GPT-4-powered Bing Chat introduces ads – and experts believe it’s a natural fit

The chatbot, backed by OpenAI’s new large multimodal language model GPT-4, is expected to display a variety of sponsored results and ads to users soon.

Experimenting with ad formats in chat

In a blog post published Wednesday, Yusuf Mehdi, Microsoft’s corporate vice-president of modern life, search and devices, said the company is beginning to experiment with ad placements in the chat.

Microsoft sees ads as a necessary step on a path to achieve its goals with Bing Chat as well as with its Microsoft Edge browser, Mehdi suggested in the blog post. Chief among these objectives is the aim to “drive more traffic to publishers in this new world of search.” Mehdi explained that the company “[measures] success in part by how much traffic we are sending from the new Bing/Edge.”

Additionally, Microsoft wants to boost revenue to publishers, which it hopes to accomplish “by both driving more traffic to them through new features like chat and answers and by also pioneering the future of advertising in these new mediums….”

Microsoft is beginning by serving up paid results sprinkled in with other organic search results when responding to user queries. In its blog post, Microsoft highlights an example in which a user has searched: “latest healthcare headlines” and received three results, one of which is a sponsored Forbes link titled ‘Next-Generation AI Can Dramatically Revamp Healthcare in 4 Ways.’

The company is also exploring the option of placing ads directly in the chat experience, according to the post. For this kind of advertising, Microsoft plans to “share the ad revenue with partners whose content contributed to the chat response.”

The tech titan is considering additional capabilities for publishers, which include over 7,500 partner brands. Microsoft is in talks with a select number of these partners to determine which ideas will prove the most valuable in terms of driving traffic and ad revenue. One early idea is an option that displays additional links from a given publisher if a user hovers over a single link from that publisher.

Some users have previously reported encountering ads in their Bing Chat experience, but it appears that until now ads have been viewable for only a portion of users. Soon, more users will encounter ads in their interfaces – though Microsoft has not yet clarified a timeline.

The advantages of ads in Bing Chat

For many in the industry, the move makes sense. “Integrating advertising and marketing solutions with generative AI is a no-brainer,” says Parry Malm, chief executive at Phrasee, a generative AI platform designed specifically for enterprise marketers. “It will allow unique ways to overcome irrelevance issues of the past and provide contextually relevant ads in nearly any setting.”

Malm predicts the trend will spread quickly. “Infrastructure-focused demand-side platforms worldwide will be revisiting their product roadmaps as we speak.”

Others agree with the assessment. “If ChatGPT is the new form of search, and if people are migrating from ad-supported Google, then this is a golden opportunity for Microsoft to monetize the new influx of users and information being sought after via their pipes. Advertising is only going to continue to grow, and the opportunities with ads on chat are the next era,” says Jeremy Bloom, an adtech expert and entrepreneur in the process of launching a new adtech networking platform called OhHello.

The possibilities will only expand with GPT-4, which can assess both text- and image-based prompts, Bloom suggests. “[If a user searches:] ‘What should I wear to a good friend’s daughter’s quinceanera in Columbus, OH, in October?’ All of a sudden, Abercrombie & Fitch, based in Columbus, comes up in the answer with an outfit suggestion,” he says. “Bing Chat is the next wave of programmatic. Move over behavioral and contextual targeting.”

A new edge in a competitive market

Microsoft’s decision to integrate ads into Bing Chat and Edge, some experts say, is likely part of its broader strategy to compete with Google, the irrefutable giant of search. “Bing has been lagging, and GPT has helped boost them,” says Dr. Rajkumar Venkatesan, a professor at the University of Virginia’s Darden School of Business who specializes in marketing and martech. “And ads are the key to monetizing Bing Chat.”

Microsoft, in Venkatesan’s estimation, has its work cut out for it. It will need to experiment to ensure ads are relevant and that specific ad formats fit into the chat seamlessly while also garnering engagement.

Microsoft will likely use this initial rollout as a test-and-learn phase to optimize the ads experience iteratively, some experts posit. “There are a lot of unknowns right now on how to monetize AI chatbots and how to define revenue share with content providers whose content may be used to generate responses,” says Dr. Sameer Maskey, the founder and chief executive at AI education firm Fusemachines and an adjunct associate professor at Columbia University. “Starting to show ads this early on in the product lifecycle is to collect data from how users would react to it, not just from the perception of ads but also on click-through rates on a variety of ways ads will be shown to them. I am assuming Microsoft will use all this user interaction data with ads to start polishing their revenue model on monetizing Bing Chat.”

As far as how ads within Bing Chat will perform compared to more traditional search ads, Venkatesan says we’ll have to wait and see. He does, however, have a hunch that Bing Chat users may engage with the chat for a longer average period than they would engage a webpage of search results – which could benefit brands by extending audiences’ exposure to their ads.

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