In October 2024, Sam Altman said advertising was "like a last resort for us as a business model." This week, OpenAI announced it's introducing ads to the free and Go tiers of ChatGPT.
That's a fast trip to the last resort.
Let's be clear about what this means: OpenAI has raised billions in funding at a $157 billion valuation. It charges $20/month for Plus subscriptions. It has enterprise contracts with major corporations. And it still needs advertising revenue to make the economics work.
That should tell you everything about AI unit economics.
The company is positioning this as expanding access - "advertising allows us to serve more users for free." That's technically true. It's also conveniently profitable for OpenAI. Advertising at scale is lucrative. Google makes $200+ billion annually from ads. If even a fraction of ChatGPT's hundreds of millions of users see ads, that's real money.
The announcement specifies ads will appear initially in the free and Go tiers. Initially. That word is doing a lot of work. If you believe premium subscribers are permanently safe from ads, I have a Netflix ad-free tier to sell you from 2015.
The progression is predictable: Start with free users (they can't complain, they're not paying). Then add ads to lower-paid tiers (they're paying less, so ads offset costs). Eventually introduce a new "Premium Plus Ultra" tier that's actually ad-free while the regular Plus tier gets ads (but hey, they're "tastefully integrated").
One Reddit user in the source thread made an excellent point: "No thank you, I don't want product recommendations in my answers when I make important health emergency related questions."
That's the real concern. Google Search ads are clearly labeled and separated from results. You know when you're seeing sponsored content. How exactly does OpenAI plan to integrate ads into conversational AI responses?
Will ChatGPT recommend products in answers? Will there be banner ads in the interface? Will sponsored responses be clearly labeled, or will the AI subtly steer conversations toward advertisers' products? The announcement is vague on implementation details, which is never reassuring.
The timing also matters. OpenAI is supposedly working on next-generation models that will cost even more to train and run. If the current generation already requires advertising revenue to be sustainable, what happens when compute costs increase?
Meanwhile, competitors are circling. Anthropic and Google aren't running ads on their AI assistants yet. That's a competitive advantage OpenAI just handed them. "Switch to Claude - no ads" is an obvious marketing angle.
The Altman quote from October is particularly damning because it suggests OpenAI knew this was coming. When a CEO says something is a "last resort," that's typically code for "we're already planning it but don't want to announce yet."
For users: expect ads to expand beyond free tiers eventually. For the AI industry: this is a signal that even the most well-funded AI companies with massive user bases and paying customers can't make the math work without additional revenue streams.
The question isn't whether AI is useful enough to justify its existence. The question is whether it's profitable enough. And if OpenAI - with every advantage possible - needs advertising, that answer might be no.
