Anthropic is holding firm on the pledge made in its Super Bowl commercial this year to keep Claude ad-free. The company’s recent IPO filing didn’t even mention the possibility of selling ads to make money from the AI chatbot. It’s easy to maintain the high ground with about $112 billion in investor cash.
The chatbot industry, though, may find selling ads necessary to defray the high costs of generating AI responses. OpenAI is all in, with over 100,000 customers advertising in ChatGPT since ads debuted there in February. Last week, Google expanded ads in its search chatbot AI Mode to 10 more countries beyond the US and declared that users “find them highly relevant.” Advertisers are far from satisfied with the experience, but they expect it to improve.
Ads stand to be particularly vital for the long-term viability of niche chatbot platforms, which can’t rely on the same degree of venture capital largesse as the top AI labs or the massive revenues of tech giants. I recently spoke with Koah Labs, one of a number of new ad technology companies focused on AI experiences. The San Francisco startup markets itself as bringing ads to over 200 apps, such as DeepAI, which offers tools for creative queries, and Liner, which focuses on providing citations in AI answers. It works with brands like telehealth giant Hims and flower delivery service UrbanStems.
Koah has attracted just a tenth of the advertisers OpenAI has, but CEO Nic Baird still believes he’s getting a good sense of what’s working and what’s fuzzy as chatbots take over from traditional search engines—and what their rise will mean for your AI experiences.
Machine-Crafted
Ads composed partly by AI rather than fully by a human generate double the clicks, Baird says. It’s difficult to assess exactly why, but AI-generated marketing copy likely feels more natural next to the output of an AI model.
Because ads shown by Koah are grounded in product details and imagery supplied by the advertiser, users don’t seem to be encountering AI-hallucinated, erroneous information. But some advertisers, such as drugmakers, face government requirements on what they must—or cannot—say in ads, Baird says. These companies default to more human control over their ads, generating weaker results, according to Baird.
Since ads with dull messages or that feel like clutter could drive users away, the onus is on ad tech companies to find a middle ground that’s engaging to users without triggering risk-averse brands. That balance might be harder to strike when a human is out of the loop.
Creative Targeting
Google searches for “help with stress” are likely to bring up ads for therapists. Chatbots can get more creative, in Baird’s view. For instance, ads for spas have performed well within Koah’s network when shown after users’ prompts related to “stress,” he says.
The key difference, according to Baird, is that Koah can select and customize the ad based on “not only the prompt, or the Google search, but also the response from the AI platform, which brings context from the rest of the conversation thus far.” In addition, chatbot prompts tend to be at least double the length of Google queries, giving Koah more information to determine a relevant ad.