An octopus with more tentacles: OpenAI’s plans to expand its advertising business

After completing the first phase of its pilot advertising program, OpenAI is preparing to expand that program to other markets.

The first ads on ChatGPT debuted on OpenAI’s renowned chatbot in early February, and the initial phase of the much-talked-about advertising experiment by the company led by Sam Altman concluded at the end of March. It seems, however, that the results of the experiment have satisfied OpenAI, so much so that the test, initially conducted in the United States, will soon be extended to other markets as well.

In the experiment, US users of the free version of ChatGPT (and also those accessing the chatbot through the «low-cost» ChatGPT Go subscription) were exposed to ads placed below the responses provided by OpenAI’s flagship product (and always contextually aligned with the user’s queries).

Aware that the introduction of ads on ChatGPT doesn’t necessarily make the product more trustworthy (and that this is obviously a significant obstacle), OpenAI has always insisted that the chatbot’s organic responses will always be clearly separated from advertising (and that advertising will not influence these responses in any way). Furthermore, ChatGPT will never display commercial messages to users under 18.

OpenAI is preparing for the next phase of its pilot program.

During the six weeks of the first phase of OpenAI’s advertising experiment, the company generated revenue equivalent to approximately $100 million in annual sales. More than 600 advertisers initially participated in the test, and once the first phase is complete, OpenAI plans to expand the experiment to Canada, Australia, and New Zealand.

In addition, a self-service platform dedicated exclusively to advertisers will debut on ChatGPT in April. This new feature will allow a much wider range of advertisers to access advertising on ChatGPT. Until now, brands were required to make a minimum investment of $200,000 to place ads on ChatGPT, where the CPM was set at $60 (an unusually high amount in the advertising industry).

It’s also worth noting that, to date, advertisers’ access to the metrics associated with their advertising activity on ChatGPT has been rather limited.

The experiment undertaken by OpenAI has been executed in a highly controlled manner, and less than 20% of ChatGPT users have been exposed to ads on this platform, which boasts around 900 million weekly active users.

Despite the barriers to entry that advertisers have encountered in participating in OpenAI’s advertising experiment, there is considerable interest within the advertising industry in this new format, which, if successful, could be potentially revolutionary. Large holding companies such as WPP, Omnicom and Denstu have facilitated the participation in the experiment of major brands such as Adobe, Ford, Mazda, Enterprise Mobility, Expedia, Target and Best Buy.

OpenAI has recently forged important alliances with Criteo and Smartly.

While there are no comprehensive analyses yet of the success (or failure) of OpenAI’s experiment, the company has apparently faced some criticism regarding the slow rollout of advertising on ChatGPT, which may have prevented advertisers from fully utilizing their budgets.

OpenAI emphasizes, however, that the conclusions of the first phase of the test are generally very positive. «We have observed no impact on user trust metrics and that ad blocker usage rates are equally low. Furthermore, improvements are currently underway regarding ad relevance,» the company insists. «These positive signs suggest that we should begin the next phase of our pilot program,» OpenAI adds.

The company has already taken several steps that point in that direction. OpenAI has been working, for example, since last month with the French company specializing in commerce media, Criteo. Through Criteo’s network, 17,000 advertisers will be able to access product recommendations made by ChatGPT. The parent company of the popular chatbot is also reportedly in talks with the DSP provider The Trade Desk.

OpenAI has also forged another alliance with Smartly, a company specializing in real-time ad optimization. Based in Helsinki, Smartly works with clients such as Spotify and Uber, helping them optimize their ads on platforms like Meta, Google, TikTok, and now, ChatGPT as well.

Through its partnership with OpenAI, Smartly hopes that so-called «conversational ads» (already used by clients like the British pharmacy chain Boots) will also take off on ChatGPT. When a user clicks on a «conversational ad,» a chat window opens, allowing them to initiate a conversation with the advertiser, if they wish. This format is up to five times more effective than traditional online ads, according to Smartly.

OpenAI’s fledgling advertising business is a crucial test for a company that has been burdened by significant losses for years and aspires to finally achieve profitability by 2030, a profitability to which advertising could contribute in an absolutely decisive way.

Source: www.marketingdirecto.com