Spinning up an all-new ad network is pretty tough. I would think OpenAI would need to beat Meta/Google on basics like CPM in order for the network effects to make it desirable for ad vendors over Meta/Google. Ad budgets are fixed and zero-sum and vendors (in my head, I don't know) would prefer to spend their money on the best network giving the best results. I don't know if ads in LLM chats can get there.
ChatGPT shows a sponsored entry in chat history list with a colorful border around it to get users to click. This product is something that ChatGPT knows the user desperately needs from previous chats. The user can chat directly with the product and learn more about it. The advertiser specifically sent OpenAI information (like a RAG) about their products buyers might have questions for.
When the user is ready, they can open a link to the product's website or just buy directly in ChatGPT.
But the missing part is "we know they need this!" but they don't have the ad network to have the pixels on the vendor sites to track the conversion (or not for remarketing!). They only have half (at most) of the picture. This is why they tried to create a browser (remember that? Nope me neither) to try and get the full picture.
Advertisers are accustomed to pay for conversions now. If you can't track it, you cant prove it happened.
Open ai will need to spin up the entire infrastructure (Inc sales teams, support teams, servers etc) to run the ad network. Not impossible but it is a big lift and they're already burning money.
Their best bet is probably to just sign up for selling their ad space with Google, like all the other apps and websites do
I think the amount of money they’re burning on their operations would make that organizational lift a drop in the bucket. A few dozen annual 6 figure salaries? A few hundred? A bunch of normal CPU-based AWS services? They must spend 10 million per day on their current operating expenses.
Google and Meta are many thousands of sales people, managers, engineers, SREs, HR, masseuses etc. If you want to scale to Meta or Goog scale when doing ads you won't be able to do it with a few dozen people. Just sales will be hundreds or thousands spread across all the major territories
Except OpenAI’s value is overinflated by an economic bubble. They don’t have the manpower or resources to effectively implement an ad network on the scale they’d need to become profitable. Why are you insisting we keep the conversation positive?
Just like people said of a bunch of saas companies going up against Oracle, IBM, etc. 20 years ago.
I honestly don’t think open ai has the maturity or discipline for long-term viability, but their operating expenses for a week would eclipse the annual payroll required to hire a large corporate infrastructure that may be the best shot they have at transitioning from a company operating on hope and buzz to one that actually makes a few bucks. I’ll eat my hat if they become the next Google, but they didn’t pull the playbook out of thin air.
I don't think it is impossible, but suggesting you can go from zero to competing with Google and Facebook with a few dozen people is wildly underestimating the requirements. Yes a few dozen engineers could probably build and support the infrastructure to run it, but that is not the hard part. The hard part is the sales, is the compliance, the account management, is the billing system and inevitable snafus, is the first second and third line of tech support, the wining-and-dining, the networking, the AdChoices stuff, the sales calls and pitches, the conversion tracking, the legal arguments and contracts, the gearing up for the clients' big holiday campaigns, the management and general feeding and watering of those hundreds and thousands of people etc as a business, and then also building and supporting the self-serve platform for all the advertisers with credit cards but who are too small to get to talk to real sales people (and how do you support and service those clients too? Billing, reporting, charge backs, stolen cards, fraud, bad ads, more fraud etc - AI and automation can do some of this yes, but it's not like the market leaders aren't already doing this)
When you're working in ads, you don't have 1 person that looks after multiple huge clients.
If you have a Coke or a Nike or a McDonalds or an Apple etc spending 10s/100s of millions in ad spend on your platform, you have a dedicated whole team of 3 or 4 or 5 or more people (sales and dedicated tech support, plus managers etc) per client who exist solely to make it easy for that client to run ads on your platform, and make sure they're happy and getting results. So just those 4 clients you are probably looking at 20+ people just in sales/after-sales supporting 100+mil of ad spend, and that is before you need to support agencies like WPP et al that are often teams of 10 to 15 or more. And if a client doesn't think they're getting the results they need or the treatment they need, they'll take their ad spend elsewhere - this is why you have multiple sales people and hands-on tech people swarming the big spenders to keep them happy and keep them spending. They won't be happy talking to an AI chat bot when their Thanksgiving campaign has gone offline and no one knows why - they'll want their dedicated person to help them get back online ASAP.
