There are only two successful ad business forms in the digital world, attention or intent. Meta is built on attention and Google and others like amazon are built on intent.
Everything else is optimizing the targetting data in some kind of behavioral way to get better intent data or to reach the right users.
I have no idea where something like Chatgpt stands on that axis, it has actually very little attention (in hours per day) for most people and I am not sure that it has enough intent signals.
Ignoring whether or not OpenAI can reach this, do we think a massive expansion of ad revenue is fruit of the poisonous tree for GPTs? Does anyone want to use a tool that is capable of disguising an ad as a geniune recommendation at anytime? I suppose if the platforms become super entrenched and we boil slowly then they'll get away with it
Emarketer’s data finds that standalone chatbots like ChatGPT,
Microsoft Copilot app, Google AI Mode, and Amazon Alexa for
Shopping (formerly Rufus) in U.S, will generate less than $1
billion in ad revenue this year, and just $5.41 billion by 2030.
How would that be possible? In the past I used Google maybe 10 times a day with a short query. From which Google had to guess my intent. Now I babble with Gemini all day about everything. And Gemini can ask questions what exactly I mean. Why wouldn't Alphabet be able to generate more revenue from this than from search? And Google's ad revenue from search is over $100B per year.
Just because there are no ads now does not mean there never will be. Google search was run without ads for the first years too.
> How would that be possible? In the past I used Google maybe 10 times a day with a short query. From which Google had to guess my intent. Now I babble with Gemini all day about everything. And Gemini can ask questions what exactly I mean. Why wouldn't Alphabet be able to generate more revenue from this than from search?
When you used google 10x a day, you saw, at a minimum, 20 ads/day. How many ads are you seeing when you babble all day long with a chatbot?
> When you used google 10x a day, you saw, at a minimum, 20 ads/day. How many ads are you seeing when you babble all day long with a chatbot?
There is also way more competition between chatbots than there was between search engines after Google started leaning into ads. Which strengthens the Khan-Esayas hypothesisis "that data privacy constitutes a key parameter of non-price competition in the market for" consumer tech [1][2].
why would they be able to generate more revenue? it isn't clear to me. Maybe ads will be targeted better, maybe they wont. Either way, major companies marketing budgets won't be going up, only shuffling around?
So its not really much to do with the technology or how good it is, but the stories their salespeople can tell. And I guess the story isnt good/convincing enough
The same kind of speculation questioned whether Facebook would ever have a significant business. Before that, the same was asked about Google's business.
If GPT can maintain or grow usage, the ad dollars will be there given the enormous scale. There is a hundred billion dollars plus worth of advertising waiting in the LLM space. It would be surprising if Facebook doesn't contract for example, losing ground to LLMs on advertising over the coming decade.
They have to build out all the backend ad tech crap that google and fb have built over decades. As in the campaign tools, scheduling, targeting, analytics, auctions, exchanges etc. Advertisers and publishers have already deeply integtated into that eco system. Also the google and fb system has created a content generating army that is incentivized to fight tooth and nail for eyeballs. OpenAI doesnt reduce the activities of the eyeball capture army, it just freaks them out and pushes them into overdrive.
> I reckon they'll get government to block chinese models just like the US car industry did with EVs.
This is more or less already the case. Not that they're blocked, but... it may limit who you can work with and what insurance companies will cover you.
Founding a start-up with VC money, dumping the bag into someone else's lap, and then riding off into the sunset is a very different skill set from actually growing and running a company that is no longer early stage.
Look at Zuckerberg. He may have been good as a founder, but if he didn't have super voting shares, and if Meta's cash flow from their ad business wouldn't mask how poor his strategic decision making has been, he would have been pushed out as CEO years ago.
tldr is: They either get a successful IPO to stave off bankruptcy for a couple more months, or they're going to be bankrupt by the beginning of next year.
There's a very low chance of OpenAI doing an IPO this year: https://polymarket.com/event/openai-ipo-by. So the assumption that they "have to do an IPO" already seems questionable. The rest of the analysis also feels pretty hand-wavy. I'm not saying OpenAI is in a strong financial position, but this article doesn't make a solid enough case for why it's supposedly in such dire straits.
Or they stay private and raise more capital. Until they have a failed round people predicting bankruptcy are getting way ahead of how this would actually play out. Some of us are old enough to remember the "Amazon can never make a profit and will go bankrupt" predictions of 25 years ago.
True, but the current state of advertising is, charitably, kinda goofy.
I'm not surprised the iteration we're seeing now is perceived as failing: on the few remaining screens where ads are still present for me, they're between highly irrelevant to flat out repulsive. There are a few brands I will never touch with a long stick, purely as a result of their disturbing, disgusting ads -- again, charitably, a negative-sum game.
As someone who doesnt really see ads either, we are in the minority. The vast majority of people are bombarded with ads from their TVs, streaming platforms, and unadblocked browsers. Try using a relatives iPhone or something its mad.
A simulacrum, simultaneously more detailed than the ones built by Meta and Instagram and Tik Tok, but even more shallow, without even the illusion of human connection.
An endless forest of mirrors reflecting no one but the user.
There are only two successful ad business forms in the digital world, attention or intent. Meta is built on attention and Google and others like amazon are built on intent.
Everything else is optimizing the targetting data in some kind of behavioral way to get better intent data or to reach the right users.
I have no idea where something like Chatgpt stands on that axis, it has actually very little attention (in hours per day) for most people and I am not sure that it has enough intent signals.
Ignoring whether or not OpenAI can reach this, do we think a massive expansion of ad revenue is fruit of the poisonous tree for GPTs? Does anyone want to use a tool that is capable of disguising an ad as a geniune recommendation at anytime? I suppose if the platforms become super entrenched and we boil slowly then they'll get away with it
Just because there are no ads now does not mean there never will be. Google search was run without ads for the first years too.
