OpenAI has enticed more than 100,000 advertisers to test its ad platform. Now comes the hard part: moving out of the “experimental” bucket and becoming a permanent fixture in media plans.
To do so, OpenAI will need to demonstrate that its ads are moving the needle on hard business metrics. In my conversations with CMOs and data wonks, the verdict so far is — mixed.
“We’ve dabbled in it,” Twilio CMO Chris Koehler told me. Intuit is “experimenting,” per its CMO Thomas Ranese.
One big problem: effectiveness.
A working paper under review by e-commerce researchers Maximilian Kaiser and Christian Schulze found that across 102 advertiser sites, ChatGPT Ads generated $0.89 in revenue per US session, compared with $2.45 for Google search ads.
OpenAI launched ChatGPT Ads about nine months ago and rapidly scaled an entirely new type of advertising to a $1 billion annualized revenue run rate as of this summer. It’s added new formats, partnerships, and tools at a dizzying pace. Is ho-hum performance normal at this phase?
“What makes us cautious about ‘it will come with time’ is the size of the gap,” Kaiser and Schulze told me over email.
The search intelligence platform Adthena recently shared ChatGPT ad-performance results from 30 enterprise brands for July through September. It said 52% of those advertisers struggled to recoup their ChatGPT ad spend, while 26% matched or beat Google ads. The remainder reported mixed results.
A counterpoint: OpenAI published a case study in October from the note-taking app Evernote, which found that ChatGPT Ads delivered a trial-to-paid conversion rate about 10% to 20% above the company’s historical average across paid-acquisition channels earlier that year.
At this stage, one key to seeing success with ChatGPT ads might be for marketers to do a bit of legwork themselves.
Hans Fischmann, VP of product at the adtech company AdRoll, said it tags every ChatGPT ad it runs and uses that information to inform the broader media buy.
“Someone asks ChatGPT about a hotel on Tuesday, and sees that brand on their TV Thursday,” Fischmann said. “That’s the full-funnel play, and it’s what earns ChatGPT a permanent spot on the plan.”
Ads need an audience
Right now, the growth of OpenAI’s ad business is limited by the size of ChatGPT’s free user base, the scarcity of ad-relevant conversations, and the tight ceiling on how many ads users will tolerate before abandoning the product.
OpenAI’s head of global ad solutions, Dave Dugan, told CMO Insider in a June interview that ad delivery and volume had improved as its confidence in the ChatGPT Ads user experience had grown.
Brands are still struggling to show up at scale, though.
“It’s really hard for these LLMs to find audience,” Qualcomm CMO Don McGuire said. “Unless it’s super, super broad, targeting is not really happening right now, so that really begs the ROI question.” (ROI refers to return on investment.)
One way to close ChatGPT’s performance gap could be to move ads from cards that sit alongside ChatGPT conversations to sitting more naturally inside the answers themselves, the researchers Kaiser and Schulze said.
That’s a risky trade-off that seems unlikely. OpenAI’s ad principles state that ads won’t influence the answers ChatGPT gives you and that it prioritizes user experience over revenue.
Measuring up
Adthena CMO Ashley Fletcher said measurement remains a “sore point” for marketers with ChatGPT.
OpenAI introduced a new measurement pixel and conversion bidding, so advertisers can set a target cost per acquisition or cost per click, which will take some of the guesswork out of the equation. Fletcher said those improvements would give CMOs better numbers to model where to go next, but he worries what they will say.
Cleaner measurement might show that ChatGPT ads mostly “nudge people” at the first stage, when they begin considering a brand, but that’s a long way from the quick conversions that many advertisers have come to expect from other platforms, and therefore ChatGPT, Fletcher said. He added that Black Friday will be a big moment to watch.
Some marketers are finding early wins with ChatGPT Ads.
Natural Intelligence operates comparison sites including Top10.com and BestMoney.com alongside a performance marketing business. Jonathan Vardi, its head of strategy, said the company has moved ChatGPT Ads from its test budget to its “growth budget,” a more repeatable category where its investments will scale as performance increases.
Vardi said he has found that making a list of pain points each of its products solves and turning those into specific ads was one way to leverage the channel’s uniqueness — making sure ads show up as ChatGPT users are trying to get answers to tricky questions. He said his team’s work to accurately report conversion data to the ChatGPT ad platform has been crucial.
“If you don’t tell ChatGPT what users are doing on your site after they click your ad, you’re not allowing the ads algorithm to learn which users actually engage with what you have to offer and become paying customers,” Vardi said. “Stopping at views or clicks really constrains your ROI now that there’s more competition on the channel.”
