The Problem With OpenAI Putting Ads in ChatGPT

OpenAI’s Jan. 16 announcement that it will introduce ads in some ChatGPT plans surprised even its closest competitors. Google DeepMind CEO Demis Hassabis told Axios in Davos this week 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, even as Gemini recently rolled out an in-app shopping feature.

The moment underscores how urgently large A.I. companies are searching for new ways to make money. Despite their soaring valuations, none of the major players is profitable, largely because of 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.

So far, most chatbots generate revenue through subscriptions, enterprise contracts, API access and licensing deals with partners. Advertising offers a fast way to close revenue gaps, but it also risks undermining user trust and degrading the experience that made these tools—many known for their minimalistic user interface—popular in the first place.

“It carries a high risk of feeling intrusive if a brand interrupts a helpful A.I. conversation with an unsolicited pitch,” Gilad Bechar, co-founder and CEO at Moburst, a growth marketing agency used by Google, told Observer. “If an ad does not feel like a resource or a solution in that specific moment, it does not belong in the chat.”

Anticipating such concerns, OpenAI said in its announcement that users “need to trust that ChatGPT’s responses are driven by what’s objectively useful,” and emphasized that ads will not influence a chatbot’s answers. Critics, however, argue that separating advertising from A.I. outputs may prove harder in practice.

Those worries come as A.I. companies are already pushing into more sensitive areas. In recent weeks, both OpenAI and Anthropic launched health care-focused products, raising alarms about the accuracy and reliability of A.I.-generated medical advice and the security of user data. Introducing ads faces similar challenges.

“OpenAI is starting down a risky path,” Miranda Bogen, director of the AI Governance Lab at the nonpartisan think tank Center for Democracy and Technology (CDT), said in a statement to Observer. “Even if A.I. 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.”

Some critics warn that the backlash could be especially strong among women, who now make up more than half of ChatGPT’s users.

“Data shows that women have an ethical dilemma when it comes to artificial intelligence and its use,” said Shampaigne Graves, a women’s consumer expert and founder of the e-commerce education company Boldifi, citing research from the Oxford Internet Institute showing that women are more likely to recognize A.I.’s societal risks and inequities. “They’re also not fans of advertising on platforms that they use for entertainment, especially when there are competitors that aren’t incorporating ads into their platform. This is the perfect storm for OpenAI to bleed subscribers.”

Google, meanwhile, is pursuing its own commercial strategy. On Jan. 11, the company 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.

A new report from the nonpartisan think tank 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,” the report said. Beyond advertising, companies are also chasing government contracts—such as deals with the Pentagon—and exploring A.I.-powered devices like watches and smart glasses as additional revenue streams.