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It's sort of hard to judge this. The article mostly focuses on ChatGPT uses, but hard to say if ChatGPT is going to be the main revenue driver. It could be! Al

It's sort of hard to judge this. The article mostly focuses on ChatGPT uses, but hard to say if ChatGPT is going to be the main revenue driver. It could be! Also unclear if the underlying report is underconsidering the other products. It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. There will be challenges in capturing it and challenges with user trust, but it seems super promising because it will likely be harder to block and has a lot of intent context that should make it like search advertising++. And for context, search advertising is 40% of digital ad revenue. Seems like the error bars have to be pretty big on these estimates.

disgruntledphd2 10mo ago
> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. There will be challenges in capturing it and challenges with user trust, but it seems super promising because it will likely be harder to block and has a lot of intent context that should make it like search advertising++. And for context, search advertising is 40% of digital ad revenue. Yeah, I don't like that estimate. It's either way too low, or much too high. Like, I've seen no sign of OpenAI building an ads team or product, which they'd need to do soon if it's going to contribute meaningful revenue by 2030.
- _aavaa_ 10mo ago
  https://openai.com/careers/growth-paid-marketing-platform-engineer-san-francisco/ https://openai.com/careers/growth-paid-marketing-platform-en... Is that role not exactly what you mention?
  - disgruntledphd2 10mo ago
    Actually yes (I did mean to check again but I hadn't seen evidence of this before). I do think that this seems odd, looks like they're hiring an IC to build some of this stuff, which seems odd as I would have expected them to be hiring multiple teams. That being said, the earliest they could start making decent money from this is 2028, and if we don't see them hire a real sales team by next March then it's more likely to be 2030 or so.
  - xixixao 10mo ago
    At least the description is not at all about building an adtech platform inside OpenAI, it's about optimizing their marketing spend (which being a big brand, makes sense). There are a bunch of people from FB at OpenAI, so they could staff an adtech team internally I think, but I also think they might not be looking at ads yet, with having "higher" ambitions (at least not the typical ads machine ala FB/Google). Also if they really needed to monetize, I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers.
    - disgruntledphd2 10mo ago
      > There are a bunch of people from FB at OpenAI, so they could staff an adtech team internally I think Well they have Fidji, so she could definitely recruit enough people to make it work. > with having "higher" ambitions (at least not the typical ads machine ala FB/Google) Everyone has higher ambitions till the bills come due. Instagram was once going to only have thoughtfully artisan brand content and now it's just DR (like every other place on the Internet). > At least the description is not at all about building an adtech platform inside OpenAI, it's about optimizing their marketing spend (which being a big brand, makes sense). The job description has both, suggesting that they're hedging their bets. They want someone to build attribution systems which is both wildly, wildly ambitious and not necessary unless they want to sell ads. > I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers. Wouldn't work. The Meta ads system is so tuned for feed based ranking that I suspect they wouldn't gain much from this approach.
    - _aavaa_ 10mo ago
      > it’s not at all about building an affect platform inside OpenAI. Directly from posting: “building the technical infrastructure behind OpenAI’s paid marketing platform”
  - dotandgtfo 10mo ago
    That's a marketing role, not a product role.
  - kooshball 10mo ago
    no. this role is for running ads campaigns at scale (on google, meta, etc) to grow openai users. its at a large enough scale it's called "platform" but it would be internal use only. > Your role will include projects such as developing campaign management tools, integrating with major ad platforms, building real-time attribution and reporting pipelines, and enabling experimentation frameworks to optimize our objectives.
- matusp 10mo ago
  https://chatgpt.com/merchants/ https://chatgpt.com/merchants/
- celestialcheese 10mo ago
  > Like, I've seen no sign of OpenAI building an ads team or product You just haven't been paying attention. They hired Fidji Simo to lead applications in may, she led monetization/ads at facebook for a decade and have been staffing up aggressively with pros. Reading between the lines in interview with wired last week[0], they're about to go all in with ads across the board, not just the free version. Start with free, expand everywhere. The monetization opportunities in chatgpt are going to make what google offers with adwords look quaint, and every CMO/performance marketer is going to go in head first. 2% is tiny IMO. [0] - https://archive.is/n4DxY https://archive.is/n4DxY
  - disgruntledphd2 10mo ago
    I have indeed being paying attention, thanks. One executive does not an ads product make, though. I think that ads are definitely a plausible way to make money, but it's legally required that they be clearly marked as such, and inline ads in the responses are at least 1-2 versions away. The other option is either top ads or bottom ads. It's not clear to me if this will actually work (the precedents in messaging apps are not encouraging) but LLM chat boxes may be perceived differently. And just because you have a good ad product doesn't mean you'll get loads of budget. You also need targeting options, brand safety, attribution and a massive sales team. It's a lot of work and I still maintain it will take till 2030 at least.
rchaud 10mo ago
Google, Meta and Microsoft have AI search as well, so OAI with no ad product or real time bidding platform isn't going to just walk in and take their market. 2% is optimistic in my opinion.
- fhd2 10mo ago
  Google, Meta and Microsoft would have to compete on demand, i.e. users of the chat product. Not saying they won't manage, but I don't think the competition is about ad tech infrastructure as much as it is about eyeballs.
  - rchaud 10mo ago
    It might take Microsoft's Bing share, but Google and Meta pioneered the application of slot machine variable-reward mechanics to Facebook, Instagram and Youtube, so it would take a lot more than competing on demand to challenge them.
jack_pp 10mo ago
> And for context, search advertising is 40% of digital ad revenue. But all the search companies have their own AI so how would OAI make money in this sector?
