OpenAI Bets on ChatGPT Advertising, Between Google and Meta

Key Takeaways

1OpenAI is preparing for its IPO and was recently valued at $852 billion

2ChatGPT's advertising revenue reaches an annual run rate of $1 billion after seven months

3Sarah Friar describes an advertising strategy combining search intent and user context, with native AI formats in preparation

Why it matters : OpenAI is looking to transform its user base and AI advancements into a sustainable business model, amid high competition and significant expenses.

OpenAI accelerates the monetization of ChatGPT through advertising, with formats envisioned as native to AI. Sarah Friar discusses an approach that combines search intent and user context, while the company prepares for its IPO and faces high technical expenses.

IPO Preparation and OpenAI's Financial Requirements

OpenAI and Anthropic are gearing up for IPOs that will test market interest in artificial intelligence. Both companies filed a confidential S-1 prospectus in June, and Anthropic's public version is expected in the coming weeks. OpenAI has not provided a detailed timeline, but Sarah Friar has already mentioned a possible timeframe extending to the end of 2027. OpenAI reached a valuation of $852 billion during a funding round in March, which raised $122 billion. The company aims to transform these funds, its base of one billion users, and its research lead into a sustainable business model. Sarah Friar must balance the development of consumer and enterprise segments with the high costs of AI inference, data center creation, and research.

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Advertising Revenue Already on a $1 Billion Annual Pace

According to Sarah Friar, after seven months of running ads on ChatGPT, the advertising business is on pace to reach $1 billion on an annual basis. At this stage, ads are displayed below ChatGPT's responses for users of the free or Go offerings, in a still basic format.

Towards Native AI Formats Combining Intent and Context

Sarah Friar describes the ambition for future advertising formats as "a baby between Google and Meta," a phrase attributed to Fidji Simo, former leader at OpenAI. The goal is to monetize a base of one billion weekly users by combining the intent of a Google search with user context learned over interactions. Friar notes that her team has presented her with initial examples of more AI-native formats, as the platform is being developed and expanded. She specifies that no truly endemic AI format has been launched yet and anticipates more complex and personalized experiences in the future.

Divergent Positions in the Industry and Venue of the Announcement

In 2024, Sam Altman, CEO of OpenAI, described the combination of advertising and AI as "particularly troubling," a stance that contrasts with the current strategy. Anthropic, a competitor of OpenAI, has also criticized the insertion of ads into chatbot responses. Sarah Friar's statements were made in San Francisco, in front of investors and analysts, during the Communacopia + Technology Conference organized by Goldman Sachs.