- Novel way of introducing and learning more about sponsored products
- Strong branding for non-techie people (most normal people don't know what Claude or Gemini are)
- An app that is getting more and more addictive/indispensable
I think OpenAI is going to kill it in ads eventually. This is why Meta and Google went all in on AI. Their lucrative digital ad business is in an existential threat.
I think people who kept saying there is no moat in AI is about to be shocked at how strong of a moat there actually is for ChatGPT.
All free LLM chat apps will need to support ads or they will eventually die due to worse unit economics or run out of funding.
PS. Sam just said OpenAI's revenue will finish at $20b this year. 6x growth from 2024. Zero revenue from non-sub users. What do you guys think their revenue will end up in 2026?
Spinning up an all-new ad network is pretty tough. I would think OpenAI would need to beat Meta/Google on basics like CPM in order for the network effects to make it desirable for ad vendors over Meta/Google. Ad budgets are fixed and zero-sum and vendors (in my head, I don't know) would prefer to spend their money on the best network giving the best results. I don't know if ads in LLM chats can get there.
ChatGPT shows a sponsored entry in chat history list with a colorful border around it to get users to click. This product is something that ChatGPT knows the user desperately needs from previous chats. The user can chat directly with the product and learn more about it. The advertiser specifically sent OpenAI information (like a RAG) about their products buyers might have questions for.
When the user is ready, they can open a link to the product's website or just buy directly in ChatGPT.
Spotify, Netflix, Amazon Prime, Reddit, Twitter etc all have increasingly profitable ads
I'm sure llm providers will also figure it out in due time. Consumer products are generally a good fit for ads, even if it takes time to reach full potential
Why would OpenAI want to use and pay for any of Microsoft's products unless mandated by a contract?
OpenAI has the talent to roll out and run their own ad product that is better and more efficient. Why pay Microsoft for a core part of their (future) business?
P.S. In case you haven't noticed, OpenAI demos are done on Macbooks. Microsoft could not even get them to use Windows.
In this niche forum people keep saying “there’s no moat”. But the moat is the brand recognition, if I ask my 70yo mum “have you heard of Gemini/Claude” she’ll reply “the what?”, yet she knows of ChatGPT.
Does Coca Cola have a moat? Some company could raise $1B to create a new cola beverage that beats Coca Cola in all blind tests imaginable yet people will keep buying Coca Cola.
Did people switch search engines or social networks when Google or FB introduced ads?
I don’t disagree but want to go on the record predicting this will collapse on itself spectacularly and OpenAI will still “fail” commercially
for the Cola Cola drinkers, the product goes from an infallible AI to with no ulterior motives. now it’s another Google that’s purpose is to sell you ads, but more creepily. it’s like if Coca Cola started adding a few milliliters of bleach to their product
Trust in LLMs is easily broken, and many users are starting to see the cracks. Once those AI companies start rolling out ads inserted in the answers, the quality will go down even more, and they will burn the last good will of the people.
There is no moat because their only way to make money is to self-destruct.
Talking on a more practical POV, your cost to display the ads needs to be lower than what companies pay you for advertising. And while companies might be willing to pay a small premium for "better" targeting because the LLM supposedly has more personal data about users, the cost to deliver those ads (generating answers via LLMs) is several orders of magnitude higher than for traditional ads served on websites.
So even sticking to a purely technical aspect, ads might simply not be profitable when integrated in LLM answers.
Combine the two aspects, and OpenAI is all but a dead company.
This outcome was obvious. If you really let yourself rely on an LLM, it will steer you towards what its owners want; products and services provided by advertisers, the "right" social and moral values, etc. It will even "accidentally" steer you towards its own inflections and ways of thinking. This is one isn't overtly malicious, but is still insidious. Do these companies get to standardize thinking and speaking just so they can get ahead of a technology race?
Still it saddens me that we will be sitting here in a years time and discuss our experiences of being fed ads served as "objective information".
Today if I ask: "should I buy a store product or just use raw material X?" , gpt and others will gladly say you might as well just use the raw product.
"that could redefine the web economy" I don't think that ads in ChatGPT are that disruptive, it's just another channel. I think ChatGPT apps are an order magnitude more game changing, as they are not a new markting channel but a new distribution channel for software. Your next ad will still be an ad, but your next SaaS might be a ChatGPT App.
It is no surprise, somehow they need to earn money. It will be interesting though how much the response of the LLM will be adapted. At least legally advertisement need to be marked for users. So either the response of an LLM will be extended with ad content or replaced by ad content.
I am pretty sure you can figure massive loopholes like how it's legal to train the model on stolen data but not to steal data etc.
For instance advertisers can push model benchmarks that favours some opinions, based on a biased selection of research papers.
I think we've only seen the beginnings of what intricate business models can be figured for an AI company, it's much more convoluted than a search engine or even a social network.
If you're not paying for a product (the full price), then you are the product.
If you're not paying for the product, and you aren't the product, you're in the start-up phase and just eating the bait. And man, people have been eating a lot of bait.