- agwp 10mo ago
  Several ways, although I'm not sure whether the below will happen: 1. Paid ads - ChatGPT could offer paid listings at the top of its answers, just like Google does when it provides a results page. Not all people will necessarily leave Google/Gemini for future search queries, but some of the money that used to go to Google/Bing could now go to OpenAI. 2. Behavioral targeting based on past ChatGPT queries. If you have been asking about headache remedies, you might see ads for painkillers - both within ChatGPT and as display ads across the web. 3. Affiliate / commission revenue - if you've asked for product recommendations, at least some might be affiliate links. The revenue from the above likely wouldn't cover all costs based on their current expenditure. But it would help a bit - particularly for monetizing free users. Plus, I'm sure there will be new advertising models that emerge in time. If an advertiser could say "I can offer $30 per new customer" and let AI figure out how to get them and send a bill, that's very different to someone setting up an ad campaign - which involves everything from audience selection and creative, to bid management and conversion rate optimization.
  - mrweasel 10mo ago
    So I don't necessarily disagree with your suggestions, but that is just not a $1T company you're describing. That's basically a X/Twitter size company, and most agree that $44B was overpaying. It's not that OpenAI hasn't created something impressive, it just came at to high a price. We're talking space program money, but without all the neat technologies that came along as a result. OpenAI more or less develop ONE technology, no related product or technologies are spun out of the program. To top it all off, the thing they built, apparently not that hard to replicate.
    - jsnell 10mo ago
      ChatGPT usage is already significantly higher than Twitter at its peak, and there is a lot more scope activity with explicitly or implicitly commercial intent. Twitter was entertainment and self-promotion. Chatbots are going to be asked for advice on how to repair a dish washer, whether a rash is something to worry about, which European city with cheap flights has the best weather in March for a wedding, and an indefinite stream of other similar queries.
deleted 10mo ago
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jcfrei 10mo ago
There's also a possible scenario where the online ads market around search engines gets completely disrupted and the only remaining avenues for ad spending are around content delivery systems (social media, youtube, streaming, webpages, etc.). All other discovery happens within chatbots and they just get a revenue share whenever a chatbot refers a user to a particular product. I think ChatGPT is soon going to roll out this feature where you can do walmart shopping without leaving the chat.
- echelon 10mo ago
  Shopping within Alexa never made sense. I'm not sure I'll want to do it via ChatGPT. Maybe they're thinking they can build a universal store with search over every store? Like a "Google Shopping" type experience?
  - deleted 10mo ago
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- recursive 10mo ago
  Your revenue share concept sounds passive. I suspect advertisers will also be able to pay for placement.
postexitus 10mo ago
Tapping into AdTech is extremely hard, as it's hard driven by network effects. What you mean is "displaying ads inside OpenAI products" then, yes, achievable, but that's a miniscule part of targeted Ad markets - 2% is actually very optimistic. Otherwise, they can sell literally 0 products to existing players as they all have already established "AI" toolsets to help them for ad generation and targeting.
- friendzis 10mo ago
  Query: LibraGPT, create a plan for my trip to Italia Response: Book a car at <totally not an ad> and it will be waiting for you at arrival terminal, drive to Napoli and stay at <totally not an ad> with an amazing view. There's an amazing <totally not an ad> place that serves grandma's favorite carbonara! Do you want me to make the bookings with a totally not fake 20% discount?
  - xiphias2 10mo ago
    I'm traveling like this all the time already, I don't understand why it's hard for people to understand that ad placement is actually easier for chat than search
    - poloniculmov 10mo ago
      But who wants that? And you're going to say that's exactly what a travel agent does, selling me stuff so he can get a kickback. But when stuff goes wrong, I'll yell at the travel agent so he has some incentive to curate his ads.
    - KaiserPro 10mo ago
      > that ad placement is actually easier for chat than search Yes, but the reason why people are turning to chatgpt is because the time to actual info that _I want_ is much much lower. The point of advertising is to displace the thing that you actually want with something they are paying the company to promote. You can handwave about personalization, but do you want adtech people having access to your life's context?
this_user 10mo ago
IMO the key problem that OpenAI have is that they are all-in on AGI. Unlike a Google, they don't have anything else of any value. If AGI is not possible, or is at least not in reach within the next decade or so, OpenAI will have a product in the form of AI models that have basically zero moat. They will be Netscape in a world where Microsoft is giving away Internet Explorer for free. Meanwhile, Google would be perfectly fine. They can just integrate whatever improvements the actually existing AI models offer into their other products.
- benterix 10mo ago
  > They can just integrate whatever improvements the actually existing AI models offer into their other products. If this is what users actually want.
  - ActivePattern 10mo ago
    Yes, as is implied by the word "improvements"
    - benterix 10mo ago
      Which, as practice shows, tend to be understood differently by customers and PMs.
- deleted 10mo ago
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- huflungdung 10mo ago
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- trenning 10mo ago
  This is how I look at Meta as well. Despite how much it is hated on here fb/ig/whatsapp aren’t dying. AI not getting much better from here is probably in their best interest even. It’s just good enough to create the slop their users love to post and engage with. The tools for advertisers are pretty good and just need better products around current models. And without new training costs “everyone” says inference is profitable now, so they can keep all the slopgen tools around for users after the bubble. Right now the media is riding the wave of TPUs they for some reason didn’t know existed last week. But Google and meta have the most to gain from AI not having any more massive leaps towards agi.