> How would that be possible? In the past I used Google maybe 10 times a day with a short query. From which Google had to guess my intent. Now I babble with Gemini all day about everything. And Gemini can ask questions what exactly I mean. Why wouldn't Alphabet be able to generate more revenue from this than from search?
When you used google 10x a day, you saw, at a minimum, 20 ads/day. How many ads are you seeing when you babble all day long with a chatbot?
> When you used google 10x a day, you saw, at a minimum, 20 ads/day. How many ads are you seeing when you babble all day long with a chatbot?
There is also way more competition between chatbots than there was between search engines after Google started leaning into ads. Which strengthens the Khan-Esayas hypothesisis "that data privacy constitutes a key parameter of non-price competition in the market for" consumer tech [1][2].
[1] https://yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf
[2] https://www.researchgate.net/publication/327111419_Privacy_a...
why would they be able to generate more revenue? it isn't clear to me. Maybe ads will be targeted better, maybe they wont. Either way, major companies marketing budgets won't be going up, only shuffling around?
So its not really much to do with the technology or how good it is, but the stories their salespeople can tell. And I guess the story isnt good/convincing enough
> And Google's ad revenue from search is over $100B per year.
From search or from adsense? That's very different. People place adsense banners on their websites which has nothing to do with search.
Because writing a headline with 90% miss in it will get more clicks than actually thinking through business strategy and realistic projections.
The same kind of speculation questioned whether Facebook would ever have a significant business. Before that, the same was asked about Google's business.
If GPT can maintain or grow usage, the ad dollars will be there given the enormous scale. There is a hundred billion dollars plus worth of advertising waiting in the LLM space. It would be surprising if Facebook doesn't contract for example, losing ground to LLMs on advertising over the coming decade.
They have to build out all the backend ad tech crap that google and fb have built over decades. As in the campaign tools, scheduling, targeting, analytics, auctions, exchanges etc. Advertisers and publishers have already deeply integtated into that eco system. Also the google and fb system has created a content generating army that is incentivized to fight tooth and nail for eyeballs. OpenAI doesnt reduce the activities of the eyeball capture army, it just freaks them out and pushes them into overdrive.
Wouldn't be surprised if there is utter panic behind the scenes.
They somehow need to corner many billions of business meanwhile chinese labs reckon they'll have fable class models by end of the year. [0]
That does not leave a lot of room for mistakes. I reckon they'll get government to block chinese models just like the US car industry did with EVs.
https://www.tomshardware.com/tech-industry/artificial-intell...
> I reckon they'll get government to block chinese models just like the US car industry did with EVs.
This is more or less already the case. Not that they're blocked, but... it may limit who you can work with and what insurance companies will cover you.
Does anyone at OpenAI know how to run a business?
Sam Altman worked at the same incubator that runs this website.
Founding a start-up with VC money, dumping the bag into someone else's lap, and then riding off into the sunset is a very different skill set from actually growing and running a company that is no longer early stage.
Look at Zuckerberg. He may have been good as a founder, but if he didn't have super voting shares, and if Meta's cash flow from their ad business wouldn't mask how poor his strategic decision making has been, he would have been pushed out as CEO years ago.
But how many companies did he actually launched? lol
The only actual product was "Loopt", some bs location sharing app that nobody used or ever heard about.
So, how do their overall financials look these days?
They can probably raise more capital, and stave off the inevitable bankruptcy for just a bit longer. Wouldn't be surprised if US Gov buys a stake too.
Will Locket wrote about it last month: https://www.planetearthandbeyond.co/p/openai-is-in-a-far-wor...
tldr is: They either get a successful IPO to stave off bankruptcy for a couple more months, or they're going to be bankrupt by the beginning of next year.
There's a very low chance of OpenAI doing an IPO this year: https://polymarket.com/event/openai-ipo-by. So the assumption that they "have to do an IPO" already seems questionable. The rest of the analysis also feels pretty hand-wavy. I'm not saying OpenAI is in a strong financial position, but this article doesn't make a solid enough case for why it's supposedly in such dire straits.
Or they stay private and raise more capital. Until they have a failed round people predicting bankruptcy are getting way ahead of how this would actually play out. Some of us are old enough to remember the "Amazon can never make a profit and will go bankrupt" predictions of 25 years ago.
The scale current of money-burning is just wild. I'm not sure you can compare it to anything else this century.
[delayed]
Any particular preparations to do before this ship hits the sand?
Extract as much liquidity as you can and don't have any commitments to them.
Using "on pace to miss its own forecast" is a weird way of phrasing "OpenAI made it up to bullshit the rubes".
Not to mention that being "on pace" is usually a term that means "keeping pace with".
What a shitty title.
“An analyst thinks OpenAI may miss its 2030 ad revenue target by 90%” is what the article says.
the ad business is dead and openai's brand is toxic.
The ad business will never die. It’s capitalisms air and water.
True, but the current state of advertising is, charitably, kinda goofy.
I'm not surprised the iteration we're seeing now is perceived as failing: on the few remaining screens where ads are still present for me, they're between highly irrelevant to flat out repulsive. There are a few brands I will never touch with a long stick, purely as a result of their disturbing, disgusting ads -- again, charitably, a negative-sum game.
As someone who doesnt really see ads either, we are in the minority. The vast majority of people are bombarded with ads from their TVs, streaming platforms, and unadblocked browsers. Try using a relatives iPhone or something its mad.
People heavily relying on LLM literally live in a Truman show.
A simulacrum, simultaneously more detailed than the ones built by Meta and Instagram and Tik Tok, but even more shallow, without even the illusion of human connection.
An endless forest of mirrors reflecting no one but the user.