities thanks to gaps in their business models.

According to the data, almost one in five (19%) of consumers use AI tools every day, which when expanded out to global AI users, taking into account discrepancies in internet access, age distribution, and regional AI adoption rates, means that somewhere around 500-600 million people are likely plugging into AI every single day.

Despite the multibillion-dollar market that has created, only around 3% of those users pay for premium services, a strikingly low conversion rate and one Menlo described as the ‘largest and fastest-emerging monetisation gap in recent consumer tech history’.

Menlo found that even the world’s most recognised AI ‘brand’, ChatGPT, only manages to convert around 5% of its reportedly more than 600 million monthly active users into paying subscribers, reducing its potential revenue from the tens of billions to the hundreds of millions.

In another blow to niche AI developers, the study also suggests that despite countless specialised apps to choose from, most of which come with a price tag, consumers are much more likely to stick with familiar general AI assistants.

The report discovered that 91% of AI users reach for their favourite AI tool for nearly every task, with consumers not overly concerned with distinguishing between technologies like chatbots, voice assistants, writing assistants, or even the underlying algorithms behind them, instead lumping everything into one big ‘AI bucket’.

Menlo’s report suggest that because of this knee-jerk consumer reaction, first-mover advantage and built-in distribution currently stand as the most likely driving force behind tech firm’s market shares, but as the underlying technology progresses and the public becomes more AI savvy, this is likely to change.

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However, a growing number of consumers (60%) now say that they supplement general AI assistants with more specialised tools, leaving high frequency ‘white space opportunities’ for smaller AI developers to move in.

For example, the study found that just 16% of people currently use AI to help pay household bills and just 18% use AI for personal learning, even as 80% of people in both instances use digital technology for both purposes.

Rather than attempt to outdo AI giants like OpenAI and Google, Menlo suggests that tech founders should instead focus on closing the gap by delivering specific tools for high-trust tasks that support the need for premium products, ones that discourage customers from switching due to the sunken costs involved in personalisation.