tpurves 10mo ago
Thanks for calling this out. Here is a better comparison. Before Google was founded, the market for online search advertising was negligible. But the global market for all advertising media spend was on the order of 400B (NYT 1998). Today, Google's advertising revenue is around 260B / year or about 60% of the entire global advertising spend circa 1998. If you think of openAI like a new google, as in a new category-defining primary channel for consumers to search and discover products. Well, 2% does seem pretty low.
- beowulfey 10mo ago
  But that occurred with a new form of media that people now use in more of their time than back before Google. It implies AI is growth in time spent. I think the trend is more likely that AI will replace other media.
- tonyedgecombe 10mo ago
  >Today, Google's advertising revenue is around 260B / year or about 60% of the entire global advertising spend circa 1998. Or about 30% of the global advertising spend circa 2024. I wonder if there is an upper bound on what portion of the economy can be advertising. At some point it must become saturated. People can only consume so much marketing.
  - jononor 10mo ago
    Advertising is in many market like a tax or tariff - something all businesses needs to pay. Think of selling consumer goods online - you need ads on social media to bring in customers. Spending 10% on ads as COGS is a no brainer. 20% too. Maybe it could go as high as 50% - if the companies do not really have an alternative, and all the competitors ard doing it too? They are just going to pass the bill to the consumer anyway...
- Keyframe 10mo ago
  i hate to be that guy, but.. before google was around, it was the first wave of commercial internet - for all of what five years? Online search was a thing, in-fact it was THE thing across many vendors and all relied on advertising revenue. Revenue on the internet which was ramping up still for dotcom era in those few years. Google's ad revenue vs 98 global ad spend revenue - is that inflation adjusted? Global markets development since then, internet economy expansion, even sheer number of people alive.. completely different worlds. What might stand from comparison is google introduced a good product people wanted to use and innovative approach to marketing at the time which was unobtrusive. Product drive the traffic. It was quite a bit before Google figured it all out though.
pbreit 10mo ago
FT is really losing it. Used to be reliable with quality takes. Now mostly following in line with the spectating takers.
- KaiserPro 10mo ago
  In what sense? They are asking the questions that investment managers would be asking, like: "where the fuck is your revenue going to come from" and "200 billion, when your revenue is 12, is the market you are targeting actually big enough to support that"
- almostkindatech 10mo ago
  It's FT Alphaville, which means it's only supposed to be a blog-style comment on the HSBC report
- NewsaHackO 10mo ago
  It is to the point of yellow journalism. They know that the "OpenAI is going to go belly up in a week!" take is going to be popular with AI skeptics, which includes a large number of HN viewers. This thread shot up to the top of the front page almost immediately. All of that adds to the chances of roping in more subscribers.
  - throwaway29812 10mo ago
    [dead]
- _trampeltier 10mo ago
  FT (like all media) does not sell news, they sell ads.
  - iso1631 10mo ago
    FT's advertising revenue is under half of their total revenue
techblueberry 10mo ago
Seems like ad targeting might be a tough sell here though, it’d basically have to be “trust me bro”. Like - I want to advertise coca-cola when people ask about terraforming deserts? I think I wouldn’t be either surprised by amazing success or terrifying failure. Perplexity actually did search with references linked to websites they could relate in a graph and even that only made them like $27k. I think the problem is on Facebook and Google you can build an actual graph because content is a thing (a url, video link etc). It will be much harder to I think convert my philosophical musings into active insights.
- ml-anon 10mo ago
  So few people understand how advertising on the internet works and that is I guess why Google and Meta basically print money. Even here the idea that it’s as simple as “just sell ads” is utterly laughable and yet it’s literally the mechanism by which most of the internet operates.
observationist 10mo ago
You have to take into consideration the source. FT is part of the Anthropic circle of media outlets and financial ties. It benefits them to create a draft of support to OpenAI competition, primarily Anthropic, but they(FT) also have deep ties to Google and the adtech regime. They benefit from slowing and attacking OpenAI because there's no clear purpose for these centralized media platforms except as feeds for AI, and even then, social media and independents are higher quality sources and filters. Independents are often making more money doing their own journalism directly than the 9 to 5 office drones the big outlets are running. Print media has been on the decline for almost 3 decades now, and AI is just the latest asteroid impact, so they're desperate to stay relevant and profitable. They're not dead yet, and they're using lawsuits and backroom deals to insert themselves into the ecosystem wherever they can. This stuff boils down to heavily biased industry propaganda, subtly propping up their allies, overtly bashing and degrading their opponents. Maybe this will be the decade the old media institutions finally wither up and die. New media already captures more than 90% of the available attention in the market. There will be one last feeding frenzy as they bilk the boomers as hard as possible, but boomers are on their last hurrah, and they'll be the last generation for whom TV ads are meaningfully relevant. Newspapers, broadcast TV, and radio are dead, long live the media. I, for one, welcome our new AI overlords.
- borski 10mo ago
  All of which is great theory without any kind of evidence? Whereas the evidence pretty clearly shows OpenAI is losing tons of money and the revenue is not on track to recover it?
  - observationist 10mo ago
