Report: OpenAI explores ways to make money from ChatGPT with conversational ads – News

Artificial intelligence industry darling OpenAI Group PBC is reportedly mulling the idea of embedding advertisements into ChatGPT’s responses amid pressure from investors to start making money from the chatbot.

A report in The Information today suggests that OpenAI is already exploring possible ad formats and partnerships, with one of the favorite ideas being to integrate them within ChatGPT’s responses. While the initiative is still in the initial planning stage, it’s believed that the company sees ads as key to building a sustainable business model over the long term.

To date, OpenAI has struggled to monetize the immensely successful ChatGPT application. Its primary revenue stream comes from subscriptions, with the company charging “power users” $20 per month, but the vast majority of users don’t pay anything at all. In order to fund its extremely ambitious data center-building plans and satisfy investors who have poured multiple billions of dollars into the company, OpenAI needs to find a way to monetize these free users, and digital advertising represents the most obvious way to do that.

OpenAI simply has to find a way to generate revenue. ChatGPT has been amazingly successful, but the subscription fees it generates don’t even scratch the surface of the immense cost of the powerful infrastructure that supports it. Training large language models and performing real-time inference for millions of users globally requires vast computing resources, and it’s thought that the company is burning through hundreds of millions of dollars per month. If OpenAI can’t generate enough revenue to cover these costs, it’s ultimately destined to become the biggest failed venture in the history of the technology industry.

That explains why there are some very smart people trying to figure out the best way to extract money from ChatGPT’s millions of free users. According to The Information, which cites anonymous sources familiar with the company’s plans, it’s not going to try and clone the business model of rivals such as Google LLC and Meta Platforms Inc., which rely on AI algorithms to bombard users with sponsored ads in their search results and social feeds. Instead, it’s trying to monetize user’s actual conversations with ChatGPT.

Conversational recommendations

OpenAI’s ad strategy has been labeled internally as “intent-based monetization”, and instead of just providing answers to people’s questions, ChatGPT may evolve to start making recommendations on occasion, too.

In Google Search, the ad model is quite straightforward. If someone types “best running shoes”, the results will show multiple sponsored links from advertisers, as well as a few organic results that aren’t ads. In OpenAI’s vision, ads will appear much more naturally in the context of user’s conversations with ChatGPT. So if someone asks it for tips on how to run a marathon, the chatbot will provide basic advice on long-distance running and also suggest a local running clinic or a specific brand of running shoes or hydration packs.

OpenAI would be able to monetize this by taking a cut out of any purchases that stem from its product recommendations. Alternatively, it might let companies pay to be prompted within the chatbot’s decision-making logic, so when a scenario arises where a brand sells products or services that might be useful to the person engaging with ChatGPT, it’ll recommend them ahead of others.

For advertisers, one of the most appealing aspects of this model is that it will involve much less work on their part. The Information says OpenAI is exploring “generative ads”, where ChatGPT basically creates the ad itself, choosing which specific features of a product to mention. It would experiment with different ways of pitching different products to try and increase conversion rates.

In addition, OpenAI is also considering the idea of “sponsors”, where brands might be able to sponsor specific products and services within the GPT store. For instance, a brand that sells sauces might become the sponsor of a gourmet-chef GPT chatbot that generates recipes and cooking instructions. It would also have the opportunity to favor its own ingredients in the recipes.

The trust problem

The challenge for OpenAI is to integrate these “recommendations” into ChatGPT in such a way that it remains useful and continues to provide value for users. Most people trust ChatGPT as a neutral AI assistant that doesn’t have favorites. If that trust is eroded and users perceive it to be shilling different products and services, they may end up going elsewhere.

OpenAI Chief Executive Sam Altman therefore tasked the nascent ad team with ensuring that any ads in ChatGPT are just as helpful as the organic responses it generates, and they’ll also have to strike the right balance. If every single response ends up pitching a product or a service, users are going to get annoyed very quickly, so the ads must only be promoted in the right time and place.

It’s a tricky challenge but there is a powerful incentive for OpenAI to pull it off, for the value of the global advertising industry is expected to reach $1 trillion annually this year or next.

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