Ads in ChatGPT are starting to look better. After a splashy entrance, immediate backlash, and handwringing from advertisers over limited options, OpenAI’s move into advertising has turned around. Signs are starting to show some favorable performance as OpenAI figures it out… as we predicted.
Backing up for context, OpenAI announced earlier this year that it would begin testing sponsored content in ChatGPT. Posted alongside answers to questions, they resemble search ads in a lot of ways, including contextually-targeted sponsored links and other formats like product sliders and carousels.
The “backlash” noted above came when OpenAI’s terms were viewed as restrictive and overpriced. Complaints included a lack of performance-based options and exorbitant rates. Specifically, CPMs in early stages were around $60 an the minimum campaign spend to even get in the door was $200,000.
But OpenAI quickly lowered these barriers, including opening up more performance-based options. It also lowered CPMs to reasonable levels and lowered the minimum campaign spend to 50,000, before removing the price floor altogether. And just like that, the program’s objections were addressed.
Conversational Intent
In addition to the moves above, OpenAI started to work with Adtech players to build ad managers that made it easy for advertisers to launch ChatGPT campaigns. These include collaborations with Criteo, Smartly, StackAdapt, and others – a move that brought ChatGPT ads to where advertisers live.
That brings us to the present, where more enticements for ChatGPT advertising are coming out of the woodwork. Specifically, these ads have spent enough time in the wild to prove they actually work. And the signs look good so far, given evidence from campaigns that were run by early adopter brands.
For example, Business Insider reports data from Similarweb that indicates strong performance in campaigns from multi-location retailers such as Dick’s Sporting Goods and Nordstrom. Ads from these brands and others generated click-through rates as high as 5.4 percent greater than Google search ads.
So what can be attributed to the strong performance? It’s all about conversational intent. This inherits search’s strong intent and layers in more dimension, given that natural-language dialogues offer more intent signaling. Rather than traditional search terms of a few words, full sentences are used.
SOCi Study: LLM Queries Are 6x Longer Than Traditional Search
Intent Drift
Sticking with that last part, longer queries provide AI engine more surface area to infer intent. Users are literally spelling out exactly what they want. And beyond longer queries about a given need, the back & forth dialogues with probing questions from the AI engine can draw out even more explicit intent.
In some cases, users start without commercial intent but then drift towards commercial outcomes as dialogues pique their interest in products – a phenomenon called intent drift. According to Similarweb’s data, 46 percent of ChatGPT users who saw ads started the dialogue without commercial intent.
Another opportunity can be seen from the fact that 83 percent of ad-triggering dialogues in ChatGPT wouldn’t have activated a shopping ad on Google. This means that ChatGPT could be finding ways to monetize user interaction that traditional search missed – again, due to deeper conversational intent.
So what about SMBs? It’s worth noting that early adopters include the Nordstroms of the world. As ChatGPT ads evolve and assimilate, they’ll move down market as it often goes. SMBs will be part of this ecosystem. And like everything else, they’ll need platforms and agencies to deliver it to them.
