Ads in Chatbots Have Arrived. Here’s What’s Working—and What’s Not

Anthropic is holding to the ad-free pledge it made in its Super Bowl commercial this year, and its recent IPO filing did not raise the possibility of selling ads — an easier stance to maintain with roughly $112 billion in investor cash behind it. The rest of the chatbot industry is less fortunate: selling ads is increasingly seen as necessary to defray the cost of generating AI responses.

OpenAI has gone all in, with more than 100,000 customers advertising in ChatGPT since ads launched there in February. Google last week extended ads in its AI Mode search chatbot to 10 additional countries beyond the US, saying users "find them highly relevant" — a claim that sits uneasily with advertisers, who remain unsatisfied but expect the experience to improve.

Advertising is arguably even more critical for smaller chatbot platforms that lack top-lab venture funding or tech-giant revenue. Koah Labs, a San Francisco startup, markets ads across more than 200 apps, including DeepAI for creative tools and Liner for citations, working with brands such as Hims and UrbanStems. The company has attracted roughly a tenth of OpenAI's advertisers, but CEO Nic Baird says it already reveals what works in an ad market being reshaped by chatbots.

His early data is specific: ads partly written by AI produce double the clicks of fully human-crafted ones, likely because AI copy reads more naturally beside AI-generated answers. Ads grounded in advertiser-supplied product details appear to sidestep hallucinated claims, though regulated advertisers such as drugmakers default to heavier human control and see weaker results. Targeting is also richer than search — Koah selects ads using the prompt, the AI's response, and prior conversation, with chatbot prompts running at least twice the length of Google queries. Spa ads performed well after "stress"-related prompts, and Koah says users click about 3 percent of ads, on par with Google's mature system.

The open questions cluster around privacy and restraint. Koah generally receives a user's entire conversation up to the ad break, and Baird says queries are anonymized and stored de-identified, but he declined to elaborate on data collection. Since people treat chatbots as confidants as much as search tools, whether users will accept that trade-off as such ads proliferate is unresolved — as is whether click rates hold once ad density rises and risk-averse brands push back on automation.

keyFacts