LLMS & CHATBOTS
The end of ChatGPT ads
In an internal announcement late Monday, OpenAI CEO Sam Altman declared a “code red” saying, in effect, that he wanted the entire company working to improve ChatGPT and drop everything else. The Information broke the news and reported the company’s developing ad strategy would be mothballed for now.
The Information’s Stephanie Palazzolo and Erin Woo continued:
“OpenAI hasn’t publicly acknowledged it is working on selling ads, but it is testing different types of ads, including those related to online shopping, according to a person with knowledge of its plans. Millions of people already use ChatGPT to search for products to buy.
Altman said the code red ‘surge’ to improve ChatGPT meant OpenAI would also delay progress with other products such as AI agents, which aim to automate tasks related to shopping and health, and Pulse, which generates personalized reports for ChatGPT users to read each morning.”
Read more on The Information. (subscription)
LLMS & CHATBOTS
Reaction: The end of ChatGPT ads
Stratechery analyst Ben Thompson chimed in on “code red” saying he thought the recent “OpenAI is doomed” narrative was overblown but:
“I really do think that OpenAI has seriously erred by not aggressively building out an advertising model. Google and Meta are years ahead of OpenAI in this regard, which lets them compete with ChatGPT using cash flow today; OpenAI is promising revenues in the future, but from what? Subscriptions are great, and it’s legitimately amazing how large the OpenAI subscription business is, but any subscription model is fundamentally limited by the challenges of price elasticity: higher prices mean fewer users, while lower prices for a product that has real marginal costs means a worse user experience.”
Read more from Mr. Thompson on Stratechery. (December 2)
On his blog, entrepreneur and ad tech board member John Battelle wrote:
“I can’t imagine how [OpenAI CEO of Applications] Fidji Simo feels about all this – she ran monetization at Facebook, after all, and was brought in to OpenAI just months ago to do the same there. Now instead of triumphantly delivering OpenAI’s most important new revenue stream, she must instead find a way to compete with Google’s reinvigorated Gemini chatbot. Not a fun pivot just six months into the new gig.“
Read more from Mr. Battelle. (December 2)
In response to the “code red” news, Mobile Dev Memo analyst Eric Seufert tweeted new app store data on X, saying:
“OpenAI’s Sora app has fallen out of the Top 20 most downloaded apps in the US on both the App Store and Google Play.”
From tipsheet: Is this all Salesforce CEO Marc Benioff’s fault? See his X post on November 23. Are users really clamoring for a better ChatGPT and cancelling in droves? Maybe so.
Regardless, I am declaring a “code red” on Mr. Altman’s “code red.”
I “get” the perception of Google catching up to ChatGPT with its Gemini 3 models and a shift to more urgency by OpenAI. But from here, the last thing OpenAI needs to do is to stop building out key elements of the rest of the company – especially a strategic pillar that could quickly produce significant revenue and margins such as advertising.
When will Mr. Altman envision the end of “code red” and a return to ad strategy development? 3 months, 6 months, a year from now? That’s another 3 months, 6 months, year behind Google, Meta, Amazon and the threatened-but-nimble open web.
Could open web ad tech solutions become OpenAI’s ad strategy through M&A? Certain investment bankers and startup founders likely hope so. Maybe walled gardens lend a hand with their ad tech?
At a minimum, perhaps “code red” should inspire a new surge of hiring at OpenAI focused on ads.
At the end of the day, I find it hard to believe advertising strategy is truly being mothballed at OpenAI and Ms. Simo is left twiddling her thumbs.
Related:
- OpenAI slammed for app suggestions that looked like ads (December 2) – TechCrunch
- Apptopia: ChatGPT referrals to retailers’ apps increased 28% year-over-year during Black Friday weekend (December 2) – TechCrunch
LLMS & CHATBOTS
Developments
- How Google’s AI Chips Stack Up to Nvidia’s (December 2) – The Information (subscription)
- Anthropic Acquires Bun in First Acquisition as It Looks to Grow Claude Code (December 2) – Adweek
- Introducing Mistral 3 (December 2) – Mistral
CREATIVE
Getting used to AI creative
“Anne-Liese Prem, head of cultural insights & trends at creative digital agency Loop, said although Valentino was showing ‘the right instinct’ by being upfront about the generative AI use, backlash to it showed “a deeper cultural tension’.
‘The main issue is not the technology itself – it is the perception of what the technology replaces,’ she told the BBC.”
Read: “Fashion house Valentino criticised over ‘disturbing’ AI handbag ads” (December 2) – BBC
From tipsheet: The Impressionists ran into similar pushback.