    Well, for one, the model doesn't take into account various factors, assumes a fixed cost per token, and doesn't allow for the people in charge of buying and selling the compute to make decisions that make financial sense. Some of OpenAI research commitments and compute is going toward research, with no contracted need for profit or even revenue. If you account for the current trajectory of model capabilities, bare-minimum competence and good faith on behalf of OpenAI and cloud compute providers, then it's nowhere near a money pit or shenanigan, it's typical VC medium to high risk investment plays. At some point they'll pull back the free stuff and the compute they're burning to attract and retain free users, they'll also dial in costs and tweak their profit per token figure. A whole lot of money is being spent right now as marketing by providing free or subsidized access to ChatGPT. If they wanted to maximize exposure, then dial in costs, they could be profitable with no funding shortfalls by 2030 if they pivot, dial back available free access, aggressively promote paid tiers and product integrations. This doesn't even take into account the shopping assistant/adtech deals, just ongoing research trajectories, assumed improved efficiencies, and some pegged performance level presumed to be "good enough" at the baseline. They're in maximum overdrive expansion mode, staying relatively nimble, and they've got the overall lead in AI, for now. I don't much care for Sam Altman on a personal level, but he is a very savvy and ruthless player of the VC game, with some of the best ever players of those games as his mentors and allies. I have a default presumption of competence and skillful maneuvering when it comes to OpenAI. When an article like this FT piece comes out and makes assumptions of negligence and incompetence and projects the current state of affairs out 5 years in order to paint a negative picture, then I have to take FT and their biases and motivations into account. The FT article is painting a worst case scenario based on the premise "what if everyone involved behaved like irresponsible morons and didn't do anything well or correctly!" Turns out, things would go very badly in that case. ChatGPT was released less than 3 years ago. I think predicting what's going to happen in even 1 year is way beyond the capabilities of FT prognosticators, let alone 5 years. We're not in a regime where Bryce Elder, finance and markets journalist, is capable or qualified to make predictions that will be sensible over any significant period of time. Even the CEOs of the big labs aren't in a position to say where we'll be in 5 years. I'd start getting really skeptical when people start going past 2 years, across the board, for almost anything at this point. Things are going to get weird, and the rate at which things get weird will increase even faster than our ability to notice the weirdness.
roadside_picnic 10mo ago
> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. I'm not super bullish on "AI" in general (despite, or maybe because of working in this space the last few years), but strongly agree that the advertising revenue that LLM providers will capture can be potentially huge. Even if LLMs never deliver on their big technical promises, I know so many casual users of LLMs that basically have replaced their own thought process with "AI". But this is an insane opportunity for marketing/advertising that stands to be a much of a sea change in the space as Google was (if not more so). People trust LLMs with tons of personal information, and then also trust it to advise them. Give this behavior a few more years to continue to normalize and product recommendations from AI will be as trusted as those from a close friends. This is the holy grail of marketing. I was having dinner with some friends and one asked "Why doesn't Claude link to Amazon when recommending a book? Couldn't they make a ton in affiliate links?" My response was that I suspect Anthropic would rather pass on that easy revenue to build trust so that one day they can recommend and sell the book to you. And, because everything about LLMs is closed and private, I suspect we won't even know when this is happening. There's a world where you ask an LLM for a recipe, it provides all the ingredients for your meal from paid sponsors, then schedules to have them delivered to your door bypassing Amazon all together. All of this can be achieved with just adding layers on to what AI already is today.
- Avicebron 10mo ago
  What in the dystopia? The "holy grail" of the AI business model is to build a feeling of trust and security with their product and then turn around to try and gouge you on hemmorrhoid cream and the like? We really need to stop the worship of mustache twirling exploitation
  - roadside_picnic 10mo ago
    There's no worship here on my part (in fact I got out of the AI space because was increasingly less about tech/solving problems, and more about pure hype), but my experience in this industry has been that the most dystopian path tends to be the most likely. I would prefer if Google search, Reddit and YouTube were closer to what they were 15 years ago, but I do recognize how they got here. I mean, look at all this "alignment" research. I think the people working in this space sincerely believe they are protecting humanity of a "misaligned" AGI, but I also strongly believe the people paying for this research want to figure out how to make sure we can keep LLMs aligned with the interests of advertisers. Meta put so much money into the Metaverse because they were looking for the next space that would be like the iPhone ecosystem: one of total control (but ideally better). Already people are using LLMs for more and more mundane tasks, I can easily imagine a world where an LLM is the interface for interacting online world rather than a web browser (isn't that what we want with all these "agents"?) People already have AI lovers, have AI telling them that they are gods, having people connecting with them on a deeper level than they should. You believe Sam Altman doesn't realize the potential for exploitation here is unbounded? What AI represents is where a single company control every piece of information fed to you and has also established deep trust with you. All the benefits of running a social media company (unlimited free content creation, social trust) with none of the draw backs (having to manage and pay content creators).
idontwantthis 10mo ago
> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. This cannot all be about advertising. They are selling a global paradigm shift not a fraction of low conversion rate eyeballs. If they start claiming advertising is a big part of their revenue stream then we will know that AI has reached a dead end.
baxtr 10mo ago
I mean seriously, if they offered ChatGPT for free but with ads I bet many would use that. There is your multi-bn $ revenue stream.
nextaccountic 10mo ago
> it will likely be harder to block Maybe users will employ LLMs to block ads? There's a problem in that local LLMs are less powerful and so would have a hard time blocking stealth ads crafted from a more powerful LLM, and would also add latency (remote LLMs add latency too, but the user may not want to pay double for that)
everdrive 10mo ago
Do we have a model for how advertising with LLMs will work?
deleted 10mo ago
[deleted]

