OpenAI's Advertising Business Expands to Small and Medium Businesses, Targeting Meta's Core

OpenAI is extending its advertising business from major brands to small and medium-sized merchants, directly challenging Meta's core market.

Earlier this year, when OpenAI launched advertising on ChatGPT, the partners were mainly well-known brands with large budgets such as Adobe, Ford, and Target, with a minimum investment threshold of $200,000. Now, this threshold has been quietly abandoned.

According to The Information report, this month OpenAI launched a self-service advertising platform in the United States, where small and medium-sized enterprises can enter without a minimum consumption requirement, and external partners have also generally canceled the minimum investment requirements.

OpenAI executives have indicated to some advertising technology companies that the next focus is to attract local small and micro-merchants such as car wash shops and dry cleaners. At the same time, starting this week, OpenAI will open "conversion-oriented advertising" tests to advertisers—which charge fees only after users complete specific actions such as purchases, appointments, or form submissions. This aligns with the performance advertising logic of platforms like Meta and Google.

To track conversion effects, advertisers need to install OpenAI's advertising pixel code on their websites and can use the newly launched API to send back user behavior data.

It is worth noting that the executive team leading this business has a distinct Meta background—Dave Dugan, who joined as the head of advertising sales in March this year, as well as Benji Shomair, Vijaye Raji, and Asad Awan, all had considerable tenures at Meta. This team is attempting to replicate Facebook's strategy of growing its advertising business with small and medium-sized merchants onto ChatGPT.

From a business logic perspective, advertising is OpenAI's core bet to monetize its 900 million weekly active users (most of whom use the free version). According to The Information, the company is expected to generate $2.4 billion in advertising revenue this year, double it by 2027, and reach $102 billion by 2030, when advertising will contribute more than 35% of the total revenue. The realization of this goal will directly affect OpenAI's valuation logic in preparing for its IPO.

However, the challenges are also evident. The in-app shopping feature launched by OpenAI earlier this year was stopped in March due to the uneven quality of merchant data, leaving the issue of standardization of product data unresolved. In addition, as the volume of ChatGPT advertising increases and user novelty fades, whether the early impressive click-through rates can continue is still unknown. Currently, advertising executives say that most advertisers still view ChatGPT advertising as an experimental investment and have not yet shifted a large amount of funds from other platforms' budgets.