After years of anticipation, ads have arrived in ChatGPT. And for e-commerce professionals, the rollout of ChatGPT Ads has prompted a new set of questions about the future of AI and advertising.
For now, AI advertising is starting small. ChatGPT Ads are available only to a select group of end users, with only limited functionality.
Many brands are waiting to see how these ads perform before investing—though a few major brands like Williams-Sonoma, Adobe, Amazon-owned Audible, Ford, and Mazda already announced they were going to begin testing ChatGPT Ads.
Most strikingly, ChatGPT also has one major retail media partner: Target is going to surface ads purchased through its retail media network, Roundel, on ChatGPT.
Wait, so what do ChatGPT Ads look like?
You can see an example of a ChatGPT ad here.
Basically, ChatGPT Ads appear at the bottom of a typical ChatGPT response to a user—just sporting a “Sponsored” tag.
So if a user asks ChatGPT for recommendations on which cutting boards last the longest, ChatGPT will offer up its recommendations, and then end with a mention of an advertised cutting board.
For now, ChatGPT Ads are a pretty minor part of the experience.
In fact, you can see a reality in which users just read the regular ChatGPT response, and skip past the sponsored recommendation at the bottom.
Are ChatGPT Ads really going to become effective?
It’s an open question. Since people go to ChatGPT for product advice, a paid-for recommendation might not resonate with users. They might just look right past it.
There’s a lot that marketers are still sorting out here. On one hand, ChatGPT is becoming a fast-growing referrer of e-commerce traffic.
Target itself said that the amount of online traffic to its website referred by ChatGPT is increases 40% YoY. AI is becoming intertwined with e-commerce—though advertised recommendations probably won’t refer shoppers at the same rate as organic ones.
We certainly expect particular product categories to benefit more from these ads than others.
It’s probably going to take a while for ChatGPT Ads to have much of an impact on purely visual product categories, like fashion, for instance. But more function-first products, like kitchenware or electronics, will likely see greater impacts faster.
A lot less context is required for a chatbot to recommend a new saucepan than a new gown.
What is ChatGPT Ads like for advertisers?
ChatGPT Ads are going to work a bit like ads on Amazon. Brands load their ad inventory into the AI system, but ChatGPT has the ultimate say over which ads users see in their chats, and when.
These ads are purchased on a CPM rather than a CPC basis. That means advertisers are going to have to roll the dice a bit on ChatGPT Ads—especially when you consider that ChatGPT, at least at the moment, offers limited targeting and measurement information,
What will Target Roundel look like in ChatGPT Ads?
Target Roundel’s ChatGPT partnership will offer a fascinating test case for these ads.
Target Roundel, Target’s retail media network, is relatively small. Over 2,000 vendors sell on Target’s third-party marketplace, in addition to the many 1P brands that sell on Target.
But it is making up an increasing share of ad budgets, as we wrote about here.
Roundel ads can already appear on Target’s website, third-party partner websites, CTV, and more. ChatGPT is basically becoming another placement option on Roundel.
Some ads purchased through Roundel will begin appearing on ChatGPT, roughly like how Amazon’s Sponsored Products ads appear on third-party social platforms like Pinterest.
Expect more AI chatbot ads soon
The rollout of ChatGPT Ads is coming after Amazon announced the creation of Sponsored Prompts ads that surface in its internal AI chatbot, Rufus.
Similarly, Google has started pushing ads that appear at the bottom of conversations in Google’s AI Mode.
More and more, retail media is expanding into the AI chatbots. But marketers still have a lot to figure out about the long-term effectiveness of this type of advertising.
