Is Microsoft’s Copilot push the biggest bait-and-switch in AI

Last month, millions of Microsoft 365 customers thought they were paying for Office. Instead, they got Copilot, whether they wanted it or not. This is the biggest bait-and-switch in the history of AI.

Let me explain.

Over a year ago, Microsoft launched Copilot Pro, an AI assistant embedded in its Office suite, with a $20/month price. The uptake apparently was abysmal. By October, they admitted that the way they were selling Copilot was not working out.?

So what did they do? They forced it on Microsoft users by including Copilot in Office, and hiking up subscription fees. Microsoft first made this change in Asia, then fully pulled the plug across the globe last month, impacting 84 million subscribers. To add insult to injury, Microsoft renamed the product to Microsoft 365 Copilot. You didn’t want to pay for Copilot? Well, now you are.

But it gets worse. Just before publishing this newsletter, we saw this Reddit post from a U.S. customer sharing the 365 price update email they received:

Thank you for being a valued Microsoft 365 subscriber. To reflect the value we've added over the past decade, address rising costs, and enable us to continue delivering new innovations, we're increasing the price of your subscription.

Effective February 14, 2025, the price for Microsoft 365 Personal subscriptions will increase from USD 6.99* per month to USD 9.99* per month. To continue with the new price, no action is needed — your payment method on file will be automatically charged. To make changes to your subscription plan or turn off recurring billing, visit your Microsoft account at least two days before your next billing date.

Nothing about Copilot, the original reason for the price increase they forced on subscribers in Asia last October. We also learned that there actually is a way to opt out of Copilot, but Microsoft is being cagey about it, according to The Register and first-hand accounts from customers on social media. Apparently, if a customer goes to their account page, they have the option to switch to a "lower cost without AI" subscription. Problem is that might not even show up as an option for all customers.

One UK-based Microsoft subscriber advised his followers on Bluesky to simply click “cancel” to make sure they receive the option to maintain their subscription without Copilot, if all else fails.

Not only is Microsoft’s Copilot rollout deceptive, it’s also embarrassingly disastrous.

This goes to show that even tech giants, including a major backer of AI pioneer OpenAI, can suffer the hype and competitive pressure surrounding AI. And it’s a stark reminder that what businesses should really be focused on instead is value — communicating it clearly and delivering it tangibly to customers. They need to see and feel the concrete benefits AI brings to the table before you ask them for money. Many customers aren’t seeing that value with Copilot, but Microsoft isn’t letting that stop them.

So what do consumers even think about using and paying for AI? To answer that question, we conducted a survey with The Harris Poll. Here’s what we found out:

First, AI usage is strongest among Gen Z (50%) and Millennials (43%) consumers, which bodes well for businesses looking for an audience in this space and doing some long-term thinking.?

Second, 70% of respondents said they wouldn't pay extra for GenAI-enabled features, which Microsoft found out.

But — and this is the third thing — if they were to pay for it, most respondents said they would prefer to pay only for their usage. Respondents also expressed preference for outcome-based pricing for AI — a model where customers pay based on tangible results, not usage or fixed subscriptions.

So what do you do? Well, there’s a good contrast to Microsoft’s approach — from Adobe.

Adobe took a different approach with its AI rollout last fall, resisting the temptation to immediately monetize its new video generator, instead using it to boost adoption and engagement. By positioning AI as a value-add rather than a paid extra, Adobe was playing the long game, building a loyal user base that would be ripe for future upselling once they experienced AI's benefits for themselves.

Yes, Adobe's stock still dropped 8% in December, partially due to concerns about how it is investing in and monetizing AI. But this isn’t the first time that Adobe took the long view. Remember, Adobe is one of the pioneers of the subscription model, a move that spooked Wall Street initially, and then was celebrated as a huge success.

So what do these two cases tell us about monetizing AI? Only time will tell, but the key is to focus on delivering value. When consumers see that value, then and only then will they pull out their wallets.

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Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.