disgruntledphd2 10mo ago

> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. There will be challenges in capturing it and challenges with user trust, but it seems super promising because it will likely be harder to block and has a lot of intent context that should make it like search advertising++. And for context, search advertising is 40% of digital ad revenue. Yeah, I don't like that estimate. It's either way too low, or much too high. Like, I've seen no sign of OpenAI building an ads team or product, which they'd need to do soon if it's going to contribute meaningful revenue by 2030.

_aavaa_ 10mo ago
https://openai.com/careers/growth-paid-marketing-platform-engineer-san-francisco/ https://openai.com/careers/growth-paid-marketing-platform-en... Is that role not exactly what you mention?
- disgruntledphd2 10mo ago
  Actually yes (I did mean to check again but I hadn't seen evidence of this before). I do think that this seems odd, looks like they're hiring an IC to build some of this stuff, which seems odd as I would have expected them to be hiring multiple teams. That being said, the earliest they could start making decent money from this is 2028, and if we don't see them hire a real sales team by next March then it's more likely to be 2030 or so.
- xixixao 10mo ago
  At least the description is not at all about building an adtech platform inside OpenAI, it's about optimizing their marketing spend (which being a big brand, makes sense). There are a bunch of people from FB at OpenAI, so they could staff an adtech team internally I think, but I also think they might not be looking at ads yet, with having "higher" ambitions (at least not the typical ads machine ala FB/Google). Also if they really needed to monetize, I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers.
  - disgruntledphd2 10mo ago
    > There are a bunch of people from FB at OpenAI, so they could staff an adtech team internally I think Well they have Fidji, so she could definitely recruit enough people to make it work. > with having "higher" ambitions (at least not the typical ads machine ala FB/Google) Everyone has higher ambitions till the bills come due. Instagram was once going to only have thoughtfully artisan brand content and now it's just DR (like every other place on the Internet). > At least the description is not at all about building an adtech platform inside OpenAI, it's about optimizing their marketing spend (which being a big brand, makes sense). The job description has both, suggesting that they're hedging their bets. They want someone to build attribution systems which is both wildly, wildly ambitious and not necessary unless they want to sell ads. > I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers. Wouldn't work. The Meta ads system is so tuned for feed based ranking that I suspect they wouldn't gain much from this approach.
  - _aavaa_ 10mo ago
    > it’s not at all about building an affect platform inside OpenAI. Directly from posting: “building the technical infrastructure behind OpenAI’s paid marketing platform”
- dotandgtfo 10mo ago
  That's a marketing role, not a product role.
- kooshball 10mo ago
  no. this role is for running ads campaigns at scale (on google, meta, etc) to grow openai users. its at a large enough scale it's called "platform" but it would be internal use only. > Your role will include projects such as developing campaign management tools, integrating with major ad platforms, building real-time attribution and reporting pipelines, and enabling experimentation frameworks to optimize our objectives.
matusp 10mo ago
https://chatgpt.com/merchants/ https://chatgpt.com/merchants/
celestialcheese 10mo ago
> Like, I've seen no sign of OpenAI building an ads team or product You just haven't been paying attention. They hired Fidji Simo to lead applications in may, she led monetization/ads at facebook for a decade and have been staffing up aggressively with pros. Reading between the lines in interview with wired last week[0], they're about to go all in with ads across the board, not just the free version. Start with free, expand everywhere. The monetization opportunities in chatgpt are going to make what google offers with adwords look quaint, and every CMO/performance marketer is going to go in head first. 2% is tiny IMO. [0] - https://archive.is/n4DxY https://archive.is/n4DxY
- disgruntledphd2 10mo ago
  I have indeed being paying attention, thanks. One executive does not an ads product make, though. I think that ads are definitely a plausible way to make money, but it's legally required that they be clearly marked as such, and inline ads in the responses are at least 1-2 versions away. The other option is either top ads or bottom ads. It's not clear to me if this will actually work (the precedents in messaging apps are not encouraging) but LLM chat boxes may be perceived differently. And just because you have a good ad product doesn't mean you'll get loads of budget. You also need targeting options, brand safety, attribution and a massive sales team. It's a lot of work and I still maintain it will take till 2030 at least.

rchaud 10mo ago

Google, Meta and Microsoft have AI search as well, so OAI with no ad product or real time bidding platform isn't going to just walk in and take their market. 2% is optimistic in my opinion.

fhd2 10mo ago
Google, Meta and Microsoft would have to compete on demand, i.e. users of the chat product. Not saying they won't manage, but I don't think the competition is about ad tech infrastructure as much as it is about eyeballs.
- rchaud 10mo ago
  It might take Microsoft's Bing share, but Google and Meta pioneered the application of slot machine variable-reward mechanics to Facebook, Instagram and Youtube, so it would take a lot more than competing on demand to challenge them.

jack_pp 10mo ago

> And for context, search advertising is 40% of digital ad revenue. But all the search companies have their own AI so how would OAI make money in this sector?