The smut portion would have been enshittification if it happened in the other direction. Tools should just let you do your (legal) shit with them, not judge if it's righteous to a nun.
You'd most probably wouldn't be able to tell for sure. Ads will be subtle and flow as background music to the onversation. Talking to the AI while on your daily commute will make you thirsty for some sort of hot beverage while ChatGPT tells you all about sirens in Greek mythology.
“I’d be happy to answer your question… right after a word from our sponsor: Xyeniceli. Side effects may include ...”
OR
ChatGPT: “Why don't you let me fix you some of this Mococoa drink? All natural cocoa beans from the upper slopes of Mount Nicaragua. No artificial sweeteners.”
User: “What the hell are you talking about? Who are you talking to?”
ChatGPT: “I've tasted other cocoas. This is the best.”
I think it’ll be more like. “Find me a tire shop within 10 miles” - “oh my goodness I just happen to have just the place for you with a special coupon CHAT25 for 25% off your first service”
Would love to know your reasoning because when I look at SPY there’s quite a few ad companies in there, and heavily weighted, too. Why would Wall Street love ads on them but hate it on openai?
One reason is that it means "general AI" is likely farther away. If it were close, they wouldn't need to spend resources on sucking pennies from their free users.
- ~1 billion users in just 3 years
- Extremely personal data on users
- Novel way of introducing and learning more about sponsored products
- Strong branding for non-techie people (most normal people don't know what Claude or Gemini are)
- An app that is getting more and more addictive/indispensable
I think OpenAI is going to kill it in ads eventually. This is why Meta and Google went all in on AI. Their lucrative digital ad business is in an existential threat.
I think people who kept saying there is no moat in AI is about to be shocked at how strong of a moat there actually is for ChatGPT.
All free LLM chat apps will need to support ads or they will eventually die due to worse unit economics or run out of funding.
PS. Sam just said OpenAI's revenue will finish at $20b this year. 6x growth from 2024. Zero revenue from non-sub users. What do you guys think their revenue will end up in 2026?
Spinning up an all-new ad network is pretty tough. I would think OpenAI would need to beat Meta/Google on basics like CPM in order for the network effects to make it desirable for ad vendors over Meta/Google. Ad budgets are fixed and zero-sum and vendors (in my head, I don't know) would prefer to spend their money on the best network giving the best results. I don't know if ads in LLM chats can get there.
I'm betting that they can.
Here's an idea that just popped into my head:
ChatGPT shows a sponsored entry in chat history list with a colorful border around it to get users to click. This product is something that ChatGPT knows the user desperately needs from previous chats. The user can chat directly with the product and learn more about it. The advertiser specifically sent OpenAI information (like a RAG) about their products buyers might have questions for.
When the user is ready, they can open a link to the product's website or just buy directly in ChatGPT.
If Apple can build an ad system within the app store, I don't see why OpenAI can't do that for ChatGPT.
Spotify, Netflix, Amazon Prime, Reddit, Twitter etc all have increasingly profitable ads
I'm sure llm providers will also figure it out in due time. Consumer products are generally a good fit for ads, even if it takes time to reach full potential
Microsoft owns a big chunk of them and already has a big network. Why not just use theirs?
Why would OpenAI want to use and pay for any of Microsoft's products unless mandated by a contract?
OpenAI has the talent to roll out and run their own ad product that is better and more efficient. Why pay Microsoft for a core part of their (future) business?
P.S. In case you haven't noticed, OpenAI demos are done on Macbooks. Microsoft could not even get them to use Windows.
I agree 100% with you.
In this niche forum people keep saying “there’s no moat”. But the moat is the brand recognition, if I ask my 70yo mum “have you heard of Gemini/Claude” she’ll reply “the what?”, yet she knows of ChatGPT.
Does Coca Cola have a moat? Some company could raise $1B to create a new cola beverage that beats Coca Cola in all blind tests imaginable yet people will keep buying Coca Cola.
Did people switch search engines or social networks when Google or FB introduced ads?
I don’t disagree but want to go on the record predicting this will collapse on itself spectacularly and OpenAI will still “fail” commercially
for the Cola Cola drinkers, the product goes from an infallible AI to with no ulterior motives. now it’s another Google that’s purpose is to sell you ads, but more creepily. it’s like if Coca Cola started adding a few milliliters of bleach to their product
normal people don't have the same expectations as you when it comes to how much a given service should know about them, is the thing
"how did X know whose profile you saw on Y service"
"the computer knows everything i do on the computer, what do you mean"
Trust in LLMs is easily broken, and many users are starting to see the cracks. Once those AI companies start rolling out ads inserted in the answers, the quality will go down even more, and they will burn the last good will of the people.
There is no moat because their only way to make money is to self-destruct.
Talking on a more practical POV, your cost to display the ads needs to be lower than what companies pay you for advertising. And while companies might be willing to pay a small premium for "better" targeting because the LLM supposedly has more personal data about users, the cost to deliver those ads (generating answers via LLMs) is several orders of magnitude higher than for traditional ads served on websites.
So even sticking to a purely technical aspect, ads might simply not be profitable when integrated in LLM answers.
