Ads, the easy way out
We were told that from AI we will soon get to AGI (Artificial Generic Intelligence) to ASI (Artificial Super Intelligence). AI will take over the world, it will do everything for us. It will make us obsolete. Billions have already been spent, with billions more committed to be spent.
What are we getting?
Another advertising and soul sucking tech.
This week, we learned directly from OpenAI that ChatGPT Ads reached $1 billion in annualized revenue.
Side note: This is a new way that AI companies are reporting their potential earnings. It doesn’t mean that OpenAI made $1 billion. The figure is based on an undisclosed time period — maybe a month — they use the revenue from that period and multiply it to get the whole year.
I know $1 billion sounds very impressive but a) OpenAI hasn’t made it yet and b) it’s based on its own prediction it is supposed to bring in $2.5 billion. OpenAI is short of $1.5 billion. Actually that detail I can understand. You are building a new product, deploying a new technology stack within your organization and there are always delays. But the real question is the OpenAI prediction for its advertising growth.
This year, it was supposed to be $2.6 billion, next year $11 billion, then $25, $53 and finally $100 billion in 2030. That’s a 4x jump from year one to two, and doubling every year after that. By 2030, the $100 billion in revenue is supposed to be part of the $280 billion figure, while the company is expected to spend $600 billion between now and 2030.
For comparison, Google ad revenue for 2025 was close to $295 billion.
The year before that $265 billion and the year before that $238 billion. That’s 1.11x year over year from a company which has search, video and websites as its distribution channels. And it’s a company which doesn’t sit still and wait for the competition to overtake its ad business. Not to mention Facebook and Amazon.
The other interesting thing is how quickly OpenAI’s projected revenue and revenue per user are growing year over year. In 2025 the projected revenue in 2030 was less than $30 billion, a year later the projection is $100 billion. Revenue per user has increased from $15/user to $60/user. You should be pleased that your value has risen four times in the eyes of OpenAI.
And that’s the real story this week. The accounting acrobatics, promising trillions in revenue and functionality beyond everyone’s imagination is getting old. But your eyeballs, thoughts and intentions — that’s where the real money is.
This week, Facebook/Meta introduced a new AI model — muse-spark1.3.
Yes, it is supposed to be another world wonder as all these models are. The most interesting part is that it comes with a different pricing structure. The makers of these models charge per token (token is a unit of text which the LLM uses to parse an input or create an output). For this model you can either pay $1.25 per million input tokens (text you submit to AI) and $4.25 per million output tokens (text which AI returns back), or you can pay $0.10/million input and $0.20/million output. Why is there such a difference? The first price is for an instance that doesn’t remember anything you asked or the answers it has given. The second is for an instance that will remember everything and will use it for training.
Just a few weeks ago I wrote a piece about the ways companies want to train their AI models on new data. Here they have found another way. You will get your answer, either for free or at a low cost. In return, everything you do will be harvested to sell you more ads.
OpenAI is becoming desperate to demonstrate that it has a product which will bring revenue big enough to justify the billions of dollars invested and billions to keep running. Despite all these billions spent, OpenAI is only capable of coming up with this business model — advertising. Getting your eyeballs, thoughts and intentions; and turning them into dollars. Pitiful. Pathetic.
For the history buffs, I have two quotes here:
Mr. Altman about ads: ‘I hate ads, I think ads were important to give the early internet a business model but they fundamentally misalign a user’s incentives with the company providing the service. I am not totally against them, I am not saying OpenAI would never consider ads but I don’t like them in general and I think that ads plus AI is sort of uniquely unsettling to me, When I think of GPT writing me response if I had to go figure out exactly how much was who paying here to influence what I’m being shown, I don’t think I would like that. And as things go on I think I would like that even less. So there is something I really like about the simplicity of our model which is we make great AI and you pay us for it and it’s like we’re just trying to do the best we can for you. And then given that that has some inherent lack of access and inequality we commit as a company to use a lot of what basically the rich people pay to give free access to the poor people.’
Mr. Altman about revenue: ‘We have no current plans to make revenue. We have no idea how we may one day generate revenue. We have made a soft promise to investors that once we’ve built this sort of generally intelligent system basically we will ask it to figure out a way to generate an investment return for you. <laughter from the audience> I get it, you can laugh it’s alright but it is what I actually believe is going to happen.’
The recurrent pattern? No strategy, only panic to make some money quickly and get out.