It is a huge undertaking to pivot to become a large-scale ad network. Not saying it is impossible, but it is not quick nor easy by any stretch, and should not be underestimated.
Genuinely their best bet is to start by selling ad slots via Google (and you can bet there will be a team of 10+ sales and tech support ready to support them exclusively within a few days if they do) while they build their own capability (if at all). Google ads will have better tracking and targeting and so better conversions than Open ai could do themselves due to the network effect of Google's existing online properties (e.g. YouTube, Search, Play etc), partner ad network, browser, and mobile dominance (despite what people on HN think, the "normal" people online do click on ads and retargetting (i.e. ads following you around) does get results for advertisers. This is why Google and Facebook are printing money).
I also forgot to point out that Open ai is not "disrupting" some stuffy old ad company by bringing AI to the ads business to revolutionise and automate it. They're not going to get AI to do all the hard work and put everyone else out of business because they're the only ones using AI.
They are competing directly against their biggest AI competitor who has better AI models than them (at the moment at least) which are SOTA, AND also has an existing huge ad business and sales force. Not to mention Google is currently cramming AI into every single one of their products and serving to billions of people already, and own their entire business from silicon up through to the properties people are advertising on.
OpenAI are coming from behind both in their AI tech, their DAU count, and in their advertising business (or rather lack of it). And they're doing this while actually renting hardware from Google Cloud to do it too!
Not impossible for them to do this of course, but it is a big lift and will take years. They might do it though, but I think odds are they'll fizzle out before then (either run out of money, enshitification, or simply fall to the back of the pack)
People who say "Google are toast" just don't understand the scale of the ads business (and the markets seem to agree that goog is insurmountable, at least for now)
They can also suggest chat topics. Like how Reddit ads are meant to look like threads. "Frustrated with food baked on dishes? Let's chat about it! (sponsored)"
I thought that most advertisers go through middlemen and do not do business with the ad networks directly? So you only have to make it attractive for the middlemen (of which there are fewer), and that shouldn't be a problem for anything AI-related.
Furthermore, anyone offering some sort of assisted browsing service is automatically in the ad business, regardless what they do with affiliate links in generated page summaries.
Oh yeah and on top of that these companies like WPP hate the fact that Google and Facebook refuse to share more information with them. They can't wait to jump ship.
Spotify, Netflix, Amazon Prime, Reddit, Twitter etc all have increasingly profitable ads
I'm sure llm providers will also figure it out in due time. Consumer products are generally a good fit for ads, even if it takes time to reach full potential
Every single one of those companies have ridiculously low marginal cost per request compared to ChatGPT and much lower fixed costs and continued development costs.
They have all the resources anyone could possibly need to do this, including an enormous list of companies who would kill to get their products into ChatGPT. It’s “just” an execution challenge.
Why would they need to beat Meta/Google, and at what game? They just won’t let any other add network work in their app. Voila! You just beat Meta/Google, and they didn’t even compete with them. I guess they could provide some sort of SDK for websites to embed that tracks users, or they could come up with a browser extension that tracks users too. They already have an app that people are freely giving them so much info. Where else could the compete as you suggest? Being a generic ad platform to serve ads not through their app?
Is it harder than spinning up a multi billion dollar data centre network with other people’s money?
Partner branding would be a mechanism to get the ball rolling - and some are big names. Oracle, Shutterstock, BuzzFeed, Bain & Company, Salesforce, Atlassian, Neo, Consensus,
Why would OpenAI want to use and pay for any of Microsoft's products unless mandated by a contract?
OpenAI has the talent to roll out and run their own ad product that is better and more efficient. Why pay Microsoft for a core part of their (future) business?
P.S. In case you haven't noticed, OpenAI demos are done on Macbooks. Microsoft could not even get them to use Windows.
Microsoft runs many of their demos on MacBooks. You missed the memo that Windows OS is no longer their bread and butter. Go check their GH OSS projects (e.g. .NET) and all of them have have shell scripts alongside PowerShell.
If OpenAI manages to get the agentic buying going, that could be big. They could tie the ad bidding to the user actually making the purchase, instead of just paying for clicks.
