Publishers Delay Monetizing AI Chatbots with Ads Until Scale

Publishers are exploring different methods to monetize generative AI technology. These include:

• Subscriptions: For instance, OpenAI's more powerful version of ChatGPT requires a subscription, and publishers like Ingenio are rolling out subscriptions for more interactions with AI chatbots.
• Advertising: BuzzFeed is selling brand sponsorships for its GPT-powered games, and Perplexity is planning to add native advertising around the suggested related questions in its generative AI search engine. Outside is also considering adding ads in later phases of its AI chatbot Scout, which is currently only available to paying subscribers.

Publishers are hesitant to add advertising to their generative AI products for a few reasons:

• Low CPMs: The cost per thousand impressions (CPMs) is currently low, which makes advertising less profitable.
• Lack of Scale: There isn't enough user scale to attract significant advertising revenue.
• Sustainability Concerns: There is a belief that advertising might not be a sustainable model unless CPMs increase significantly.

Publishers like Ingenio and Outside are focusing on building subscription models that provide more control over revenue, the user relationship, and distribution.

Ingenio's AI chatbot Veda is designed to encourage subscriptions by implementing a registration wall that appears after three prompts. Following this, the next iteration of the chatbot feature, called Ether, will ask for a phone number. Eventually, users will be asked to pay for a subscription to purchase messages with the chatbots. This approach is part of Ingenio's strategy to focus on subscriptions or registrations for its chatbots.

The potential of using generative AI for targeted advertising lies in the ability to create curated environments for ads using contextually targeted and first-party data. For example, Outside's director of digital marketing & strategy, Katie Cruickshank, is optimistic about using generative AI to improve ad alignment. Although personally identifiable data from their AI chatbot Scout isn't stored, they are considering creating targetable cohorts from user data such as the questions asked and articles clicked through to. Ingenio also plans to develop profiles based on demographic data shared by registered users and inferences made from conversations with chatbots, which could eventually be used for richer user profiles.

The impact of ads on user trust in generative AI products is a subject of debate. Some, like Katie Cruickshank from Outside, believe that ad-supported chatbots can offer contextually relevant and targeted ads without undermining trust. However, Liz Bartges, director of brand engagement at ad agency FerebeeLane, expresses hesitation, noting that ads in generative AI search engines are not always clearly labeled, which could be disruptive and potentially erode the trust that platforms have built with their audiences.