Welcome to the forefront of conversational AI as we explore the fascinating world of AI chatbots in our dedicated blog series. Discover the latest advancements, applications, and strategies that propel the evolution of chatbot technology. From enhancing customer interactions to streamlining business processes, these articles delve into the innovative ways artificial intelligence is shaping the landscape of automated conversational agents. Whether you’re a business owner, developer, or simply intrigued by the future of interactive technology, join us on this journey to unravel the transformative power and endless possibilities of AI chatbots.
Advertisers are crowding into the next digital frontier.
It’s official. Chatbots have entered their ads era.
OpenAI has begun showing ads in ChatGPT and is in talks with The Trade Desk to expand the effort. Google already runs ads across its AI search products, and Adweek recently reported that Google plans to bring them to Gemini this year. (Google has since pushed back on the idea, but it’s extremely hard to imagine Google, which makes the vast majority of its money from ads, abstaining forever.) Most recently, The Information reported that Amazon, which is experimenting with ads inside its AI shopping assistant, Rufus, is also exploring licensing that technology to others.
Startups are all over the space, too. AI ad marketplace Koah, which recently raised $20 million, is placing ads inside everything from coding copilots to AI pediatricians to meal-planning chatbots.
Why?
AI chatbots are the innovation du jour, popping up inside companies and apps of all stripes — and launching as businesses in their own right. They’ve also been around long enough that the bills are coming due. Running large language models is expensive. As chatbots proliferate across the web, their creators are looking for ways to offset those costs — and, in some cases, build entire business models.
While many including ChatGPT are trying subscription models, there’s a ceiling to how many people will opt to pay for those and how much. Advertising, on the other hand, can grow alongside chatbots’ rapidly expanding adoption. It’s the obvious solution.
“Right now everybody’s not caring about revenue too much because they have hundreds of billions of dollars of venture funding to burn,” Koah founder Nic Baird told Sherwood News. “Eventually they have to actually make unit-economics-positive decisions.”
Advertisers, meanwhile, see opportunity. Users don’t just scroll in AI chats; they ask questions and spell out exactly what they’re looking for. That could make conversational AI more valuable than traditional web ads. Users also spend significantly more time on chatbots than in traditional search. For advertisers, that kind of sustained attention is hard to ignore.
The potential market is enormous, and some analysts think it could rival search. Roger Beharry Lall, research director at IDC, estimates that over time, the roughly $300 billion to $400 billion spent annually on search ads could shift toward AI, with one market cannibalizing the other.
“The vast majority of the internet today is ad-sponsored,” he told Sherwood. “You’re going to see the exact same thing happen in AI.”
That may not be a hard sell to consumers. Despite how expensive LLMs are to run, many people view them the way they view news sites or social media: free. About two-thirds of consumers say advertising is an acceptable way to monetize AI, according to IDC research — including ads embedded in prompt responses.
Still, ads are only just arriving in AI chats. Consumer sentiment could shift once people see what they actually look like.
We’re in the very early innings. As it stands, ads showing up through Koah and in ChatGPT are based on information shared within the chat itself, rather than data scraped from elsewhere on the web.
Both Koah and OpenAI say ads won’t influence the information provided in responses — a separation they argue is essential to maintaining trust. If you ask about running techniques, you might see an ad for sneakers, but the ad won’t cause the chatbot to steer its answer toward that particular brand.
OpenAI executives have previously expressed skepticism about ads in AI assistants, warning that monetization could distort answers. But the economics appear to be winning, as evidenced by ChatGPT’s entry into the space.
Anthropic, for its part, has so far resisted advertising altogether, positioning itself as more cautious about commercial influence — even as it advertises on the very big ad platform of the Super Bowl.
The ads within each AI chatbot are native to the platform, but labelled as sponsored and visually distinct from the conversation.
“The format design is really a huge part of it. It takes a ton of work to figure out how to make a great sponsored experience,” Baird said. “You could just take a standard display ad and shove it in there, but that hurts the experience and that really hurts user engagement.”
For now, Koah is mostly working with text ads, though Baird says those could evolve into generative video and more dynamic formats.
IDC’s Beharry Lall expects chatbot ads to start out resembling traditional internet ads, but become more personalized and interactive over time.
“There is a huge opportunity with generative AI and AI technology to be much more refined,” he said.
The frequency with which users see an ad will depend on the chatbot’s owner, but Baird says it could eventually be one ad every three or four queries.
Koah takes a 30% cut of the ad revenue generated through its marketplace. OpenAI, whose ad business Evercore ISI’s Mark Mahaney estimated could generate $25 billion a year by 2030, is charging $60 per thousand views.
Of course, for AI chats to become a major ad channel, the ads have to actually work — and that’s far from proven.
“ The data matters, the time spent matters, the inventory matters, but also the targeting matters, the self-service advertising platform matters, the price matters,” Nate Elliott, an eMarketer analyst who specializes in AI and advertising, said. “A lot of things will have to click for these ads to be useful.”
