From WIRED · Paresh Dave · · 3m
Chatbot ads are here. Nobody's sure they work yet.
OpenAI, Google and startups are selling ads in AI chatbots to cover costs, but advertisers and users are still figuring out what works.
In brief
OpenAI, Google and startups are selling ads in AI chatbots to cover costs, but advertisers and users are still figuring out what works. Ad tech companies are experimenting with ads in chatbots to offset AI costs, but early results show mixed success and unresolved privacy concerns. Originally reported by WIRED.
Anthropic stays ad-free
Anthropic pledged in its Super Bowl commercial to keep Claude ad-free and made no mention of selling ads in its recent IPO filing, backed by about one hundred twelve billion dollars in investor cash.
Other platforms embrace ads
OpenAI has over one hundred thousand customers advertising in ChatGPT since ads debuted there in February. Google expanded ads in its search chatbot AI Mode to ten more countries beyond the US.
Ads may be necessary for survival
Selling ads could be vital for niche chatbot platforms that cannot rely on venture capital or massive revenues like tech giants.
AI-written ads perform better
Ads composed partly by AI rather than fully by a human generate double the clicks, according to Koah Labs CEO Nic Baird. AI-generated marketing copy likely feels more natural next to AI model output.
“Ads composed partly by AI rather than fully by a human generate double the clicks”
Regulated industries hold back
Drugmakers and other regulated companies face government requirements on what they must or cannot say in ads. These companies default to more human control, generating weaker results than AI-composed ads.
Chatbots enable creative targeting
Koah can select ads based on the user's prompt, the AI response, and conversation context. Chatbot prompts are at least double the length of Google queries, giving more information for relevant ad placement.
Click rates match Google's
Users are clicking on about three percent of ads in Koah's network, about on par with the performance of the more mature Google ads system.Users may be more receptive to adjacent marketing in chatbot conversations.
Privacy concerns loom large
Koah receives users' entire conversation history to inform ad placement. Baird says Koah anonymizes queries and stores them de-identified, but declined to comment further on data collection and storage practices.
Ads target frustrated customers
One out of every four chatbot queries about a retailer or brand concerns a return, exchange, or support issue. Baird expects manufacturers and retailers will eventually target disappointed customers with warranty reminders and support offers.
Shopping agents pose new questions
Apps like Instinct and Meta's Muse are starting to take over shopping chores for some users.
The market could collapse
Kevin Baragona, CEO of DeepAI, says while ad revenue has been meaningful, he's not committed to it because the experience doesn't feel right yet. More AI developers could adopt Anthropic's ad-free stance.
“I don't think the ads are working terribly well for anyone”
In short
Ad tech companies are experimenting with ads in chatbots to offset AI costs, but early results show mixed success and unresolved privacy concerns.
