OpenAI has reached the advertising revenue model of their nascent product lifecycle as the company’s chief financial officer Sarah Friar hinted to The Financial Times earlier this week.
In an interview with FT, Friar explained that OpenAI is looking for “new revenue sources” while it continues to evolve into a mostly for-profit entity. Despite being worth $150B, OpenAI has been snatching up advertisers from competing companies such as Google and Meta to help it pursue “other revenue streams in the future.”
Friar touted her own advertising experience when holding leadership roles at NextDoor, Square and Salesforce as well as leaning on the company’s chief product officer, Kevin Weil who helped build out ad support platforms for Instagram and X.
Sources familiar with the matter have also found that OpenAI CEO Sam Altman is warming to the idea of some level of ad-support. Altman’s reception to introducing his customers to ads makes more sense at a macro-level as OpenAI continues to burn through money as the company continues to expend resources to train the language models that power its ChatGPT services.
As OpenAI is about to watch $5B slip annually through its hands like water according to the company’s own predictions, it marked its highest revenue reach in its short existence at $4B.
To date, OpenAI has banked on its application programming interface (API) licensing model as its highest revenue generator, unfortunately “the API is not a high margin business.”
With that being said, Friar is aware of a future where OpenAI runs ad-supported products that drift away from guided user-feedback to that of creating platforms more beneficial to paying advertisers.
For now, an ad-supported ChatGPT is only theoretical, but OpenAI is putting real money behind exploring what that reality could look like. Friar’s added “for now there’s a lot of low hanging fruit in the way were are doing things,” when referring to the company’s API marketplace model.
The next question for OpenAI investors seems to be less about getting to net zero in expenditures to return to sustained positive profitability, but more about long is the runway for the company’s current licensing model if it is already exploring ads two years into a heavily hyped lifecycle?
