Two years ago, Sam Altman told an event at Harvard University that he was disgusted by the idea of advertising in ChatGPT. He said that if ChatGPT starts inserting paid ads into its answers, users will gradually lose trust in the company's flagship product. "I think advertising is the business model for us.last resort. "Ultraman said at the time.
And just this week, his company started showing ads in ChatGPT.
In order to build and deploy artificial intelligence technologies such as ChatGPT, OpenAI needs to invest tens of billions of dollars in purchasing basic computing power. The San Francisco-based startup is scrambling to find new ways to generate revenue for these technologies and eventually break even. Selling ads in chatbots is just one of its many plans to increase revenue, and all of these attempts face huge obstacles.
Financial stress is imminent. According to people familiar with the matter, OpenAI achieved revenue of approximately US$13 billion last year. But over the next four years, the company expects to invest another $100 billion.
Altman and his team have had great success raising capital in recent years. However, there are only a handful of investors around the world who are willing and able to continue to spend billions of dollars to support its computing power costs.
One option is to go public on Wall Street. But even OpenAI executives privately admit that losses must be stopped before going public. The company hopes to triple revenue this year, which means it will have to start a lot of business with little to no experience.
It had never run an advertising business before, which could diminish the value of the chatbot or, even worse, alienate users. The company also plans to make more money by selling technology to businesses, but at the same time, a long list of competitors are also vying for the same market.
Google has provided services to businesses for decades, and so has Microsoft. Rival startup Anthropic continues to make inroads in AI programming—perhaps the most talked about segment in this emerging market.
OpenAI is also promoting new business models that could drive away customers. The company recently said it wanted to be more interested in the results generated by using its AI toolsShare of scientific achievements. Although it was later explained that this only applied to big pharmaceutical companies, the idea still unsettled many independent scientists who used its technology.
“OpenAI is trying to win over consumers, catch up with Anthropic’s programming tools, build data centers, and continue to raise funds. It has too many things to catch up with,” said Brian O’Kelley, CEO and co-founder of Internet advertising company Scope3, who has twenty years of experience in the industry. "Can it really do good advertising? Can it really do everything it wants to do well?"
Two people familiar with internal discussions at the company said some executives were surprised when reports emerged last week that OpenAI planned to go public as soon as December. The main reason for their concern is that they believe the companynot ready yet.
At the end of last year, about 60% of OpenAI's revenue came from consumer products and 40% from enterprise technology.
Most of the consumer revenue comes from subscriptions: of the 800 million users of ChatGPT, about 6% pay at least $20 a month to use a more premium version. Entering the advertising business with the aim of generating additional revenue from the free version of ChatGPT.
Many online advertising industry veterans believe that AI chatbots like ChatGPT could eventually generate billions of dollars in annual advertising revenue. But that could take years of experimentation. While OpenAI is exploring, it will also face competition from established advertising companies such as Google.
OpenAI has begun building an ad sales team, but the effort is still in its early stages.
"OpenAI actually does not have a real sales team." Mark Zagorski, CEO of DoubleVerify, which cooperates with Google and many other advertising companies, said, "They must build the corresponding infrastructure and the technical system required to operate the advertising business."
In May of this year, Altman hired Fidji Simo, a long-time Facebook employee, as CEO of OpenAI’s application business. This new position is responsible for overseeing all the company’s products. Seamus previously served as CEO of Instacart, where he pushed the grocery delivery company toward an advertising-focused business model.
Over the next few months, OpenAI poached hundreds of employees from X and Meta (the parent company of Facebook), many of whom had worked on advertising products.
Zagorski compared OpenAI to Netflix, which took two years to build a viable advertising business. During this period, Netflix outsourced much of its work to more experienced companies.
Even as it expands into the advertising business, OpenAI still hopes to increase the proportion of revenue from enterprise products - technology for enterprises, government agencies and other large organizations - to 50% by the end of this year.
"This is the key issue that technology investors are most concerned about today." UBS analyst Karl Keirstead said, "OpenAI has no choice but to enter the enterprise software market more aggressively."
Currently, companies pay OpenAI to use Office tools such as Codex (which helps developers write code) and ChatGPT Enterprise. Such tools are widely used in Silicon Valley technology circles, with some users paying as much as $200 a month.
But Kiersted said the average business might not be willing to pay such a high price for office software. Moreover, OpenAI faces increasingly fierce competition in the enterprise market, the most important of which is Anthropic and its code generation tool ClaudeCode.
While OpenAI is still working on both the consumer and enterprise sides and struggling to accelerate revenue growth, Anthropic is mainly focusing on enterprise tools.
Anthropic also recently ran a Super Bowl ad poking fun at OpenAI’s introduction of advertising. “Advertising is coming in the AI era—but there are no ads for Claude,” the ad reads.
Altman fired back in a post on
At the World Economic Forum Annual Meeting in Davos, Switzerland last month, OpenAI Chief Financial Officer Sarah Friar talked about another new profit idea for the company. She calls it “value sharing.” For example, if the company's technology helps discover new drugs, OpenAI may share a portion of the profits.
A few days later, the company launched Prism, a product for scientists. Many researchers cited Fryer's comments and questioned whether OpenAI intended to take a cut of their scientific discoveries.
Worried about alienating customers, OpenAI executives discussed how to deal with the growing public opinion and ultimately decided to post a clarifying message on social media.
In a post, Kevin Weil, who was recently named OpenAI's scientific lead, explained that the company does not take a cut of the work of individual scientists using Prism. Other executives echoed this sentiment at X. But Will has not ruled out the possibility of cooperating with large pharmaceutical companies and OpenAI sharing profits.
Altman expressed a similar view this week at an event in Silicon Valley: "We may explore some cooperation models where we bear the costs and share the benefits."