Ads are now inside AI chatbots, and one ad firm says it often sees a user's whole conversation before it picks which ad to show.
Ads are moving into AI chatbots, and the companies placing them can use what you type to choose them. OpenAI says more than 100,000 advertisers have bought ads in ChatGPT since February. Last week, Google brought ads in its AI Mode search chatbot to 10 more countries beyond the US.
Anthropic is the holdout. Its Super Bowl commercial this year promised that its chatbot, Claude, would stay ad-free. Its recent IPO filing did not even mention selling ads. It has about $112 billion in investor cash to lean on. Much of the industry may not. Generating AI answers is costly, and smaller chatbot apps have less of a cushion.
Koah Labs, a San Francisco startup, places ads in over 200 apps, including DeepAI and Liner. Its brands include Hims and UrbanStems. CEO Nic Baird says a Google search for "help with stress" likely brings up therapist ads. In Koah's network, spa ads have done well after stress-related chatbot prompts.
The difference, Baird says, is that Koah can use the prompt, the chatbot's reply and the rest of the conversation. Chatbot prompts tend to be at least double the length of Google queries. Koah says users click about 3 percent of ads, about the same as Google's more mature system. Ads written partly by AI get double the clicks, Baird says.
When Koah is asked to show an ad, it generally receives the user's entire conversation up to that point. Many people use chatbots as confidants, not just search tools. Baird says Koah anonymizes the queries and stores them in a de-identified way, but he declined to say more about how data is collected and stored.
Koah estimates that one in four chatbot queries about a retailer or brand involves a return, exchange or support issue. Baird expects companies to target unhappy customers with ads about warranties or AI-run support. In the worst case, he says, that means a wasted ad buy and a more irate customer.
It is unclear whether users will accept the privacy trade-offs of personalized chatbot ads. Koah has not shared details on how long it keeps data. It also has no data on whether people want ad pages customized from their chats. Advertisers are far from satisfied with the experience so far, but they expect it to improve.
If you chat with AI about stress, money or health, assume the app may use it to pick ads, and check its privacy settings.
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