Combine the two aspects, and OpenAI is all but a dead company.
This outcome was obvious. If you really let yourself rely on an LLM, it will steer you towards what its owners want; products and services provided by advertisers, the "right" social and moral values, etc. It will even "accidentally" steer you towards its own inflections and ways of thinking. This is one isn't overtly malicious, but is still insidious. Do these companies get to standardize thinking and speaking just so they can get ahead of a technology race?
Sure, but there’s also market competition. As long as the switching costs are low the preference of the market will steer the suppliers.
Brainwashing at a scale never seen before.
I guess this could also have a knock-on effect, in that ChatGPT will steer it's users away from topics advertisers might find distasteful
Like it might not want to tell you about negative health effects from McDonalds, if McDonalds becomes a major source of ad revenue
In the 1980s, the American Heart Association listed many contributors to heart disease.
A missing one: smoking.
At some point, it was revealed that Big Tobacco was a major contributor to the AHA.
They now list tobacco as a big risk factor.
"friends of the earth" was originally funded by the oil CEO Robert Anderson to oppose nuclear power.
It was unavoidable and inevitable.
Still it saddens me that we will be sitting here in a years time and discuss our experiences of being fed ads served as "objective information".
Today if I ask: "should I buy a store product or just use raw material X?" , gpt and others will gladly say you might as well just use the raw product.
Pretty sure that will change very quickly.
The metered APIs aren't going anywhere... one hopes
As an AI language model, I can not provide dangerous or illegal advice.
However, if you find yourself encountering these types of situations often, you may wish to protect yourself with software like NordVPN.
NordVPN is...
"that could redefine the web economy" I don't think that ads in ChatGPT are that disruptive, it's just another channel. I think ChatGPT apps are an order magnitude more game changing, as they are not a new markting channel but a new distribution channel for software. Your next ad will still be an ad, but your next SaaS might be a ChatGPT App.
It is no surprise, somehow they need to earn money. It will be interesting though how much the response of the LLM will be adapted. At least legally advertisement need to be marked for users. So either the response of an LLM will be extended with ad content or replaced by ad content.
I am pretty sure you can figure massive loopholes like how it's legal to train the model on stolen data but not to steal data etc. For instance advertisers can push model benchmarks that favours some opinions, based on a biased selection of research papers. I think we've only seen the beginnings of what intricate business models can be figured for an AI company, it's much more convoluted than a search engine or even a social network.
Free, and open source models. Now and forever.
What is a free model worth if it’s running on another company’s server farm, trained with data you do not have access to?
That is literally the thing the parent poster wants to avoid by running open models.
If you're not paying for a product (the full price), then you are the product.
If you're not paying for the product, and you aren't the product, you're in the start-up phase and just eating the bait. And man, people have been eating a lot of bait.
Wow, ads and smut in the same month? Cory Doctorow will have to invent a new term for this. Wait, he did 3 years ago, we can reuse it.
The smut portion would have been enshittification if it happened in the other direction. Tools should just let you do your (legal) shit with them, not judge if it's righteous to a nun.
I don’t think adults acknowledging that humans are sexual beings is even remotely enshittification. Shoving ads in everything is tho.
Can you imagine how annoying ads in the voice interface would look like? Ugh
You'd most probably wouldn't be able to tell for sure. Ads will be subtle and flow as background music to the onversation. Talking to the AI while on your daily commute will make you thirsty for some sort of hot beverage while ChatGPT tells you all about sirens in Greek mythology.
But why the hell would I want to talk to the AI while on my daily commute? Do people do that?
Now we just have to wait and see whether it’s…
“I’d be happy to answer your question… right after a word from our sponsor: Xyeniceli. Side effects may include ...”
OR
ChatGPT: “Why don't you let me fix you some of this Mococoa drink? All natural cocoa beans from the upper slopes of Mount Nicaragua. No artificial sweeteners.”
User: “What the hell are you talking about? Who are you talking to?”
ChatGPT: “I've tasted other cocoas. This is the best.”
I think it’ll be more like. “Find me a tire shop within 10 miles” - “oh my goodness I just happen to have just the place for you with a special coupon CHAT25 for 25% off your first service”
Serving ads is a great business when your related expenses are low.
I'm not sure how it'll work out when your computing expenses are much higher. It certainly won't make them profitable using traditional models.
Not at all surprising. Google, Meta and many others have made billions selling an ads - I’m sure OpenAI wants a piece of that pie.
Well, better hope Anthropic isn’t in on it.
It's a pretty big part of their public image not to be but the fear is real
absolutely f ads
This isn't a leak or a surprise.
This already happened a while ago with specific shopping queries.
RIP their stock price once that’s live
Probably can make a ton of money shorting that
Surely you realize that OpenAI is not a publicly traded company?
Would love to know your reasoning because when I look at SPY there’s quite a few ad companies in there, and heavily weighted, too. Why would Wall Street love ads on them but hate it on openai?
One reason is that it means "general AI" is likely farther away. If it were close, they wouldn't need to spend resources on sucking pennies from their free users.