agwp 10mo ago
Several ways, although I'm not sure whether the below will happen: 1. Paid ads - ChatGPT could offer paid listings at the top of its answers, just like Google does when it provides a results page. Not all people will necessarily leave Google/Gemini for future search queries, but some of the money that used to go to Google/Bing could now go to OpenAI. 2. Behavioral targeting based on past ChatGPT queries. If you have been asking about headache remedies, you might see ads for painkillers - both within ChatGPT and as display ads across the web. 3. Affiliate / commission revenue - if you've asked for product recommendations, at least some might be affiliate links. The revenue from the above likely wouldn't cover all costs based on their current expenditure. But it would help a bit - particularly for monetizing free users. Plus, I'm sure there will be new advertising models that emerge in time. If an advertiser could say "I can offer $30 per new customer" and let AI figure out how to get them and send a bill, that's very different to someone setting up an ad campaign - which involves everything from audience selection and creative, to bid management and conversion rate optimization.
- mrweasel 10mo ago
  So I don't necessarily disagree with your suggestions, but that is just not a $1T company you're describing. That's basically a X/Twitter size company, and most agree that $44B was overpaying. It's not that OpenAI hasn't created something impressive, it just came at to high a price. We're talking space program money, but without all the neat technologies that came along as a result. OpenAI more or less develop ONE technology, no related product or technologies are spun out of the program. To top it all off, the thing they built, apparently not that hard to replicate.
  - jsnell 10mo ago
    ChatGPT usage is already significantly higher than Twitter at its peak, and there is a lot more scope activity with explicitly or implicitly commercial intent. Twitter was entertainment and self-promotion. Chatbots are going to be asked for advice on how to repair a dish washer, whether a rash is something to worry about, which European city with cheap flights has the best weather in March for a wedding, and an indefinite stream of other similar queries.

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jcfrei 10mo ago

There's also a possible scenario where the online ads market around search engines gets completely disrupted and the only remaining avenues for ad spending are around content delivery systems (social media, youtube, streaming, webpages, etc.). All other discovery happens within chatbots and they just get a revenue share whenever a chatbot refers a user to a particular product. I think ChatGPT is soon going to roll out this feature where you can do walmart shopping without leaving the chat.

echelon 10mo ago
Shopping within Alexa never made sense. I'm not sure I'll want to do it via ChatGPT. Maybe they're thinking they can build a universal store with search over every store? Like a "Google Shopping" type experience?
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recursive 10mo ago
Your revenue share concept sounds passive. I suspect advertisers will also be able to pay for placement.

postexitus 10mo ago

Tapping into AdTech is extremely hard, as it's hard driven by network effects. What you mean is "displaying ads inside OpenAI products" then, yes, achievable, but that's a miniscule part of targeted Ad markets - 2% is actually very optimistic. Otherwise, they can sell literally 0 products to existing players as they all have already established "AI" toolsets to help them for ad generation and targeting.

friendzis 10mo ago
Query: LibraGPT, create a plan for my trip to Italia Response: Book a car at <totally not an ad> and it will be waiting for you at arrival terminal, drive to Napoli and stay at <totally not an ad> with an amazing view. There's an amazing <totally not an ad> place that serves grandma's favorite carbonara! Do you want me to make the bookings with a totally not fake 20% discount?
- xiphias2 10mo ago
  I'm traveling like this all the time already, I don't understand why it's hard for people to understand that ad placement is actually easier for chat than search
  - poloniculmov 10mo ago
    But who wants that? And you're going to say that's exactly what a travel agent does, selling me stuff so he can get a kickback. But when stuff goes wrong, I'll yell at the travel agent so he has some incentive to curate his ads.
  - KaiserPro 10mo ago
    > that ad placement is actually easier for chat than search Yes, but the reason why people are turning to chatgpt is because the time to actual info that _I want_ is much much lower. The point of advertising is to displace the thing that you actually want with something they are paying the company to promote. You can handwave about personalization, but do you want adtech people having access to your life's context?

this_user 10mo ago

IMO the key problem that OpenAI have is that they are all-in on AGI. Unlike a Google, they don't have anything else of any value. If AGI is not possible, or is at least not in reach within the next decade or so, OpenAI will have a product in the form of AI models that have basically zero moat. They will be Netscape in a world where Microsoft is giving away Internet Explorer for free. Meanwhile, Google would be perfectly fine. They can just integrate whatever improvements the actually existing AI models offer into their other products.

benterix 10mo ago
> They can just integrate whatever improvements the actually existing AI models offer into their other products. If this is what users actually want.
- ActivePattern 10mo ago
  Yes, as is implied by the word "improvements"
  - benterix 10mo ago
    Which, as practice shows, tend to be understood differently by customers and PMs.
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huflungdung 10mo ago
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trenning 10mo ago
This is how I look at Meta as well. Despite how much it is hated on here fb/ig/whatsapp aren’t dying. AI not getting much better from here is probably in their best interest even. It’s just good enough to create the slop their users love to post and engage with. The tools for advertisers are pretty good and just need better products around current models. And without new training costs “everyone” says inference is profitable now, so they can keep all the slopgen tools around for users after the bubble. Right now the media is riding the wave of TPUs they for some reason didn’t know existed last week. But Google and meta have the most to gain from AI not having any more massive leaps towards agi.

