OpenAI’s Sam Altman seems to have received a hard dose of reality from somewhere, as ChatGPT’s wanton money-digestion is coming to an end.
Yesterday, OpenAI formally announced that it will begin bringing ads to ChatGPT. The ads will appear at the bottom of chats for free and “Go” subscription users. Users on higher tiers won’t see them (for now at least).
In the coming weeks, we plan to start testing ads in ChatGPT free and Go tiers.We’re sharing our principles early on how we’ll approach ads–guided by putting user trust and transparency first as we work to make AI accessible to everyone.What matters most:- Responses in… pic.twitter.com/3UQJsdriYRJanuary 16, 2026
ChatGPT finds itself on something of an island, reliant almost entirely on apps to find users and third-parties to find compute, chiefly Microsoft and Azure. It has hundreds of millions of monthly active users and various major enterprise contracts, but its balance sheet is nowhere near approaching any semblance of profitability. Yet, it’s on the hook for over a trillion dollars of compute commitments in the next decade, and that money certainly has to come from somewhere.
Investors have clearly gotten tired of waiting for AI to show pathways to profitability. Microsoft’s own share price has seen a downward trend over the last couple of quarters, as capital expenditure seems to be outpacing the raw economics of the now. Microsoft’s products are powered by ChatGPT and other OpenAI models, and it has found success with products like Github Copilot and Microsoft 365 Copilot integrations. Fortune 500 companies tend to prefer Microsoft for its expertise in regulatory compliance, as well as its industry-leading position in corporate security. Nation states use Microsoft Copilot (for better or worse), owing to perceptions around its capacity to remain insulated and secure from the wider web.
Google, Microsoft, Meta, and other major tech companies can self-cash flow its AI development and infrastructure build out, but ChatGPT relies entirely on funding rounds from venture capital firms, Wall Street, and big companies like Microsoft. ChatGPT’s balance sheet reads like a sci-fi horror novel, and the mood seems to be shifting away from hype and towards hard realities.
ChatGPT’s ads were rumored for a long time, and felt inevitable in the end. There are various examples throughout history of companies offering products for free to create habitual behavior in their customers, only to eventually move hard towards profitability. Given how rapid ChatGPT burns cash given its astronomical costs and inefficient products, ads were always the most logical conclusion. The same is more than likely true for Microsoft Copilot, Google Gemini, and other similar AI products — there’s no such thing as “free,” as we all know.
I realize the irony of writing this on a website that has more than its fair share of ads, but I don’t think anyone ever suggested blogging without ads would ever make for a viable way to make a living. Altman, however, did say at a previous event that “ads were a last resort as a business model” for OpenAI. Does that mean we’re in “last resort” territory for the entire company?
“I kind of think of ads as a last resort for us as a business model. I would do it if it meant that it was the only way for us to get everybody in the world access to great services … but if we could find something that doesn’t do that, I prefer that.” Altman said during the 2024 XFund Experiment Cup.
It seems an alternative was never found.
The same is most likely true for Microsoft Copilot, which is not only free on Windows 11 and the web, but also provides free access to some of OpenAI’s more advanced models that typically require a subscription.
“I kind of think of ads as like a last resort for us as a business model,” – Sam Altman, October 2024 from r/singularity
One of Microsoft’s big existential issues as a business has revolved around figuring out how to monetize those “free” users. A user on Windows who doesn’t subscribe to OneDrive, Xbox Game Pass, or Office 365 is effectively useless to them. Apple iOS and Google Play-based Android are harvesting cash from their users via app purchases and in-app purchases. Microsoft has always kept Windows open to its credit, but it’s also why we’re seeing “enshittification” factors creep into the OS. If a user won’t pay for services, then at least there’s some telemetry and data to harvest from them, right? But it’s also why Windows has become pretty unpopular despite boasting hundreds of millions of users, and operating an effective monopoly in desktop computing. The bloatware, ads in the shell, and aggressive positioning of its own apps and services have weighed on perceptions of the OS.
But even for Microsoft, things aren’t exactly getting cheaper. Shareholders are demanding revenue to rise in line with inflation, and Copilot seems like an obvious additional vector for ads and “personalization,” by which Copilot offers products based on what it knows about you from your conversations.
Increasingly it feels like chatbots were less about boosting our productivity and more about having a more effective method than social media likes and cookies for figuring out what kind of ads and products to sell to us. But maybe I’m cynical.
It’ll be interesting to see how Google and Microsoft position their AI chatbot services with consumers, in a world where ChatGPT ends up as cluttered with ads as something like Instagram. But hey, Instagram is pretty popular despite all the ads, so despite the backlash on socials today, I suspect 99% of ChatGPT users actually don’t care.
But … is it enough to set OpenAI on a path to profitability, or even long-term basic sustainability before investors get tired of waiting? Time will tell.
Will Microsoft move forward with its plans to evolve Windows into an agentic OS despite backlash from users? Share your thoughts in the comments.
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