Will they be more valuable than the search ads they’re replacing?
“They just launched two weeks ago and they’ve got a lot of work to do,” he said. “Anyone who gives you an answer to that is just guessing.”
Anthropic CEO Dario Amodei said in a public post that the company will sue the Pentagon after receiving a letter from the Department of Defense officially designating Anthropic as “a supply chain risk to America’s national security.”
Amodei says that the effect of the unprecedented designation for an American company is more narrow than originally described, and that most of its customers would not be affected.
“With respect to our customers, it plainly applies only to the use of Claude by customers as a direct part of contracts with the Department of War, not all use of Claude by customers who have such contracts.”
Amodei says the company does not “believe this action is legally sound, and we see no choice but to challenge it in court.”
The CEO also apologized for statements he made in a leaked internal memo in which he claimed that the company was targeted because it didn’t show “dictator-style praise” for President Trump.
“With respect to our customers, it plainly applies only to the use of Claude by customers as a direct part of contracts with the Department of War, not all use of Claude by customers who have such contracts.”
Amodei says the company does not “believe this action is legally sound, and we see no choice but to challenge it in court.”
The CEO also apologized for statements he made in a leaked internal memo in which he claimed that the company was targeted because it didn’t show “dictator-style praise” for President Trump.
SoftBank is going to great lengths to double down on OpenAI — including taking on significant debt. After completing a $40 billion investment to become one of the ChatGPT maker’s largest backers, the Japanese conglomerate is now seeking a roughly $40 billion loan with a 12-month term, Bloomberg reports.
The financing would be SoftBank’s largest-ever dollar-denominated deal. The AI investment has helped lift profits, but it is also pressuring SoftBank’s credit profile.
Feeling the heat from Anthropic’s success with enterprise customers, OpenAI released GPT-5.4, a new model that excels at “professional work.”
OpenAI says the new model has improved capabilities for “professional tasks involving spreadsheets, presentations, and documents. The result is a model that gets complex real work done accurately, effectively, and efficiently — delivering what you asked for with less back and forth.”
The company says the model has advanced computer use skills and supports up to 1 million tokens of context — a measure of the maximum amount of information that can be read and accessed when generating a response, allowing for more complex tasks.
The company says the model has advanced computer use skills and supports up to 1 million tokens of context — a measure of the maximum amount of information that can be read and accessed when generating a response, allowing for more complex tasks.
More details are leaking out from Anthropic about how CEO Dario Amodei explained the company’s dramatic schism with the Pentagon over its AI terms of use.
The Information shared details from a leaked 1,600-word memo to employees that Amodei reportedly sent on Friday after the Trump administration attacked the startup.
Per the report, Amodei told his staff that the reason the company was on the outs with the Trump administration was the fact that it had not given “dictator-style praise” to President Trump, “(while Sam has),” referring to OpenAI CEO Sam Altman.
Amodei also noted that OpenAI President Greg Brockman and his wife donated $25 million to the MAGA Inc super PAC, which likely put their competitor in the good graces of Trump and co.
Per the report, Amodei told his staff that the reason the company was on the outs with the Trump administration was the fact that it had not given “dictator-style praise” to President Trump, “(while Sam has),” referring to OpenAI CEO Sam Altman.
Amodei also noted that OpenAI President Greg Brockman and his wife donated $25 million to the MAGA Inc super PAC, which likely put their competitor in the good graces of Trump and co.
After years of fighting with “Fortnite” maker Epic Games, Google is hitting reset on Android — cutting Play Store fees, loosening its grip on billing, and making it easier for rival app stores to set up shop on millions of devices.
The move could also dent one of Google’s lucrative businesses: Play Store commissions.
In a blog post Tuesday, Google said it will let developers use their own billing systems alongside Google Play’s, link out to external purchase pages, and distribute apps through third-party app stores that meet Google’s safety standards. The company is also lowering Play Store fees in key markets, with billing fees around 5% for developers that use Google’s system, service fees roughly 20% on new installs, and subscription fees around 10%. The changes will roll out on a staggered schedule, beginning mid-2026.
In a corresponding post, Epic said “Fortnite” would expand worldwide on Google Play. “These changes will evolve Android into a true open platform,” the company wrote. “Fortnite” returned to the Play Store in the US in December after the two companies reached a settlement following years of antitrust battles.
In a blog post Tuesday, Google said it will let developers use their own billing systems alongside Google Play’s, link out to external purchase pages, and distribute apps through third-party app stores that meet Google’s safety standards. The company is also lowering Play Store fees in key markets, with billing fees around 5% for developers that use Google’s system, service fees roughly 20% on new installs, and subscription fees around 10%. The changes will roll out on a staggered schedule, beginning mid-2026.
In a corresponding post, Epic said “Fortnite” would expand worldwide on Google Play. “These changes will evolve Android into a true open platform,” the company wrote. “Fortnite” returned to the Play Store in the US in December after the two companies reached a settlement following years of antitrust battles.
