OpenAI's ad business hits $1 billion annualized revenue run rate

Aug 31 (Reuters) - OpenAI on ‌Monday said ChatGPT ​Ads, ​the company's advertising business, has reached $1 billion in annualized revenue run rate, as adoption picks up and global expansion ‌rolls out.

The company started testing ads in ChatGPT U.S. earlier ⁠this year and has steadily expanded to add advertisers and tap into more markets, ‌as it banks on advertising ‌to boost overall revenue growth ahead of a potential IPO.

Here are more details:

• Starting on Monday, advertisers across India, Europe, the Middle ​East and North Africa can purchase ChatGPT ads directly via OpenAI's Ads Manager — a tool it has already rolled out in the ⁠United States.

• Ads Manager has been helpful in drawing small- and medium-sized businesses (SMBs) to advertise ​on ChatGPT, the company said, adding that SMBs now represent a "material share" of its ads business.

• OpenAI said advertisers ​outside the U.S. represent a growing share ‌of revenue, without disclosing further details.

• OpenAI has been displaying ads to users on ChatGPT's free tier and ⁠the lower-priced Go plan. In April, OpenAI had said its ads pilot in the U.S. crossed $100 million in annualized revenue within six weeks of its launch.

• ⁠Emarketer AI analyst Nate Elliott said the announcement was "incredibly impressive and terribly disappointing," ​as the $1 billion annualized revenue run rate suggests OpenAI is falling well short of its $2.5 billion advertising revenue target for 2026.

• For OpenAI, competing in the advertising ‌industry means challenging the dominance of Alphabet's Google and Facebook parent Meta, both of which rake in hundreds ‌of billions in ad revenue annually.

• OpenAI confidentially filed for a U.S. ⁠initial public offering earlier this ‌year, with the company ​reportedly expected to go public in 2027 or sooner.

(Reporting by Deborah Sophia in Bengaluru; Editing by Maju Samuel and ‌Shailesh Kuber)

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