Greetings from New York. ChatGPT head Nick Turley just admitted what every tech executive already knows: even 700 million weekly active users can't make the math work without ads. In an interview on Decoder, Turley said he's "humble enough not to rule it out categorically," though he hedged that OpenAI would need to be "very thoughtful and tasteful" about how ads could be integrated into ChatGPT.
This represents a stunning reversal from CEO Sam Altman's earlier position. Just last year, Altman called ads "uniquely unsettling" and a "last resort" for ChatGPT. He even proclaimed, "I kind of hate ad s... I like that people pay for ChatGPT and know that the answers they're getting are not influenced by advertisers."
The economics are brutal. OpenAI expects to generate $12.7 billion in revenue this year through subscriptions, which is more than triple the $3.7 billion it generated in 2024. This sounds impressive until you realize the company burns more money than it makes and won't be cash-flow positive until 2029. Despite 700 million weekly active users, only 20 million pay for subscriptions.
Think about that ratio: less than three per cent of users are paying customers. Netflix, by comparison, has successfully converted most of its user base to paid subscribers (and yes, they have ads, too). OpenAI's subscription model, while "incredible" according to Turley, faces the same reality every freemium product eventually confronts: free users cost money to serve.
The ad model OpenAI is exploring sounds different. Rather than traditional display advertising, the company is investigating what Turley calls "Commerce in ChatGPT," where the company would take a cut of product purchases made through ChatGPT. This sounds more like an affiliate revenue model than an ad model. Turley insists the "magic of ChatGPT is that it independently chooses your products without any interference," but anyone who's worked in affiliate marketing knows how quickly that independence can erode.
It may take OpenAI a minute or two to get there, but we need to prepare for AI-powered commerce. ChatGPT recommendations driving actual purchases represents a fundamental shift in how products get discovered and sold. Everyone needs to start thinking about how their products will surface in conversational AI contexts. (Until now, OpenAI hasn't been very interested in talking to my very biggest retail clients about this, but I guess they started doing the math.)
Once ads enter the equation, every ChatGPT recommendation will become suspect. Brands that can maintain authentic presence in AI conversations without appearing pay-to-play will win.
Competition will intensify. With Perplexity already testing ads and Meta's AI integrated across its properties, the race to monetize AI through advertising is on. Google's Gemini reaching 450 million monthly users shows this isn't just OpenAI's game anymore.
The irony is palpable. OpenAI built ChatGPT to be different, a pure AI assistant unencumbered by advertiser influence. Now, facing billions in losses and investor pressure, they're exploring the exact monetization models they once criticized. It's the classic Silicon Valley story: principles are expensive and – eventually – someone has to pay the bills.
Get ready for an AI landscape where recommendations are not purely algorithmic, where "sponsored" could appear before "suggested," and where the line between helpful assistant and sophisticated salesperson will become increasingly blurred.
As always, your thoughts and comments are both welcome and encouraged. -s
Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit shellypalmer.com.