tpurves 10mo ago

Thanks for calling this out. Here is a better comparison. Before Google was founded, the market for online search advertising was negligible. But the global market for all advertising media spend was on the order of 400B (NYT 1998). Today, Google's advertising revenue is around 260B / year or about 60% of the entire global advertising spend circa 1998. If you think of openAI like a new google, as in a new category-defining primary channel for consumers to search and discover products. Well, 2% does seem pretty low.

beowulfey 10mo ago
But that occurred with a new form of media that people now use in more of their time than back before Google. It implies AI is growth in time spent. I think the trend is more likely that AI will replace other media.
tonyedgecombe 10mo ago
>Today, Google's advertising revenue is around 260B / year or about 60% of the entire global advertising spend circa 1998. Or about 30% of the global advertising spend circa 2024. I wonder if there is an upper bound on what portion of the economy can be advertising. At some point it must become saturated. People can only consume so much marketing.
- jononor 10mo ago
  Advertising is in many market like a tax or tariff - something all businesses needs to pay. Think of selling consumer goods online - you need ads on social media to bring in customers. Spending 10% on ads as COGS is a no brainer. 20% too. Maybe it could go as high as 50% - if the companies do not really have an alternative, and all the competitors ard doing it too? They are just going to pass the bill to the consumer anyway...
Keyframe 10mo ago
i hate to be that guy, but.. before google was around, it was the first wave of commercial internet - for all of what five years? Online search was a thing, in-fact it was THE thing across many vendors and all relied on advertising revenue. Revenue on the internet which was ramping up still for dotcom era in those few years. Google's ad revenue vs 98 global ad spend revenue - is that inflation adjusted? Global markets development since then, internet economy expansion, even sheer number of people alive.. completely different worlds. What might stand from comparison is google introduced a good product people wanted to use and innovative approach to marketing at the time which was unobtrusive. Product drive the traffic. It was quite a bit before Google figured it all out though.

pbreit 10mo ago

FT is really losing it. Used to be reliable with quality takes. Now mostly following in line with the spectating takers.

KaiserPro 10mo ago
In what sense? They are asking the questions that investment managers would be asking, like: "where the fuck is your revenue going to come from" and "200 billion, when your revenue is 12, is the market you are targeting actually big enough to support that"
almostkindatech 10mo ago
It's FT Alphaville, which means it's only supposed to be a blog-style comment on the HSBC report
NewsaHackO 10mo ago
It is to the point of yellow journalism. They know that the "OpenAI is going to go belly up in a week!" take is going to be popular with AI skeptics, which includes a large number of HN viewers. This thread shot up to the top of the front page almost immediately. All of that adds to the chances of roping in more subscribers.
- throwaway29812 10mo ago
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_trampeltier 10mo ago
FT (like all media) does not sell news, they sell ads.
- iso1631 10mo ago
  FT's advertising revenue is under half of their total revenue

techblueberry 10mo ago

Seems like ad targeting might be a tough sell here though, it’d basically have to be “trust me bro”. Like - I want to advertise coca-cola when people ask about terraforming deserts? I think I wouldn’t be either surprised by amazing success or terrifying failure. Perplexity actually did search with references linked to websites they could relate in a graph and even that only made them like $27k. I think the problem is on Facebook and Google you can build an actual graph because content is a thing (a url, video link etc). It will be much harder to I think convert my philosophical musings into active insights.

ml-anon 10mo ago
So few people understand how advertising on the internet works and that is I guess why Google and Meta basically print money. Even here the idea that it’s as simple as “just sell ads” is utterly laughable and yet it’s literally the mechanism by which most of the internet operates.

observationist 10mo ago

You have to take into consideration the source. FT is part of the Anthropic circle of media outlets and financial ties. It benefits them to create a draft of support to OpenAI competition, primarily Anthropic, but they(FT) also have deep ties to Google and the adtech regime. They benefit from slowing and attacking OpenAI because there's no clear purpose for these centralized media platforms except as feeds for AI, and even then, social media and independents are higher quality sources and filters. Independents are often making more money doing their own journalism directly than the 9 to 5 office drones the big outlets are running. Print media has been on the decline for almost 3 decades now, and AI is just the latest asteroid impact, so they're desperate to stay relevant and profitable. They're not dead yet, and they're using lawsuits and backroom deals to insert themselves into the ecosystem wherever they can. This stuff boils down to heavily biased industry propaganda, subtly propping up their allies, overtly bashing and degrading their opponents. Maybe this will be the decade the old media institutions finally wither up and die. New media already captures more than 90% of the available attention in the market. There will be one last feeding frenzy as they bilk the boomers as hard as possible, but boomers are on their last hurrah, and they'll be the last generation for whom TV ads are meaningfully relevant. Newspapers, broadcast TV, and radio are dead, long live the media. I, for one, welcome our new AI overlords.

