How is the newly launched ChatGPT advertisement?

OpenAI launched the ChatGPT advertising test in February, but this highly anticipated commercialization attempt is facing a "hasty" and "chaotic" start.

According to the Chase Wind Trading Desk, on February 23, UBS (Union Bank of Switzerland) released the "ChatGPT Advertising Expert Conference Minutes," where an expert managing about $800 million in digital advertising budgets bluntly stated that the ChatGPT advertising experience is "worse than the early days of Google, Meta, and even Snapchat."

Although the market hopes that ChatGPT advertising can shake Google's dominance in search, currently, the advertising budget comes only from manufacturers' testing expenditures (accounting for less than 10% of the total budget), which has no impact on Google yet.

The current minimum participation threshold of $200,000, the chaotic user experience, and unsatisfactory return on investment mean that the commercialization path for ChatGPT advertising is still long.

High Entry Barrier: Open Only to Major Players

OpenAI has set a minimum spending commitment of $200,000 for ChatGPT advertising, effectively limiting participants to large advertisers with a monthly budget of over $10 million. The testing began in February, and the duration is yet to be determined.

Despite the high threshold, market participation enthusiasm remains high. The expert observed widespread adoption across various vertical industries—furniture retailers, automotive, subscription-based consumer goods, luxury goods, B2B, and food industries are all involved. Advertisers can choose the ad formats they want to test.

Four Advertising Formats: From Brand Exposure to Closed-Loop Transactions

ChatGPT currently offers four advertising formats, but experts expect this to expand to 15-20 in the future:

Sponsored Recommendation Ads serve as the mainstay of brand advertising, inserting brand text into natural responses to user queries, priced on a CPM (cost per thousand impressions) basis, with the current average price around $60.

Carousel Ads allow users to scroll through multiple images, each clickable to a specific product. However, the functionality still appears immature, as each image only links to one SKU, and all images redirect to the same landing page on the merchant's website. There are still many shortcomings compared to Google and Meta.

Accompanying Display Ads appear alongside the chat text and are a display version of sponsored recommendation ads. Experts point out that advertisers can directly reuse existing creative materials, lowering the adoption barrier. This format is positioned as brand advertising, with success criteria being a combination of increasing awareness and driving traffic.

Native Content Shopping Cart Ads may be the closest form to "agent advertising." When users click on a product, they do not need to jump to the seller's website but can view product details and complete checkout within ChatGPT. This format charges based on a percentage of GMV (Gross Merchandise Volume).

However, this closed-loop transaction model has also sparked controversy. Experts point out that this format is suitable for commoditized products, while high-end brands may hesitate as they lose the opportunity for upselling to users, cannot strengthen brand image through their official website, and cannot collect user information for remarketing

Budget and Returns: The Gap Between Ideal and Reality

Currently, the advertising budget for ChatGPT entirely comes from advertisers' testing budgets, with no impact on Google search budgets yet. Experts point out that brand advertising budgets usually have caps, and in the future, budgets may be shifted from other channels; however, performance-based budgets (if ChatGPT can continuously prove improvements in advertising return on investment) may be incremental budgets.

In terms of advertising performance, the data is mixed. ChatGPT ads have generated "good click-through rates," but the return on advertising spend has varied, and the limited data and small sample size make it difficult to draw definitive conclusions.

Regarding pricing, the $60 CPM is significantly higher than social media and streaming ads. However, experts believe it should not be compared to these channels but benchmarked against Google search. Based on Google search ads costing $2 per click and generating 200 conversions per thousand clicks, the cost per conversion is $40. In comparison, ChatGPT's $60 CPM is not considered expensive.

But the issue lies in the conversion rate. The average conversion rate for sponsored recommendation ads is below 0.5%, meaning the cost per click is about $12. Based on this, experts believe that the return on advertising spend must improve to maintain commercial viability.

Chaotic Situation: Worse than Early Google and Meta

Experts bluntly describe the current ChatGPT advertising experience as "rushed" and "chaotic," even "worse than the early experiences of Google, Meta, and even Snapchat."

Core issues include:

Lack of performance data makes it difficult for advertisers to measure and optimize ad units, and experts expect this to be a priority issue for ChatGPT to address.

No CRM integration means that ads display static information—ads will continue to show even if specific products are out of stock or unavailable.

Completely manual operation is the biggest pain point. Google and Meta have provided automated products to assist in creative production, selection, and placement, but ChatGPT advertisers currently must manually select all content. Experts believe OpenAI's generative AI and agent capabilities should easily resolve this issue.

Limited bidding mechanism is also a major flaw. Currently, if two advertisers bid for the same ad space, OpenAI will only display the ad with higher relevance. In contrast, Google uses a dual standard of price and relevance to determine ad display.

Advertising placement and targeting issues are also prominent— in some cases, ChatGPT has shown users irrelevant ads. Experts speculate this may be because ChatGPT currently uses keyword targeting rather than LLM capabilities to assess the fit between ads and content. Experts believe this should be a "quick fix" issue.

Outlook: A Turning Point in 6-12 Months

Despite the current challenges, experts still expect that within the next 6-12 months, ChatGPT will become a more scalable advertising platform. By then, the minimum spending threshold is also expected to decrease, allowing more advertisers to participate in testing.

However, for investors, the core question remains: When will ChatGPT advertising truly begin to eat into Google's search market share? The current chaotic start and unsatisfactory return rates suggest that this day may arrive later than the market expects.