OpenAI Lines Up Advertisers, Reveals Key Details Ahead of Ads Launch
The Takeaway
- OpenAI to launch chatbot ads in February, charging based on ad views.
- Initial advertisers asked to commit under $1 million; self-service ad buying is planned.
- Ad push aims to boost revenue amid OpenAI fundraising effort.
OpenAI has started offering its new chatbot ads to dozens of advertisers, according to two people familiar with the matter. To start off, the company is charging on the basis of ad views as opposed to per-ad clicks that are typical at large sellers of search ads like Google and Amazon, the people said.
OpenAI is asking that small pool of advertisers for less than $1 million in spending commitments each over a several week trial period, with ads launching in early February, the people said. The company does not yet offer technology for advertisers to easily buy ads themselves, but is working on getting self-service ads up and running, the people said. While OpenAI announced last week it would start testing ads in ChatGPT, it did not reveal the pricing details.
The tightly managed rollout comes as OpenAI is trying to grow revenue from ads and shopping without alienating people who might find chatbot ads intrusive or distasteful. Quickly building an ad business could strengthen OpenAI’s pitch as it tries to raise as much as $100 billion from investors, an unprecedented amount for a private company.
Advertisers and agency executives said they have been intrigued by the prospect of buying ads that appear in ChatGPT, thanks to weekly active users of about 900 million and because the personalized nature of user chats could make ads more effective.
OpenAI last week gave examples of what the ads could look like, such as an ad showing a particular sauce brand when a user looks up a recipe. The company said it will show ads to U.S. users of the free version of ChatGPT as well as to those paying $8 per month, a tier the company just added in the U.S. It said ads would appear within weeks.
Still, the company didn’t explain the details of how ChatGPT ads would be priced and sold, or how soon they would be widely available to buyers, which many advertisers had been keen to learn. And behind the scenes, it had largely kept a lid on details to advertisers. Five people working on buying ads at major ad agencies said they’d been reaching out to OpenAI about ads ahead of the Friday announcement, but hadn’t heard any response.
While OpenAI is starting by charging on the basis of views, the company may change this approach after it begins testing, said one of the people. Major search advertising companies like Amazon and Google generally sell ads on a cost per click model, charging for ads based on whether the user clicks on the ad. Social media firms like Meta charge on the cost per impression basis that OpenAI is using.
Which model will be the most lucrative approach for chatbot ads is something of an open question as the rise of conversational AI changes how people interact with the broader internet. Brands that noticed traffic declines in the past year haven’t resulted in declines in revenue, The Information previously reported, suggesting the people who are still visiting after researching using AI could be more likely to make a purchase.
OpenAI had previously told investors it would generate about $2 billion this year and nearly $11 billion next year from new products from non-paying users, such as ad and shopping revenue. But even if OpenAI opens the ad sales up more broadly, advertisers typically start testing ads in small amounts before they reallocate significant parts of their budgets to new ad types.
It is not clear which advertisers OpenAI has been targeting for its launch. Separate from ads, OpenAI has already partnered with large brands such as food delivery company DoorDash and Walmart on enabling shopping features. Spotify and Zillow also partnered with OpenAI to enable users to use the apps’ features directly in ChatGPT.
OpenAI has also enlisted Shopify, which sells software to millions of online shops including brands like Away and Glossier, to support the ChatGPT checkout feature the company announced in September.
OpenAI’s ad effort is overseen by CEO of Applications Fidji Simo, according to one of the people. Simo is a former OpenAI board member who was the CEO of Instacart and previously an executive at Facebook. Applications CTO Vijaye Raji leads a team responsible for the ads effort, and he works closely with ChatGPT head Nick Turley, said the person.