As you may have heard, OpenAI recently announced that its new ads business has reached a $1 billion run rate. After a rocky start and a fair amount of growing pains, this milestone is meaningful in both its sheer size and its velocity. It comes just 200 days after the ad program launched.
This is the topic of the latest BIA Leading Local Insights podcast, which you can watch below.
So what are the biggest takeaways? Stepping back for context, what we’re talking about here is OpenAI’s ad program in which it appends sponsored results in ChatGPT answers. Following the principles of search ads, it places contextually relevant promotions in a high-intent environment.
As for all those growing pains mentioned above? The initial set of options was limited; CPMs were high – as high as $60 – there was a $200,000 campaign minimum, and there weren’t any performance-based options, which you’d expect for a search-like ad format.
But since then, it’s eased up on a lot of those restrictions: lower CPMs, spending floor, CPC options, and it’s partnered with several third-party ad managers in the ad-tech realm so that businesses can manage ChatGPT ads in a familiar environment.
So with all those concessions, it’s doing a lot better, and we can now put a dollar value on that outcome.
But to put that $1 billion figure in further perspective, what is a billion dollars in the ad world? Google has about $300 billion in annual ad revenue, and Meta is around $200 billion. Then it fragments from there, but Amazon, in third place, is at about 70 billion?
So $1 billion is small in those terms, but the key point is the pacing. As noted, OpenAI was able to do this in 200 days. That’s the key part – the momentum. That’s what makes this potentially disruptive to the ad ecosystem as we know it.
But what comes next? OpenAI will continue evolving ChatGPT ads. That will include more formats, such as transactional and action-oriented buttons to buy or book right within the ChatGPT workflow. And we’ll see better performance as OpenAI refines its ad-targeting chops.
The latter is particularly opportune for ChatGPT because of its inherent capabilities. It prides itself on having a memory and suggesting things that are within the context of the fact that you have a dog, live in suburban Cleveland, and you’re a craft beer connoisseur.
Of course, along with the ad targeting implications, there are privacy red flags that fly up as the above possibilities are raised. AI already has an uphill battle in terms of its “brand baggage” and some of the trust issues it’s fighting. It will be particularly prone to privacy backlash.
But all the above just scratches the surface. What does all the above mean for local businesses, media sellers, and the broader media and advertising ecosystem? We tackle these questions in the latest episode of BIA’s Leading Local Podcast. Listen here or watch the full episode below and subscribe here.
