Embedded vs. standalone AI: which one wins?
The biggest shift in AI product strategy? It’s not the model. It’s where the intelligence lives.
Spellcheck didn’t win as a standalone app—it won inside Word.
AI’s heading the same way: embedded UX is eating standalone apps alive.
We’re entering an era where the interface is the differentiator—and embedded AI has a massive lead. Not because it’s technically superior, but because it’s invisible. Frictionless. Everywhere users already are.
Standalone apps? Most are drowning in cognitive overhead and clone wars.
But embedded UX? It scales like crazy—until the platform pulls the rug.
Embedded wins on friction, moats, and retention
Users don’t want another tool. They want superpowers inside the ones they already use. That’s why Grammarly thrives—not by dragging you to a new app, but by showing up in your Google Docs. Why Notion AI monetized quickly—because it lives where work happens.
New micro-models and open APIs make embedding cheaper and easier than ever. Meanwhile, standalone tools face brutal competition from free clones and commoditization.
🧠 Question: When was the last time you kept a standalone AI tool longer than a few weeks?
But if embedded wins… do existing giants win by default?
Here’s the paradox I keep wrestling with: if embedding is the dominant UX, don’t incumbents have an unfair advantage?
Slack AI has 32M daily users. Microsoft can roll Copilot into Office, Teams, GitHub. Salesforce can layer AI across every workflow it owns.
But platform scale doesn’t guarantee great UX. Early versions of Teams bots or Salesforce’s Einstein tools often felt bolted-on—functionality without flow. BigCos can ship fast, but not always elegantly.
And not all platforms play nice. Zoom’s 2023 API changes squeezed some third-party apps. Epic’s walled garden limits innovation. Platform access is a moat—until it’s not.
The hack: how startups can still win the embedded game
You don’t have to own the platform. You just have to ride it smarter.
Browser extensions (like Grammarly) sneak into any text box.
Open APIs (like Zapier AI) let you show up wherever workflows live.
Vertical focus (AI for CRM inside HubSpot) lets you embed with purpose.
💡 Example: GitHub Copilot didn’t own the IDE. It just made VS Code better—and built a $100M+ ARR business doing it.
Or Honey, pre-acquisition. Technically a plugin. Functionally embedded into commerce flows. Invisible, useful, $4B exit.
🧠 Question: What’s the next plugin that quietly becomes a category-defining company?
The risk: platform dependency
Embedding creates stickiness. But also risk.
If Slack or Zoom changes their policies, your product can get throttled overnight. Facebook’s Open Graph. Twitter’s API. Apple’s App Store policies. History is full of lessons.
That’s why smart builders hedge:
Go multi-platform early (like Grammarly)
Build proprietary data or distribution (like Zapier)
Control your core UX, even if you’re embedding into others’
Embedding is high-leverage—but it’s not without strings. Know who holds the keys.
So… who makes the money?
In the short term? The giants.
But in the long run? The startups that embed smarter, hedge harder, and scale faster.
The most successful embedded AI products are:
Closing enterprise deals faster
Monetizing through value-add upsells
Riding inference scale without owning foundation models
Embedding isn’t just a UX decision. It’s a monetization engine.
A growth strategy. A strategic moat.
🧠 Call to Action:
If you’re building embedded AI into real workflows—pitch me.
I’m a generalist investor looking across the board, from dev tools to CRM to vertical software.
TL;DR
Standalone AI apps face churn, friction, and pricing pressure.
Embedded UX wins on adoption, retention, and scale.
Incumbents have advantages—but slow, sloppy execution leaves openings.
The smartest startups embed deep and hedge early.
Embedded vs standalone?
The answer’s clear.
But the next winner? That’s still in play.