The Rise of Ads in AI: A New Frontier for Revenue, But at What Cost?
The recent announcement by OpenAI to introduce ads in some ChatGPT plans has sent shockwaves through the tech industry, with even its closest competitors expressing surprise. Google DeepMind CEO Demis Hassabis told Axios in Davos that while advertising has funded much of the consumer internet, “there’s a question about how ads fit into the [chatbot] model.” Hassabis added that Google has “no plans” to follow OpenAI’s lead, despite Gemini recently rolling out an in-app shopping feature. Indranil Aditya/NurPhoto via Getty Images
The Urgent Need for Revenue
The move to introduce ads highlights the urgent need for large AI companies to find new revenue streams. Despite their soaring valuations, none of the major players is profitable, largely due to the enormous cost of compute power, which is only expected to rise. OpenAI posted a $21 billion loss last year, while Anthropic lost more than $5.2 billion. According to a report by the Center for Democracy and Technology, the AI industry’s revenue gaps are significant, and advertising offers a fast way to close them.
The Risks of Advertising in AI
However, introducing ads in AI-powered chatbots also risks undermining user trust and degrading the experience that made these tools popular in the first place. “It carries a high risk of feeling intrusive if a brand interrupts a helpful AI conversation with an unsolicited pitch,” says Gilad Bechar, co-founder and CEO at Moburst, a growth marketing agency used by Google. “If an ad does not feel like a resource or a solution in that specific moment, it does not belong in the chat.” A study by the Oxford Internet Institute found that women, who make up more than half of ChatGPT’s users, are more likely to recognize AI’s societal risks and inequities, and may be particularly sensitive to advertising on platforms they use for entertainment.
Anticipating Concerns and Criticisms
Anticipating such concerns, OpenAI emphasized that ads will not influence a chatbot’s answers and that users “need to trust that ChatGPT’s responses are driven by what’s objectively useful.” However, critics argue that separating advertising from AI outputs may prove harder in practice. Miranda Bogen, director of the AI Governance Lab at the Center for Democracy and Technology, warned that “even if AI platforms don’t share data directly with advertisers, business models based on targeted advertising put really dangerous incentives in place when it comes to user privacy.”
A New Report and Industry Trends
A new report by the Center for Democracy and Technology suggests that such monetization efforts are spreading across the industry. Meta AI plans to use chatbot data to inform ads on Facebook, while “OpenAI is already building the infrastructure it would need to begin taking in affiliate revenue.” Beyond advertising, companies are also chasing government contracts, such as deals with the Pentagon, and exploring AI-powered devices like watches and smart glasses as additional revenue streams.
Google, meanwhile, is pursuing its own commercial strategy, having launched a shopping feature in Gemini that allows users to buy items from Walmart and Sam’s Club directly inside the app. While users can choose whether to complete a purchase, the system’s ability to suggest products raises questions about bias and conflicts of interest. Shampaigne Graves, a women’s consumer expert and founder of the e-commerce education company Boldifi, notes that “data shows that women have an ethical dilemma when it comes to artificial intelligence and its use,” and may be particularly sensitive to advertising on platforms they use for entertainment.
Image Source: observer.com
