OpenAI will hit $25 billion in ad revenue by 2030s - analyst. Is this a threat to Google?

By 2030, advertising could turn into a $25 billion a year business for the creator of ChatGPT - OpenAI - and become a serious threat to Google, according to Evercore ISI analyst Mark Mahaney. In his opinion, this size of annual advertising revenue will be possible if the company successfully launches and scales a new advertising direction, writes Business Insider. On Jan. 16, OpenAI said that users of the free version of its chatbot and subscribers to ChatGPT's Go plan will start seeing ads "in the coming weeks."

In addition to predicting that advertising revenue will grow to $25 billion a year by 2030, Mark Mahaney believes that as early as 2026, OpenAI will be able to earn "several billion dollars" from advertising, writes Business Insider. The analyst attributes his estimates to the expected scale of ChatGPT by then, monetization of marketing platforms, and the size of the digital advertising market, Business Insider reports.

OpenAI said that the first test ads will be shown at the bottom of ChatGPT responses and will be relevant to the context of the dialog. The company also named the principles of advertising: it will be clearly labeled, and user dialogs will not be shared with advertisers. According to Mahaney, this format may not be too intrusive for users, but at the same time attractive for advertisers.

"OpenAI's move directly challenges this key revenue source by offering an alternative, highly engaging platform for finding products and services," the analyst said.

The development of a "conversational" ad format, in which users discuss and explore potential purchases directly in ChatGPT, could prompt brands to reallocate marketing budgets due to high levels of audience engagement, warns Mahaney. In addition, if ChatGPT manages to embed advertising so that it is useful rather than annoying, some of the commercial requests that traditionally come to Google could be redirected to the OpenAI chatbot, the analyst does not rule out. We are talking about queries with high user intent - choosing products and services, comparing options and making purchase decisions, which are at the heart of Google's advertising business.

Mahaney estimates that Google's advertising businesses - search and YouTube - will bring its parent company, Alphabet, about $300 billion in revenue in 2025, while Meta earned about $180 billion more. These are some of the most profitable businesses in the industry with operating margins of about 40%, Business Insider specifies.

OpenAI's revenue, in turn, is also growing rapidly. The company's CFO Sarah Fryer reported on January 19 that the company's annual revenue will exceed $20 billion in 2025 against $2 billion in 2023. That said, questions remain about the size of the losses and whether OpenAI will be able to reach sustainable profitability in the long run. Advertising could be one way for the ChatGPT developer to improve both revenue and bottom line, Business Insider notes.

ChatGPT has almost 1 billion users on an average weekly basis, the publication points out. Many of them share information about their needs and plans with the chatbot. It is data about user intentions that underpins the advertising models of Google and Meta, and advertisers are willing to pay for access to such information, Business Insider adds.

At the same time, even if ChatGPT relies on advertising, we should not expect a rapid redistribution of market shares, Mahaney points out. OpenAI will have to compete with the ecosystem that Google has been building for years, including the Chrome browser, as well as with the established habit of users to search for information through Google, summarizes the analyst.

This article was AI-translated and verified by a human editor