TheChek News Flow

The Takeaway

OpenAI plans to start pricing some ChatGPT ads based on whether people click on the ads rather than just how many people see them, an agency executive who spoke with OpenAI employees and works with ChatGPT advertisers said.

At the same time, OpenAI has also indicated it plans to introduce ads aimed at getting people to take a specific action, like making a purchase or downloading an app, the agency executive said, though it hasn’t put a firm timeline on when that could happen. The discussions reflect OpenAI’s efforts to make ChatGPT more appealing for marketers as it chases its ambitious growth targets and looks to challenge Meta Platforms and Google.

OpenAI, which started showing ads in ChatGPT in early February, has so far only provided early advertisers with aggregated data such as impressions, clicks and spend. Digital ad giants Meta and Google, by contrast, provide more information on who sees ads and whether they lead to purchases.

Marketers have said it’s difficult to tell if ChatGPT’s early ads are working and likely need stronger tracking and measurement tools from OpenAI before they’ll move beyond small, experimental ad spending. Offering pricing on a per-click basis would let advertisers pay when users engage with an ad, while conversion-oriented ad campaigns could let them optimize spending toward actions like purchases.

“A lot of clients who would have the budget to want to test on a new surface are holding back and are tentative because they don’t think they’re going to be able to get the measurement that they want out of it,” said Ben Kahan, head of the programmatic practice at marketing agency Brainlabs.

OpenAI began testing ads in early February for logged-in U.S. users of the free and lowest-priced version of ChatGPT, and so far the rollout has been slow. The company has extended the pilot period for its earliest advertisers past the end of March because it hasn’t shown ads often enough to exhaust the initial spending commitments, two people managing ChatGPT ads on behalf of advertisers said.

OpenAI is also selling some ads for less than it initially wanted. It targeted a cost per thousand impressions, or cost per mille, as high as $60, on par with premium ads like those on streaming TV. But one media buyer working with a handful of early ChatGPT advertisers said some of their clients had paid CPMs ranging from $15 to $25, likely reflecting limited competition for ad inventory.

An OpenAI spokesperson said the company is exploring different approaches to understand what creates real value for users and advertisers and will continue to iterate.

Design Capabilities

OpenAI told investors in the first quarter that it expects $2.4 billion in ad revenue this year and $11 billion in 2027. If it met next year’s target, that would make it far bigger than long-established ad sellers like Snap and Pinterest. In a blog post in late March, OpenAI said the pilot had reached more than $100 million in ARR in six weeks, though it did not define how it calculated that metric.

And in recent weeks, OpenAI staffers have signaled to marketers their intention to make the ChatGPT ad offering more competitive with the big digital ad giants.

OpenAI has told some advertisers that it will allow them to run ad campaigns that charge advertisers based on the number of clicks their ads get within the coming days, the agency executive who spoke with OpenAI employees said. That offering would be alongside its existing model that charges based on how often ads are shown.

While the company has also discussed setting up ways for advertisers to run more action-oriented ads in the near future, how quickly it could roll out those capabilities is less clear. That expansion is also likely to require OpenAI to build or partner on tools to better track what ChatGPT users do after seeing an ad, such as tracking whether they go on to make a purchase.

In recent weeks, OpenAI has already started giving some advertisers access to a portal where they can manage ad campaigns themselves, the two people managing ads on behalf of advertisers said. That’s an upgrade from the manual processes involving spreadsheets and phone calls it had relied on earlier. It has also partnered with outside firms including advertising technology company Criteo, which help sell ads on its behalf.

As it looks to broaden its ad business, OpenAI has started to sign up some advertisers on a month-to-month basis, asking for monthly commitments of between $30,000 and $50,000, said Jai Amin, chief solutions officer at marketing agency Jellyfish, which has a range of clients buying ChatGPT ads. That’s a shift from OpenAI’s earliest deals, where it asked for up-front commitments of at least $200,000 to spend by the end of the first quarter.

Lingering Limitations

OpenAI advertisers still see other areas for improvement. For one, they have limited control over where their ads appear. Right now, instead of trying to line up ads with specific searches or types of users in ChatGPT, OpenAI is asking advertisers for broad keywords to give guidance on where it makes sense to show their ads, agency executives said.

But because each ChatGPT response is unique, it’s difficult for advertisers to ensure their ads will show up in response to certain prompts, even if the answers reference topics advertisers have listed. “It’s not a true keyword targeting strategy. Every prompt looks different,” said Alyson Scacciotti, senior director of digital investment at Jellyfish.

And for some marketers like Kahan, the uncertainty regarding what kinds of responses brands’ ads could appear next to is a turnoff.

“The same question can be answered in a thousand different ways,” he said. “From what we can tell, there are very limited tools that we have at our disposal to make this brand safe. Brand safety is really, really important and something that we really take very, very far with our clients, and we want to have everything watertight.”

The ChatGPT ads’ appearance, which so far only includes short headlines and a small image, is also basic compared to digital ads available elsewhere.

“It’s quite old-school in terms of what the formats are right now. And I think we should expect that to evolve quite quickly so that one, it keeps up pace with other formats—video et cetera—that the other platforms are doing. But also, I think there’s an opportunity there. Why can’t they be a bit more radically different from the other platforms?” Jellyfish’s Amin said.