RESEARCH
2026: Step-change driven by AI
On Monday, W Media Research analyst Karsten Weide offered up his top ten 2026 predictions for the ad industry and said, “Next year will be when gradual change in advertising flips into a dramatic step-change, driven mainly by AI.”
Mr. Weide’s top three 2026 predictions included:
- Potential for economic shocks.
- A shakeup in the ad supply chain
- Generative AI taking over ad creative
Get the details and all 10 predictions. (registration)
From tipsheet: AI transformation is happening faster than people are willing to accept.
TECH
RTB Fabric and cloud interoperability
When Amazon Web Services was touting its “RTB Fabric” announcement with AWS clients a month ago, it may have signaled the beginning of a broader interoperability trend among all the cloud providers in the age of AI.
On Sunday, Google and Amazon Web Services announced that the two companies had come together for interoperability and, presumably, cost savings among shared clients.
Executives from both companies explained on the Google Cloud blog:
“As organizations increasingly adopt multicloud architectures, the need for interoperability between cloud service providers has never been greater. Historically, however, connecting these environments has been a challenge, forcing customers to take a complex ‘do-it-yourself’ approach to managing global multi-layered networks at scale.”
Read:
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AWS and Google Cloud collaborate to simplify multicloud networking (November 30) – Google Cloud blog
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AWS announces preview of AWS Interconnect – multicloud (November 30) – AWS
From tipsheet: This is reminiscent of the rumor that Meta reached out to Google Cloud to help extend its AI-enabled ad system’s needs. The walled gardens are finding out that having walls may not always serve them given the AI “tidal wave” that is breaking across all of enterprise.
SELL-SIDE
Conversational publishing
On Digiday, reporter Sara Guaglione found a publisher – Newsweek – that is turning to chatbots for their own publishing strategy. Newsweek may be the first of many to embrace “conversational publishing” (my words).
“Newsweek is developing an AI-powered homepage, modeled after Google’s AI Mode search experience, as part of a broader partnership with Google Cloud.
The goal is to create a more conversational, AI-driven homepage that will function more like a utility for users, boosting time spent on-site and helping counter the drop in search referrals, according to Bharat Krish, chief product officer at Newsweek.
Read more on Digiday. (December 2)
From tipsheet: And if publishers gate their data from AI crawlers, they can leverage it with LLM technology to refine or create their own unique publishing product. This type of publishing world is still being built out, i.e. it’s early days, but coming soon!
TECH
PubMatic CEO “layers” down the AI gauntlet
In a treatise published on his company’s website yesterday, PubMatic CEO Rajeev Goel made it clear that the sell-side platform company is embracing AI, or as he coins it, “Architecture of Advertising Intelligence.”
Also, he stated that his company wants to own not rent the infrastructure and thumbed his nose at the implications of pricey capital expenditure.
Mr. Goel breaks the architecture into three layers – infrastructure, application, and transaction – and defines each.
On the transactional layer, Goel makes clear that his company is banking on the agentic AI future in ads:
“The final layer is the frontier where agentic AI begins to transact, negotiate, and optimize autonomously. This is where intelligent systems begin to interact directly, optimizing, verifying, and negotiating outcomes autonomously.
At this layer, AI can take on the entire operational backbone of campaign execution – building, managing, pacing, and optimizing campaigns continuously, while humans focus on strategy, creativity, and true value creation.Industry-wide momentum is already underway.
Emerging agent-to-agent protocols such as the Model Context Protocol (MCP) and the Ad Context Protocol (AdCP) are creating the interoperability, metadata exchange, and trust frameworks required for autonomous systems to transact safely and efficiently.”
Read the entire article. (December 2)
From tipsheet: What is most notable is what is not said. There is no mention of the sell-side, and its SSP, by the PubMatic CEO -or the buy-side for that matter. It’s simply an “AI advertising technology company.”
PubMatic is a public company where, arguably, any move is heavily scrutinized with the potential for a sharp pullback in stock price if shareholders aren’t happy. There is runway given its existing business and position in the market, but at some point given PubMatic’s AI investment in tech and people, the agentic future will have to hit.
MORE
- “So what do we measure now? Rethinking marketing metrics in the age of AI Visibility” (December 2) – brainlabs
- Opinion: “TV 2.0: Driving measurable business outcomes” – Jason Fairchild, CEO, tvScientific on his blog
- The power of Reddit: “Chive man” (December 2) – Ad Age reporter Garett Sloane on LinkedIn
- AWS CEO Matt Garman Wants to Reassert Amazon’s Cloud Dominance in the AI Era (December 2) – Wired (subscription)
- How Google’s ROI-Driven AI Tools Are Helping Businesses of All Sizes Win Next-Gen Consumers (December 2) – CO (a U.S. Chamber of Commerce website)