Ads Arrive in AI Chatbots: What Works and What Doesn't
OpenAI and Google are already showing ads in their chatbots, while Anthropic pledges to keep Claude ad-free. The head of ad-tech firm Koah Labs explains what is working and what is not.
Advertising is making its way into AI chatbots. OpenAI has shown ads in ChatGPT since February, and Google has just expanded ads in its AI Mode search chatbot to 10 more countries beyond the United States. Anthropic, the company behind the Claude chatbot, is sticking to the pledge from this year's Super Bowl commercial to keep Claude ad-free. Its recent IPO filing did not even mention selling ads. That stance is easier to hold with about $112 billion in investor cash.
Ads may become necessary to cover the high cost of generating AI answers, especially for smaller chatbot platforms. More than 100,000 customers advertise in ChatGPT. Google says users find its ads highly relevant, but advertisers are far from satisfied so far, though they expect improvement.
What Koah has seen
San Francisco startup Koah Labs places ads in more than 200 apps, including DeepAI and Liner. Its clients include telehealth company Hims and flower delivery service UrbanStems. CEO Nic Baird says:
- Ads partly composed by AI get double the clicks. Drugmakers, who face government rules on ad content, keep more human control and see weaker results.
- Ads can be matched not only to the user's prompt but also to the chatbot's reply. Spa ads, for example, have performed well after stress-related prompts. Click rates are about 3 percent, roughly on par with Google ads.
- Koah generally receives the full conversation so far, which raises privacy questions. Baird says queries are anonymized but declined to give further detail.
- By Koah's estimate, one in four chatbot queries about a retailer or brand concerns a return, exchange or other support issue, which advertisers could try to address.
Open questions
Apps such as Instinct and Meta's Muse are beginning to handle shopping for users. Meta CEO Mark Zuckerberg has said Muse could become the company's biggest revenue source, though through transaction fees rather than ads. DeepAI CEO Kevin Baragona says ad revenue has been meaningful, but he is not committed to it because the experience does not yet feel right on privacy and design. In his words, the ads are not working terribly well for anyone.
