If you’re a Microsoft shareholder, and a believer in all things AI, there was good news yesterday. OpenAI and Microsoft announced that Microsoft officially owns 27% of OpenAI’s for-profit entity, which is worth approximately $130 billion. This pegs OpenAI’s current valuation at approximately $500 billion. (Microsoft’s market cap is currently $4 trillion)
Since it began its relationship with OpenAI in 2019, Microsoft has invested a total of $13.75 billion in the company, according to The Wall Street Journal. That’s nearly a 10-bagger for MSFT and OpenAI isn’t even public, yet. Give OpenAI another year for an IPO —the company has extreme data center expenses as everyone knows, which is yet another reason for them to integrate a high margin ads business into ChatGPT.
From tipsheet: The cherry on top for Microsoft: “Under the agreement, Microsoft will have exclusive intellectual-property rights to OpenAI technology until 2032,” according to Microsoft.
That’s seven years — roughly 140 ‘AI years.’ It’s a huge win for Microsoft that must give Alphabet/Google fits.
(Write it down: Every human year is seven AI years, according to… me. AI is moving fast.)
More:
- Read this one – the deal points: “The next chapter of the Microsoft–OpenAI partnership” (October 29) – Microsoft
- Summary: “OpenAI Completes For-Profit Transition, Pushing Microsoft Above $4 Trillion” Valuation (October 28) – The Wall Street Journal
- Meanwhile: “Built to benefit everyone” (October 28) – OpenAI
- Video: “Live With Satya Nadella on the new OpenAI Partnership” (October 28) – TBPN
LLMS & CHATBOTS
Developments
- Sam Altman: OpenAI wants to get to $1 trillion a year in infrastructure spend (October 28) – Axios
- GitHub unites OpenAI, Google and Anthropic AI agents in one place to bring ‘order to the chaos’ (October 28) – CNBC
- Eli Lilly, NVIDIA team up to build pharma’s biggest AI supercomputer (October 28) – STAT (subscription)
TECH
The Minority Report promise: OOH and AI
Out-of-Home Advertising Association of America’s (OAAA) president and CEO, Anna Bager, told The Drum recently that AI is yielding a unique opportunity for the out-of-home advertising industry:
“We’re not faced with the same challenges that a lot of other publishers and brands are. (…) It’s very hard to reach audiences. And I think in our space —which is really about real-life experiences and connections and physical look and feel— we’re just in a really good spot.
And rather than threatening that position, AI is set to amplify it. This combination – a guaranteed physical presence plus smarter data and targeting – is giving OOH a rare edge in a volatile landscape. “It’s really more of an opportunity. The ability to process larger data sets and measure better because you have more input – that’s great for us.”
Read more in The Drum. (October 16)
From tipsheet: Such a compelling mix: Out-of-home (OOH) and AI. Many agree that in an AI world, “in-person” experiences become more valuable. Therefore, OOH, and its digital sibling DOOH, paired with AI, are potentially a gateway to a unique advertising opportunity. “John Anderton, you could use a Guinness right now.”
SELL-SIDE
Reddit ads are answer engine ‘gold’
Buying Reddit advertising is leading to better organic placement in answer engines according to Adweek’s Trishla Ostwal who reported:
“Five ad buyers told Adweek that brands are increasing their spend on Reddit, but also exploring creative ways to extend their reach on the platform. Some are sticking to paid campaigns, while others are reviving old threads, seeding ‘organic’ posts via Discord, and even paying third-party groups to generate content, all to gain visibility in AI models like ChatGPT and Google’s Gemini that increasingly cite Reddit conversations.”
Also, Ms. Ostwal viewed a Reddit ad sales slide deck titled, “How to Drive LLM Visibility.” Reddit wants brands to “lean into ad products that scale organic conversations.” Translation: paid advertising helps your organic listings in answer engines. Read more. (October 28)
From tipsheet: Using paid advertising to improve organic listings in search engines, for example, is nothing new. Apparently, search engines and answer engines react similarly to paid ‘signal.’
Will OpenAI’s or Gemini’s product teams figure out a way to parse the ad placements for possible demotion in organic listings? Should they even attempt to do so? The argument could be that the paid signal is, well, signal like any non-paid text snippet. Still, some might say that there needs to be transparency for the consumer around the paid placements.
TECH
AI-driven AppLovin still impressing
In a note to investors last week, Deutsche Bank analyst Benjamin Black reviewed the opportunity for AppLovin’s re-branded and AI-enabled ad platform called Axon. He said that $211 billion company AppLovin is “a dominant player within the mobile games’ user acquisition advertising space. It currently boasts an 80% market share on the supply side and more than 55% on the demand side.”
