The advertising industry’s most anticipated rollout is kicking into higher gear.
OpenAI has signed Smartly as its first adtech partner focused on improving how ads appear to users, Business Insider can exclusively report. Their work will build on an initiative OpenAI started in February to run basic ads to some users in its free and $8-a-month Go tiers. OpenAI previously announced a partnership with the adtech company Criteo, which will help brands place ads in ChatGPT.
Led by ad industry veteran Laura Desmond, Smartly is a 13-year-old adtech company that helps clients like Spotify and Uber tweak their ads in real time based on how they’re performing.
Now, Smartly will provide a similar service to OpenAI advertisers. Smartly has signed entertainment, retail, and sports clients to participate in a pilot. Initially, Smartly will help these companies tweak their ChatGPT ads in real time.
There’s a bigger vision, though. Smartly’s ultimate goal is to help OpenAI build interactive ad formats that let brands mimic ChatGPT’s conversational interface.
Desmond cited Smartly’s conversational ads for the UK retailer Boots, which run on Meta platforms like Instagram, as an example of the type of ad format OpenAI could eventually adopt. In that case, a chatbot pops up in a new window when the user clicks it and serves gift recommendations in response to a series of questions. Smartly said the ad format was nearly five times as effective at driving sales as Meta’s basic ads.
“The opportunity with conversational advertising is you can do more follow-ups, and you can ask again,” Desmond said. “The experience for people will get way more relevant, way more personal, and hopefully be seen as a much better value exchange. All of the research indicates people want to be known. Don’t serve me shoes I bought three weeks ago. Don’t serve me ads that aren’t relevant.”
OpenAI’s slow-motion ad rollout
The ad offerings in ChatGPT’s initial pilot have been basic and contextual.
A user comparing smartphones might see a Best Buy ad. A traveler looking for getaway advice might be shown an Expedia ad. The research company Sensor Tower recently found that more than 100 brands had advertised on ChatGPT in the first few weeks, with 44% of them being retail companies.
Smartly sees an opportunity to help OpenAI create ads that are better at leading people to take an action, such as clicking through to a brand’s site or making a purchase.
“They’re asking questions, and they’re open to seeing ads that help them learn more, discover, and take action,” Desmond said of consumers.
The opportunity — and stakes — for OpenAI are huge.
Mark Mahaney, Evercore ISI’s internet research analyst, said in January that OpenAI could reasonably generate several billion dollars in ad revenue this year and as much as $25 billion by 2030.
OpenAI said last week that it was on track for $100 million in annualized recurring ad revenue and was working with more than 600 advertisers.
OpenAI has a big opportunity with ads, but it’ll be hard to replicate the success of giants Google and Meta, MoffettNathanson wrote in a note distributed Tuesday. Digital advertising is concentrated among a few players. ChatGPT also has limited real estate for ad placements because, to maintain trust, it doesn’t embed ads directly in its results.
OpenAI has said ads will be separate, clearly labeled, and won’t influence ChatGPT’s organic answers. The company has said it will keep user conversations with ChatGPT private from advertisers and not sell user data to them. Users under 18 won’t see ads, and ads will not appear near certain topics, including politics and health.
There’s a lot riding on OpenAI nailing the ad experience and not creeping out users.
Rival Anthropic has rejected ads in its chatbot Claude, saying they would undermine its mission to be helpful. Google, for its part, shows ads in its AI overviews but not in its Gemini chatbot.
Desmond said that the need for trust is part of why building a highly personalized ads business will be a gradual process.
“As we gain confidence about what people are comfortable with,” the companies will be able to adapt the ads, she said.
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