OpenAI’s ad strategy faces a major reality check
It wasn’t long ago that pundits predicted OpenAI’s advertising business could eventually overshadow those of Meta and Google. The company was similarly upbeat. But a new report on the early numbers suggests that optimism may be misplaced.
The study, from Emarketer, estimates that OpenAI’s U.S. ad revenue will fall 90% short of its five-year target. The firm did not forecast OpenAI’s global revenue.
OpenAI had projected ad revenue of $2.5 billion this year, with a goal of more than $100 billion by 2030. Emarketer’s research, however, estimates that the combined ad revenue of standalone chatbots, including ChatGPT, Microsoft’s Copilot app, Google’s AI Mode, and Amazon’s Alexa for Shopping, will total less than $1 billion this year.
By 2030, Emarketer estimates that advertising across all chatbots, not just OpenAI’s, will generate only $5.41 billion.
It is the latest development in OpenAI’s complicated relationship with advertising.
Mixed messages
Most observers had long assumed that OpenAI would eventually enter the advertising market to increase its revenue. CEO and co-founder Sam Altman cast doubt on that thinking in 2024, however, when he said “I will disclose, just as a personal bias, that I hate ads” during a fireside chat at Harvard University.
Ads, he continued, “fundamentally misalign a user’s incentives with the company providing the service,” and the idea of mixing advertising with OpenAI’s products was “uniquely unsettling.”
A little more than a year and a half later, however, OpenAI began testing ads in the free version of ChatGPT, as well as in the lower-cost ChatGPT Go.
“The best ads are useful, entertaining, and help people discover new products and services,” the company wrote in a blog post at the time. “Given what AI can do, we’re excited to develop new experiences over time that people find more helpful and relevant than any other ads.”
Last month, four months after launching the trial, OpenAI was promoting advertising as a way to broaden access to its products. “The revenue that we make from the ads offering is going to subsidize and grow access to information,” OpenAI advertising chief David Dugan said at the Cannes Lions International Festival of Creativity.
The $100 billion target has always been ambitious. Meta has been building its advertising business since 2007, and that figure represents roughly half of the Facebook and Instagram parent company’s current ad revenue. Reaching it would require advertisers to substantially alter their strategies, shifting money away from search engines and social media and into AI systems.
OpenAI would also have to persuade advertisers that its platform offered a better use of their budgets than Meta and Google, both of which have AI products of their own.
An IPO on the horizon
The projected shortfall comes as OpenAI moves closer to an expected initial public offering. The company confidentially filed paperwork with the Securities and Exchange Commission in early June, setting the stage for what could be one of the largest public-market debuts in history.
Although there was speculation that OpenAI might accelerate its IPO to beat Anthropic to market, the company has instead proceeded cautiously. It is now reportedly targeting a 2027 launch, which could give it more time to boost its valuation and allow the recent market volatility to subside.
A severe shortfall in advertising revenue could create another obstacle as OpenAI tries to build investor enthusiasm. That task may already be difficult given the company’s financial losses and the early performance of competitor SpaceX. Shares of that company have fallen below their IPO price and are down more than 40% from their post-IPO high.