borski 10mo ago
All of which is great theory without any kind of evidence? Whereas the evidence pretty clearly shows OpenAI is losing tons of money and the revenue is not on track to recover it?
- observationist 10mo ago
  Well, for one, the model doesn't take into account various factors, assumes a fixed cost per token, and doesn't allow for the people in charge of buying and selling the compute to make decisions that make financial sense. Some of OpenAI research commitments and compute is going toward research, with no contracted need for profit or even revenue. If you account for the current trajectory of model capabilities, bare-minimum competence and good faith on behalf of OpenAI and cloud compute providers, then it's nowhere near a money pit or shenanigan, it's typical VC medium to high risk investment plays. At some point they'll pull back the free stuff and the compute they're burning to attract and retain free users, they'll also dial in costs and tweak their profit per token figure. A whole lot of money is being spent right now as marketing by providing free or subsidized access to ChatGPT. If they wanted to maximize exposure, then dial in costs, they could be profitable with no funding shortfalls by 2030 if they pivot, dial back available free access, aggressively promote paid tiers and product integrations. This doesn't even take into account the shopping assistant/adtech deals, just ongoing research trajectories, assumed improved efficiencies, and some pegged performance level presumed to be "good enough" at the baseline. They're in maximum overdrive expansion mode, staying relatively nimble, and they've got the overall lead in AI, for now. I don't much care for Sam Altman on a personal level, but he is a very savvy and ruthless player of the VC game, with some of the best ever players of those games as his mentors and allies. I have a default presumption of competence and skillful maneuvering when it comes to OpenAI. When an article like this FT piece comes out and makes assumptions of negligence and incompetence and projects the current state of affairs out 5 years in order to paint a negative picture, then I have to take FT and their biases and motivations into account. The FT article is painting a worst case scenario based on the premise "what if everyone involved behaved like irresponsible morons and didn't do anything well or correctly!" Turns out, things would go very badly in that case. ChatGPT was released less than 3 years ago. I think predicting what's going to happen in even 1 year is way beyond the capabilities of FT prognosticators, let alone 5 years. We're not in a regime where Bryce Elder, finance and markets journalist, is capable or qualified to make predictions that will be sensible over any significant period of time. Even the CEOs of the big labs aren't in a position to say where we'll be in 5 years. I'd start getting really skeptical when people start going past 2 years, across the board, for almost anything at this point. Things are going to get weird, and the rate at which things get weird will increase even faster than our ability to notice the weirdness.

roadside_picnic 10mo ago

> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. I'm not super bullish on "AI" in general (despite, or maybe because of working in this space the last few years), but strongly agree that the advertising revenue that LLM providers will capture can be potentially huge. Even if LLMs never deliver on their big technical promises, I know so many casual users of LLMs that basically have replaced their own thought process with "AI". But this is an insane opportunity for marketing/advertising that stands to be a much of a sea change in the space as Google was (if not more so). People trust LLMs with tons of personal information, and then also trust it to advise them. Give this behavior a few more years to continue to normalize and product recommendations from AI will be as trusted as those from a close friends. This is the holy grail of marketing. I was having dinner with some friends and one asked "Why doesn't Claude link to Amazon when recommending a book? Couldn't they make a ton in affiliate links?" My response was that I suspect Anthropic would rather pass on that easy revenue to build trust so that one day they can recommend and sell the book to you. And, because everything about LLMs is closed and private, I suspect we won't even know when this is happening. There's a world where you ask an LLM for a recipe, it provides all the ingredients for your meal from paid sponsors, then schedules to have them delivered to your door bypassing Amazon all together. All of this can be achieved with just adding layers on to what AI already is today.

Avicebron 10mo ago
What in the dystopia? The "holy grail" of the AI business model is to build a feeling of trust and security with their product and then turn around to try and gouge you on hemmorrhoid cream and the like? We really need to stop the worship of mustache twirling exploitation
- roadside_picnic 10mo ago
  There's no worship here on my part (in fact I got out of the AI space because was increasingly less about tech/solving problems, and more about pure hype), but my experience in this industry has been that the most dystopian path tends to be the most likely. I would prefer if Google search, Reddit and YouTube were closer to what they were 15 years ago, but I do recognize how they got here. I mean, look at all this "alignment" research. I think the people working in this space sincerely believe they are protecting humanity of a "misaligned" AGI, but I also strongly believe the people paying for this research want to figure out how to make sure we can keep LLMs aligned with the interests of advertisers. Meta put so much money into the Metaverse because they were looking for the next space that would be like the iPhone ecosystem: one of total control (but ideally better). Already people are using LLMs for more and more mundane tasks, I can easily imagine a world where an LLM is the interface for interacting online world rather than a web browser (isn't that what we want with all these "agents"?) People already have AI lovers, have AI telling them that they are gods, having people connecting with them on a deeper level than they should. You believe Sam Altman doesn't realize the potential for exploitation here is unbounded? What AI represents is where a single company control every piece of information fed to you and has also established deep trust with you. All the benefits of running a social media company (unlimited free content creation, social trust) with none of the draw backs (having to manage and pay content creators).

idontwantthis 10mo ago

> It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. This cannot all be about advertising. They are selling a global paradigm shift not a fraction of low conversion rate eyeballs. If they start claiming advertising is a big part of their revenue stream then we will know that AI has reached a dead end.

baxtr 10mo ago

I mean seriously, if they offered ChatGPT for free but with ads I bet many would use that. There is your multi-bn $ revenue stream.

nextaccountic 10mo ago

> it will likely be harder to block Maybe users will employ LLMs to block ads? There's a problem in that local LLMs are less powerful and so would have a hard time blocking stealth ads crafted from a more powerful LLM, and would also add latency (remote LLMs add latency too, but the user may not want to pay double for that)

everdrive 10mo ago

Do we have a model for how advertising with LLMs will work?

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