Mr. Black continued:
“AppLovin has built best-in-class ad tech that becomes more performant the larger the company’s scale. More throughput (gross ad spend) → more signal for the model → better performance → more ad spend… and so the flywheel continues, creating a deeper and deeper moat. AppLovin’s Axon model is vertical agnostic and performs well across the open web, and AppLovin is now expanding into eCommerce advertising, which is multiple times the size of the mobile game in-app advertising TAM. Moving further down the road, we don’t discount the possibility of the company penetrating other larger categories like financial services, media & entertainment, healthcare, and any transactional service on the web.”
Read more on Yahoo! Finance. (October 28)
From tipsheet: Nice flywheel, indeed. An expansion of AppLovin’s footprint to retail media and would likely be impactful. Its self-serve platform known as “Axon Ads” could also service the SMB sector and budgets that many are targeting with AI tools today.
At the same time, the company must contend with rumors of FTC scrutiny and busy short sellers. Nevertheless, Deutsche Bank’s Black sees the company’s stock moving 15% higher in the next 12 months.
RETAIL
PayPal’s seat at ChatGPT’s ad ‘table’
Payments company PayPal announced that it will provide payment services for OpenAI’s answer engine, ChatGPT, beginning in 2026.
The PayPal press release stated:
“PayPal today announced it will adopt the Agentic Commerce Protocol (ACP) to expand payments and commerce in ChatGPT. Millions of ChatGPT users will be able to check out instantly using PayPal, and PayPal will support payments processing for merchants leveraging OpenAI Instant Checkout. PayPal will also connect its global merchant network to OpenAI, creating a platform for tens of millions of small businesses and the largest brands in the world to sell within ChatGPT.
Read more. (October 28)
PayPal’s appears to be going ‘all-in’ on the platform’s AI commerce future via ACP as well as OpenAI, Google and Perplexity. They’re gauging interest with merchants here.
From tipsheet: Attention Retail Media Lovers, PayPal now has a seat at ChatGPT’s advertising table. Also in this deal, PayPal small business partners get to sell through ChatGPT. The answer engine is making a play to become the world’s leading AI-enabled shopping cart. Amazon, take note?
Related: AI Ranks Among Consumers’ Most Influential Shopping Sources According to New IAB Study (October 28) – press release
TECH
‘Flavoring’ the platform with agentic
My Marketing Pro (a.k.a. MMP) is a startup that wants to automate the entire marketing process “from brainstorm to launch, via conversations with an agent” named Memory, according to AdExchanger’s Joanna Gerber.
MMP CEO Frank O’Brien —who also is CEO of “agency in a box” platform Five Tier—told AdExchanger that his new platform “is built almost exclusively on ChatGPT. MMP prefers to rely primarily on one LLM since all of the main LLMs ‘become very similar’ at a certain point, according to O’Brien, ‘especially once you flavor them with your own prompts.’”
Read more on AdExchanger. (October 28)
From tipsheet: My Marketing Platform appears to use affiliate marketing to promote its platform. Once again, affiliate marketing is at the forefront of monetization for many AI chat platforms including ChatGPT (see OpenAI’s ChatGPT partnerships with Shopify, Etsy and Walmart). Show me the outcomes!
EVENTS
Brand Safety Summit next week
Next week, 614 Group’s Brand Safety Summit will take place in New York City from November 5-6.
Day 2 of the event promises to place special emphasis on “AI Safety.”
MORE
Now hiring
Former FreeWheel and Scope3 executive Xander Kotsatos has been appointed Chief Revenue Officer (October 28) – Aqfer
MORE
- Opinion: “Why brands must build for ChatGPT like it’s the next App Store” (October 28) – Billy Collins, consultancy Eidra, in Ad Age (subscription)
- “The Era of Outcomes – Takeaways from Marketecture Live II (M2)” (October 28) – Heather Carver, Freestar on LinkedIn
- Litigants were granted ‘summary judgment’ in private ad tech suits against Alphabet’s Google using Judge Leonie Brinkema’s ruling for the Department of Justice. (October 28) – Jason Kint, CEO of Digital Content Next, on X
- Pinterest’s new AI-powered boards promise higher user engagement and advertising potential (October 28) – eMarketer
- Treasure Data Introduces AI Marketing Cloud to Power Agentic Customer Engagement (October 28) – press release