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The Takeaway

In its initial rollout of ads, OpenAI is charging prices that rival those for coveted video programs like the NFL, and well above what rivals such as Meta Platforms’ social media apps charge.

But unlike Meta or Google, OpenAI won’t be providing detailed information about the query responses accompanying their ads or whether ads prompted ChatGPT users to take an action, like buying something or looking up a website. OpenAI could introduce that data over time, but it will need to incorporate more-sophisticated ad tools that could take time to set up. That highlights the work that likely remains for OpenAI to build an ad business that could compete with the biggest sellers of ads.

OpenAI has told early advertisers that it will give them data about impressions, or how many views an ad gets, as well as how many total clicks it gets, a media buyer working with some of the advertisers said. Advertisers will get high-level insights like total ad views, an OpenAI spokesperson confirmed. That’s similar to what TV networks offer.

But a major reason why Google and Meta have overtaken the TV industry to become the biggest ad sellers in the past 20 years is that they offer advertisers detailed information that allows marketers to measure what they get for their ad spending.

Over time, advertisers will expect OpenAI to start using sophisticated ad technology that gives advertisers more targeted information about the ChatGPT users seeing their ads, and about whether an ad leads to a purchase.

“When you have a nascent ad product and you have demand, you kind of don’t have to do those things,” said Olivia Kory, chief strategy officer at marketing analytics firm Haus, and a former marketing executive at Netflix and Quibi. “As the product evolves, there will probably be more advertiser pressure.”

OpenAI announced earlier this month that it will start putting ads in free and lowest-cost versions of ChatGPT in the coming weeks, a rollout that comes as the company is trying to raise tens of billions in fresh cash. Selling ads is a key part of its efforts to generate $11 billion in annual revenue from nonpaying ChatGPT users by the end of next year.

To line up the first batch of ads, OpenAI’s enterprise partnerships team reached out directly to several potential advertisers, as opposed to approaching them through their ad agencies, the media buyer said. Some of the advertisers that signed on include existing business customers of OpenAI, the media buyer said, and large, well-known companies across a range of categories, the media buyer said. By comparison, Meta and Google rely heavily on small businesses to buy their ads.

For its initial ads, which will appear below ChatGPT responses, OpenAI is targeting a price of roughly $60 for every 1,000 views an ad gets, the buyer said. That rate is on par with targeted streaming and premium TV inventory such as live NFL games, analysts say. Meta’s cost per 1,000 views, by comparison, is typically less than $20.

Some advertisers will likely be willing to pay ChatGPT’s asking price for early batches of ads, given its large user base and the belief that its chats offer unusually strong clues as to what those users are interested in, analysts and marketing executives said. The open-ended searches people tend to use on ChatGPT, like “good suitcase for travel,” appeal to advertisers because they indicate users don’t have a specific brand in mind when searching.

Still, many advertisers will likely hold off on devoting significant parts of their budgets to ChatGPT ads until they see whether those ads are driving sales. The initial ads are a starting point, and OpenAI may change its approach after it begins testing, The Information previously reported.

“The most important thing that ChatGPT has to build next year is the connection to the lower funnel—the connection to the sale,” said Brian Stempeck, founder of AI marketing startup Evertune AI and a former executive at ad tech firm The Trade Desk.

It’s not unprecedented for a company to launch ad sales before building up the technology to improve what it offers marketers. Around a decade ago, Facebook started adding tools showing whether ads led to clicks, app downloads or purchases, even though it largely sold its ads based on views.

“That’s the story of Facebook back in the day. They spent their first several years positioning themselves on reach and impressions,” said Andrew Lipsman, an advertising and commerce analyst. “And then they just totally changed course in 2015, and that’s when the business took off.”

The OpenAI spokesperson said the company has built out a dedicated ad sales team as it works to build the business, and that OpenAI had used its enterprise partnership team to embark on advertiser outreach. The pilot isn’t limited to existing OpenAI clients, the spokesperson said.

The company is in the early stages of using major ad agencies, which often plan long-term media spending for large brands, to recruit new advertisers, a second advertising industry source said. OpenAI is also not yet working with ad tech firms to sell or manage ad placements, the media buyer said.

“You can get that test budget no problem, but if you want to get to $10 billion, $15 billion, that’s where you’re doing a joint business plan with Omnicom and with Coca-Cola,” Stempeck said.

Another way OpenAI could eventually offer clearer ad outcomes is by tying ads more closely to a checkout feature it started adding inside ChatGPT in September. In theory, combining ads with in-chat checkout could pave the way for shoppable ads.

For now, OpenAI’s checkout feature offers a way to generate revenue when ChatGPT leads directly to a sale—instead of paying for clicks or impressions, merchants pay a commission when a purchase is completed. Starting this week, most U.S. merchants using Shopify will be able to opt in to selling their products through ChatGPT, in exchange for paying OpenAI a 4% cut of sales after a free trial period.

The initial checkout rollout has in part targeted smaller online shops and direct-to-consumer brands, which tend to rely heavily on digital ads from Meta and Google as well as ads on Amazon to drive sales. The Shopify integration makes it easy for those merchants to test the channel, said Kory, who works with direct-to-consumer brands including Mejuri and Jones Road Beauty. “If it’s kind of like flipping the switch, then they’ll try anything,” Kory said. “It’s so easy and low risk.”

Still, buying goods inside chatbots represents a new form of online shopping rather than an ingrained habit, and some brands are skeptical that ChatGPT checkouts will drive meaningful sales.

“If somebody’s looking up protein bars on ChatGPT, is that high intent? Are they just doing research?” said Yoga Acharya, president and chief operating officer of protein bar brand Mezcla, which does most of its online sales through Amazon.

“My [customer acquisition costs] are through the roof on Amazon,” Acharya said. “But it’s a very high-intent purchase, because people are going there explicitly to buy.”