OpenAI is considering introducing advertising to its suite of artificial intelligence products as the company seeks additional revenue sources amid its transition to a for-profit structure.
In an interview with The Financial Times, Sarah Friar, the company’s Chief Financial Officer, confirmed that the $150 billion AI start-up is evaluating the possibility of implementing ads. She emphasized that any potential advertising model would be carefully integrated. “We plan to be thoughtful about when and where we implement them,” Friar stated.
This move comes as OpenAI intensifies efforts to diversify its revenue. The San Francisco-based company, which secured $6.6 billion in new funding in October, has been strengthening its team by hiring experienced advertising talent from major tech firms like Meta and Google, according to multiple sources and an FT analysis of LinkedIn profiles.
Despite these efforts, Friar tempered expectations in a follow-up statement. “Our current business is experiencing rapid growth, and we see significant opportunities within our existing business model. While we’re open to exploring other revenue streams in the future, we have no active plans to pursue advertising at this time,” she clarified.
OpenAI’s push to generate more revenue comes as it seeks to leverage its leadership in the rapidly expanding AI sector. One of its products, an AI-powered search engine, has already sparked interest from competitors, including Perplexity, which is piloting ads in its own AI search offering.
Friar, who has held leadership positions at companies like Nextdoor, Square, and Salesforce, highlighted the company’s extensive advertising experience. She pointed to Kevin Weil, OpenAI’s Chief Product Officer, who previously helped develop ad-supported products at platforms like Instagram and X. “The good news with Kevin Weil at the wheel with product is that he came from Instagram. He knows how this [introducing ads] works,” Friar remarked.
In May, OpenAI also hired Shivakumar Venkataraman, a former leader of Google’s search advertising team, to serve as Vice President. His expertise further strengthens OpenAI’s advertising strategy, should the company move forward with such plans.
Advertising has proven to be an immensely successful revenue model for tech giants like Google and Meta, capitalizing on their massive online user bases. However, OpenAI executives remain divided on how advertising would function on their platform, according to two individuals familiar with the discussions. CEO Sam Altman has shown increasing interest in the idea, according to one source.
As OpenAI restructures into a for-profit entity, the company is also looking for ways to offset the steep costs associated with developing advanced AI models. These expenses are prompting AI start-ups, including OpenAI, Anthropic, and Elon Musk’s xAI, to seek new avenues for monetization. These efforts are also accompanied by frequent fundraising rounds.
Although OpenAI’s revenue has surged, reaching an estimated $4 billion annually, much of this growth is driven by the success of ChatGPT, which now boasts more than 250 million weekly active users. However, the costs of building frontier AI models are substantial, and OpenAI expects to burn through more than $5 billion in cash in the near future.
One of OpenAI’s largest revenue sources is its Application Programming Interface (API), which allows businesses and developers to build applications using OpenAI’s technology. The company also generates income from selling individual and enterprise licenses for ChatGPT. However, the API is not considered a high-margin business, according to a source familiar with the company’s strategy.
While OpenAI continues to explore advertising models, Friar acknowledged some of the potential drawbacks of relying on ads as a revenue stream. She noted that ad-supported models are often susceptible to fluctuations in the broader economic cycle and can shift a company’s focus from serving users to catering to advertisers. “I don’t preclude ads,” Friar said. ”But for now, there’s lots of low-hanging fruit in the way we are doing things”
In summary, as OpenAI eyes advertising as a potential revenue stream, the company remains cautious, weighing the benefits of monetizing its rapidly growing user base against the potential risks associated with ad-supported models. For now, OpenAI appears committed to refining its existing revenue strategies while exploring new possibilities.
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