Large language models can fundamentally shift the digital advertising space. OpenAI is offering a peek behind the curtain at how.

The AI lab published a deep dive into the ad stack for its flagship chatbot, ChatGPT, unveiling the crucial difference between an AI-powered ad system and a conventional one: context. And as a growing number of users turn to chatbots over traditional search engines for common queries, these models are able to better understand user intent, leveraging it to make ads actually useful, members of OpenAI's ad team told The Deep View.

"The big difference for us is that users use ChatGPT as a super assistant," Asad Awan, who leads monetization product and engineering at OpenAI, told The Deep View. "They're coming with these high-level questions … and there's many threads that will come out of this. We try to understand and connect with that user journey."

The key to OpenAI's ad stack is understanding user intent, said Awan. Doing so requires striking a delicate balance between accuracy and trust:

• As a user interacts with a primary model through ChatGPT, a second LLM serves as an "orchestrator" that works in an agentic loop, reading the conversation and making tool calls to place ads properly.
• This orchestrator does the heavy lifting, reading the context of the conversation to determine if it has commercial intent, then calls tools to source ads, filter for eligible candidates, evaluate their relevance, auctions the space to those advertisers and finally serves them to the user, always clearly labeled as "sponsored."
• The most important part of making these ads valuable to the user experience, Awan said, is grasping user intent through context, memory and conversational understanding. Without that, ads can appear in inappropriate places, such as when a user is discussing private, personal, or sensitive information.
• "What is the user thinking about? What is their state of mind? Are they distressed? Are they sharing something intimate?" Awan said. "The placement integrity, whether we show an ad or not, itself is a pretty big decision."

However, serving valuable ads has to start from a place of user trust, said Awan. It's why the company came up with a rubric for developing its ad stack: User trust comes first, then user value, then advertiser value, and finally revenue.

"We do not like prioritizing empty calories. We want to prioritize user trust and user experience above everything else," said Awan. "This is a very intimate environment, so we need to make sure that people are very comfortable and understand exactly how the system works."

OpenAI's ad engine was introduced into ChatGPT earlier this year. Since then, ChatGPT Ads has managed to generate $1 billion in annualized revenue run rate less than 200 days after launch, garnering more than 100,000 advertisers. The company touts that it managed to do so with a small team "compared to other ad teams in the industry," relying on OpenAI's own Codex in a "pretty massive way" to accelerate development, Karthik Gopalratnam, a member of the technical staff for the ad team, told The Deep View.

"The team got put together after Codex kind of hit its escape velocity," Gopalratnam said. "We were able to embrace the power that these coding tools give us to build everything from scratch."

Our Deeper View

OpenAI has a unique opportunity to completely transform the efficacy of ads, turning them from irritating distractions into valuable additions, especially as chatbots begin to upend the traditional search engine. However, the question is whether the consumer will accept it. On one hand, the process of so-called "enshittification," or when products become worse over time to increase shareholder value, has made the average consumer more comfortable with ads existing in practically every facet of the internet. On the other hand, OpenAI has already faced flack for its decision to embed ads in the platform, with rival Anthropic making digs at the decision in its own ads in the Super Bowl. By and large, given that consumer trust and adoption are a vital part of OpenAI's business model, the company will have to battle the growing public distaste and distrust of AI in order to see success in ads, giving it the revenue it needs to achieve its broader goal, as Awan put it, of "democratizing access to AGI."