Are ChatGPT Ads the Next Retail Channel? | Fast Five Shorts

Target and Albertsons are among the first retailers testing conversational advertising in ChatGPT through a new pilot program with OpenAI, according to various sources, sponsored ads from Target's Roundel Retail Media and Albertsons Media Collective will appear alongside User shopping conversations in ChatGPT starting this month.

Ads are served based on keywords and a user's ChatGPT prompt, for example, asking about countertop cooking appliances that might trigger an ad for an air fryer.

OpenAI said that all ads will be clearly labeled, will appear separately from responses, and will not influence the answers ChatGPT provides.

Target reported that traffic from ChatGPT to its site site is already growing 40% monthly on average.

The tests are both only for ChatGPT's free and go subscription tiers.

Plus Pro, Business, Enterprise and education tiers will all remain ad free.

Jen, are you buying or selling retailers jumping onto the ChatGPT advertising train this early?

I see very little risk being a retailer and getting involved here, but I see a lot of upside if it works in your favor.

And it sounds like 40% more traffic that Target is is reporting shows that so far.

I mean as a user I don't love the idea of being flooded with ads.

If I'm asking it like hey how do I parent better at 9pm after bedtime was a wreck, right?

I don't, I don't love being like hey here's all the things you should buy.

However, if it's 9pm and I'm dealing with a 5 year old that hates bedtime and they have a solution, I will probably buy it right?

Like yes, give me the add to cart, all of those and I'll be a better mom tomorrow.

So from the user side it's hard for me to say I want to be flooded with ads, but from the retailer side I'm a big fan of it.

Seems like just a natural next step from the Google search into AI search and retailers getting involved.

Again, I don't see a lot of risk they're spending this money elsewhere on ads if not Right, right, right.

And I think Jen, the other thing here is like the other follow up question to that would be do you hate the ads enough that you would pay for the next tier to go ad free?

Is that worth it to you?

Yeah, that is a good question.

And no, I'm not paying for that next level sometimes but probably not right?

I'm probably just going to learn to ignore the ads or like I said, I'm going to purchase from the ads because I'm asking a question For a reason.

So the one thing I, that you said that I'm not sure I totally buy into is that it won't impact search results at some point.

Right.

Like, I don't know how all of this data is brought together and how Target or an Albertsons, how they're paying and for what level of visibility.

I know it's starting this way, but will it eventually impact results?

I think that's yet to be seen.

Right, right.

Chris, where do you land on this one?

Yeah, I think Jed brings up a great point, like, let's be, let's be genuine and honest about.

Yeah, I mean, if you're serving up ads in a search result or alongside a search result, it might not actually impact the search result itself, but it's definitely impacting behavior that you're going to take based on that research result.

So I think Jen's right.

I'm 100% buying.

And I mean, I think this is, this one's no different than Google search advertising.

It's just a new form of it.

Right.

The, the question, I question if it's really growing as fast as Target says it is, because 40% sounds really paltry to me given how much we're talking about AI and the transition to AI searches.

But honestly, that could say more about target than ChatGPT at the end of the day.

So, you know, advertising goes where the eyeballs are.

The searches are likely going to convert higher.

So it's a no brainer to experiment here.

But I think when I put this in context of the things we talk about on the show very regularly, you know, while we can all, I think we'll all agree that this is a smart experiment, I think it's a much better experiment than say, like approximating your mobile app experience inside of ChatGPT like Target did back in November.

So, like, I think this is the right move, but I question some of the other moves that have been happening in the LLM AI search space.

Yeah, I mean, I think the other thing about this that is important is ChatGPT is also the most well known and arguably one of the most highly utilized AI search platforms right now.

And so I think that if I think it's smart for Albertsons and Target to be testing this, like Jen said, I don't think you really have anything to lose, but you have a lot to gain in terms of figuring out what can happen from this experiment, what can happen when you're on one of the largest search platforms and then refine how you're going to serve up ads in a more specialized search platform like a Perplexity or even a Gemini or even on your own site, how are you going to be thinking about selling that, those spaces or that ad space on your own site to your brand partners so that you know how, how and where the right moments and the right prompts are?

Hopefully not at 9pm telling Jen that she needs 15 parenting self help books.

Although I've been there, Jen, and I've purchased them.

When the Google search comes up, it's like, we'll try this one.

Seems like you might have a right

idea and I thought I would have had it figured out, but it'll just be serving me like melatonin gummies probably right?

And I'll be like, just have those delivered.

I think that's the easy button.

Let's do it.

The other point about this too is that I think is really interesting, which we don't have time for today.

But I think to bring it up to the audience too is, you know, if, if, if it starts to move in this direction, this hurts Amazon's first product search that is usually happening on their site.

So that advertising revenue that Amazon has been claiming it could start to get chipped away here over time.