OpenAI's "advertising model" has begun to take shape

OpenAI is quietly exploring new commercial paths for its flagship product ChatGPT, planning to introduce advertising to create new revenue streams, a move that could reshape the trillion-dollar digital advertising market dominated by Google and Meta. On December 24, The Information reported, citing informed sources, that OpenAI is internally discussing adjustments to its AI model to prioritize sponsored content in its responses and has begun developing internal models for how ads will be presented in ChatGPT. This marks a significant step in the company's planning phase as it explores advertising business details. Proposals discussed include prioritizing the insertion of sponsored content in ChatGPT's responses when users make relevant queries. Additionally, internal models created in recent weeks have showcased various ad presentation methods, such as displaying sponsored information in a sidebar of the main response window. This aims to convert ChatGPT's massive user traffic into direct revenue, challenging the market positions of existing digital advertising giants. An OpenAI spokesperson responded, stating, "As ChatGPT becomes more powerful and widespread, we are looking for ways to continue providing more intelligence for everyone. As part of this, we are exploring what advertising might look like in our products." The spokesperson emphasized that any proposals will be based on respecting users' trust in ChatGPT. New Type of Advertising: Seeking Seamless Integration Unlike simply replicating existing models of social media or search ads, OpenAI aims to create a new type of digital advertising. According to someone familiar with the work, the company hopes to leverage the vast amount of interest information collected from detailed user chats to display ads that are highly relevant to user intent. A focus of the internal discussions is how to present ads without compromising user experience and trust. The proposals being evaluated by employees lean towards "non-intrusive" advertising, ensuring that users do not feel overwhelmed by sponsored content in their chats. For example, ads may only appear after users reach a certain stage in their conversation. One internal model illustrated this idea: when a user asks ChatGPT to plan a trip to Barcelona, the chatbot might recommend the Sagrada Familia. This recommendation itself is not sponsored. However, if the user clicks on a related link for more information, the system might pop up a window containing sponsored links from multiple paid travel service providers. Monetization Pressure and Market Opportunities Behind the exploration of advertising business is OpenAI's immense monetization pressure and commercial ambition. Since its launch in 2022, ChatGPT's weekly active users have surged to nearly 900 million, but as of October this year, only about 5% are paying users, either $20 or $200 per month. Introducing advertising would bring substantial revenue from the large free user base. According to OpenAI's earlier predictions this year, starting next year, the average annual revenue per user from "monetizing free users" will be $2, increasing to $15 by 2030. The company expects that by 2030, total revenue from non-paying users will reach approximately $110 billion, with gross margins comparable to those of Meta Platforms' Facebook, reaching 80% to 85% This move will allow OpenAI to directly enter the global digital advertising market dominated by Google, Meta, and Amazon. According to advertising research firm WARC, these three companies account for about 60% of the global market share (excluding China), with total advertising revenue expected to approach $560 billion this year. Michael Morton, an e-commerce analyst at MoffettNathanson, stated that the conversational format of ChatGPT effectively captures user attention, "making it an incredibly promising advertising platform." Balancing Trust and Commercialization For OpenAI, advertising has always been a sensitive topic. There are concerns within the company that it could undermine user trust in its responses, and some employees believe that commercial advertising contradicts the company's grand goal of achieving Artificial General Intelligence (AGI). CEO Sam Altman stated last May that advertising would be a "last resort." However, over time, Altman's stance has softened. In a podcast earlier this October, he mentioned, "I find advertising a bit annoying, but not entirely unworkable." This shift reflects the company's balancing act between maintaining high operational costs and seeking a sustainable business model. Paving the Way for E-commerce, Advertising Still in Early Stages While discussions about the advertising business are ongoing, OpenAI's actions indicate that it is still laying the groundwork for commercialization. The company has gradually added shopping features to ChatGPT, including a checkout function built in collaboration with payment processing company Stripe, as well as partnerships with companies like Shopify, Zillow, and DoorDash to integrate e-commerce, real estate, and food delivery services into the chat experience. These e-commerce features not only help cultivate users' AI shopping habits but also provide OpenAI with up-to-date merchant data, which is crucial for precise ad targeting and performance tracking in the future. However, OpenAI's advertising business is still in a very early stage. According to The Information, an internal "code red" event prioritized improvements to ChatGPT's core features, delaying work related to advertising. Meanwhile, although advertisers and brands are keen to place ads on ChatGPT, five advertising and brand marketing executives revealed that they have yet to receive any specific information from OpenAI regarding paid advertising