OpenAI is slapping ads into ChatGPT — Microsoft Copilot is obviously next

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Sam Altman, the CEO of OpenAI, appears to have realized that ChatGPT is costing too much money, and steps are being taken to reduce expenses.

OpenAI announced yesterday that ChatGPT will soon include advertisements. These ads will be shown at the bottom of conversations for users who are on the free plan or have a “Go” subscription. Users with more expensive subscriptions won’t see ads, at least not yet.

OpenAI says it won’t share your data with other companies, and you’ll be able to prevent your conversations from being used to personalize ads. This is a particularly noteworthy time for ChatGPT and OpenAI for several reasons.

I’ve been watching the competition heat up between OpenAI and Google. Google’s Gemini models are now outperforming ChatGPT in certain tests, and it’s definitely caught the attention of investors. What’s really striking is how much control Google has over the entire AI landscape – they’ve got the server technology, the cloud infrastructure, and reach consumers directly through Android, Chrome, and their website. It’s a pretty comprehensive position.

ChatGPT finds itself on something of an island, reliant almost entirely on apps to find users and third-parties to find compute, chiefly Microsoft and Azure. It has hundreds of millions of monthly active users and various major enterprise contracts, but its balance sheet is nowhere near approaching any semblance of profitability. Yet, it’s on the hook for over a trillion dollars of compute commitments in the next decade, and that money certainly has to come from somewhere.

Investors are losing patience as they wait to see real profits from artificial intelligence. Microsoft’s stock price has been falling recently, likely because the company is spending a lot of money on AI without seeing a corresponding return. While Microsoft’s AI-powered products like GitHub Copilot and the Copilot features in Microsoft 365 are gaining traction, the overall financial benefits haven’t yet materialized. Large companies often choose Microsoft due to its strong record on regulatory issues and its leading security features. Governments are also using Microsoft Copilot, believing it offers a secure and isolated environment.

Companies like Google, Microsoft, and Meta have the financial resources to independently fund their AI projects and build the necessary infrastructure. However, ChatGPT depends completely on investments from venture capital firms, Wall Street, and partners like Microsoft. ChatGPT’s financial situation is concerning, and the excitement surrounding the technology is starting to give way to a more realistic assessment of its costs and challenges.

For a long time, people expected ChatGPT to start showing ads, and it seemed likely to happen eventually. It’s a common strategy for companies to offer a free product to get people hooked, then introduce ways to make money from it later. Considering how much money ChatGPT loses due to its high operating costs, ads were the most sensible path forward. This will probably also be the case for AI tools like Microsoft Copilot and Google Gemini – truly free services are rare.

It’s a bit ironic to say this on a site filled with ads, but it’s always been tough to make a living blogging without them. OpenAI’s Sam Altman has previously stated that advertising was only considered as a final option for funding. This raises the question: are we now at that point where OpenAI is relying on advertising as a last resort?

Altman explained during the 2024 XFund Experiment Cup that he sees advertising as a last option for their business. He’d only use it if it was the only way to make their services available to everyone, but he’d prefer to find an alternative that didn’t rely on ads.

It seems an alternative was never found.

Microsoft Copilot is likely similar – it’s free to use on Windows 11 and online, and it even gives you free access to some of the powerful AI models from OpenAI that usually cost money.

“I kind of think of ads as like a last resort for us as a business model,” – Sam Altman, October 2024 from r/singularity

Microsoft has long struggled with how to make money from users who don’t pay for subscriptions like OneDrive, Xbox Game Pass, or Office 365. Unlike Apple and Google, who earn revenue through app and in-app purchases, Microsoft has historically kept Windows open, but this has led to frustrating changes. While they can collect data from free users, it’s not ideal. This approach has contributed to Windows’ declining popularity, even though it still dominates desktop computing. Many users find the operating system bloated with unwanted software, advertisements, and Microsoft’s own aggressively promoted apps.

Even Microsoft is facing rising costs. Investors want to see revenue increase at the same rate as inflation, and Copilot appears to be a natural way to introduce more advertising and tailored recommendations – suggesting products based on your chats and data.

It often seems like chatbots aren’t really about helping us get things done, but instead are a sophisticated way to track our interests and target us with ads – a more effective version of social media tracking. Though, perhaps that’s just a pessimistic view.

It will be fascinating to watch how Google and Microsoft market their AI chatbots, especially if ChatGPT becomes as filled with advertisements as Instagram. However, despite current complaints online, most ChatGPT users likely won’t mind the ads, considering Instagram remains popular despite its own advertising.

However, the question remains: will this be enough for OpenAI to become profitable, or at least financially stable in the long run, before investors lose patience? Only time will provide the answer.

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2026-01-17 16:10