The internet exists as a universal conduit for opportunity, inquiry, and connection, a miracle funded by advertising. As has been long argued, opposing ads is effectively opposing broad access. Ads are the engine that powers the digital public good.
OpenAI’s recent announcement to integrate ads for its free users, therefore, is less a surprise and more an inevitability. The signs have been apparent: Fidji Simo’s arrival as CEO of Applications, a role widely interpreted as paving the way for ad implementation, and Sam Altman’s own public musings on the subject. Tech analysts have predicted this shift since ChatGPT’s inception.
At its core, advertising remains the most effective model for delivering services to the widest possible consumer base online.
The Long Tail of LLM Users
The tech industry often engages in performative moralizing around data privacy and advertising. Yet, the internet’s infrastructure is fundamentally built on ads, a model most users have implicitly accepted. Targeted advertising has yielded immense public benefits, often at the minor cost of occasional irrelevant ads.
History demonstrates this pattern: Google, Facebook, Instagram, and TikTok all began as free services monetized through targeted ads. Even subscription services like Netflix now offer ad-supported tiers to broaden their reach and revenue streams. This has trained users to expect digital services to be free or very low cost.
This dynamic is now playing out across frontier AI labs and specialized model companies. Converting free users to paid subscribers remains a significant hurdle for many consumer AI applications. The challenge lies in the nature of AI usage; most users leverage these tools for personal productivity tasks like drafting emails or seeking information, not high-value pursuits like complex programming.
For power users, such as programmers who rely heavily on AI for tasks akin to having a swarm of interns, subscription costs of $20 or $200 per month are justifiable given the immense value derived. However, for the vast majority using AI for general queries or basic writing assistance, paying for a subscription is a difficult proposition. Why pay when a simple Google search previously offered a satisfactory free answer?
Even for writing assistance, the utility may not always justify a subscription fee, especially when advanced models and features are not required for everyday tasks. While ChatGPT boasts a substantial base of paying users (40-80 million from 800 million WAUs), reaching billions requires a model beyond subscriptions.
The good news for developers is that users generally find targeted ads to be useful, not intrusive. Services like Instagram and TikTok excel at serving relevant products, enhancing the user experience. Framing ads as inherently exploitative overlooks their potential as valuable content delivery mechanisms.
While OpenAI is a prominent example, this logic extends to all major AI labs. To achieve mass adoption, some form of advertising or alternative monetization will be necessary. The path to widespread AI accessibility is still being defined.
Exploring AI Monetization Models
The consumer monetization model for AI remains an open question. Many AI labs have already surpassed the 10 million weekly active users threshold, a common benchmark for introducing advertising.
The forthcoming AI advertising models are likely to take several forms. OpenAI has confirmed intent-based ads for recipe ingredients or travel recommendations, clearly demarcated from AI-generated content. These could evolve into a more proactive agentic experience, seamlessly fulfilling purchase requests from sponsored and unsponsored sources, echoing early web advertising perfected by Google.
Alternatively, context-based ads, similar to Instagram’s model, could be integrated. This approach, which Ben Thompson has advocated for, would acclimate users earlier and foster a more anticipatory ad product. Such a model, leveraging OpenAI’s extensive user data, could present highly relevant products users didn’t know they needed, transforming the ad experience from opportunistic to indispensable.
Affiliate commerce presents another avenue. Building on existing instant checkout functionalities, AI agents could proactively source products—from clothing to rare collectibles—and earn commissions from marketplace partners. This transforms the AI into a personalized shopping concierge.
Games, often overlooked, represent a significant ad opportunity. App install ads, particularly for mobile games, have historically driven substantial growth for platforms like Facebook, suggesting a lucrative potential for AI platforms.
Goal-based bidding offers a more experimental approach. Users could set monetary values for specific queries, incentivizing models to allocate greater compute resources for high-value outcomes. This resembles early negotiation-based models and could lead to highly optimized, personalized search experiences.
While companionship and entertainment have shown willingness to generate subscription revenue (e.g., CharacterAI), they haven't yet proven scalable ad models. Pricing by token usage is common in creative tooling and coding, catering to power users but not addressing the broader free user base. The history of the internet suggests that as AI moves toward mass adoption, AI advertising models will inevitably emerge, driven by the need to support broad access and continued innovation, much like the early days of LLM user adoption.
