How will advertising work in AI search? If ChatGPT gives answers directly, where do the ads go?

This is THE business model question for AI search. Let me break down what we know:

Current monetization approaches:

The economic problem:

AI search is expensive to run:

• Each query costs 4-5x more compute than traditional search
• No immediate click-through for traditional ads
• User satisfaction comes from NOT clicking away

Emerging ad formats:

1. Sponsored follow-up questions - “Would you like to learn about [Brand]?”
2. Featured citations - Brands pay to be cited in answers
3. Contextual post-answer placements - Ads after AI finishes
4. Subscription ad-free - Users pay to avoid ads

The tension:

AI’s value is frictionless answers. Ads create friction. How do you monetize without destroying the product?

Media buyer perspective on preparing for AI ads:

What I’m doing now:

1. Tracking AI ad announcements - Following Perplexity, OpenAI, and Google AI ad product news

2. Testing where available - Perplexity has early ad programs; we’re in the beta

3. Budget scenario planning - Modeling what happens if we shift 10/20/30% of search budget to AI

4. Organic AI investment - Building citation-worthy content now

Early learnings from Perplexity ad testing:

• Sponsored questions feel native but limited inventory
• CPC equivalents are 2-3x Google so far
• Conversion tracking is immature
• Results are promising but small scale

My prediction:

AI advertising will mature over 2-3 years. Early adopters will learn, but scale won’t come immediately.

Budget recommendation:

For 2026: 95% traditional search, 5% AI experimentation For 2027: 85% traditional, 15% AI (adjusting based on results) Beyond: Rebalance as market matures

Don’t shift budget before there’s inventory to buy.

Brand marketing perspective:

The organic vs paid rebalancing:

In traditional search: Paid dominates consideration queries. SEO captures informational.

In AI search: Everything is organic answers. Paid is an afterthought (so far).

What this means for brand strategy:

If AI search grows and advertising is limited, organic visibility becomes the primary driver.

Being RECOMMENDED by AI is potentially more valuable than buying an ad next to the recommendation.

The trust differential:

Google Ad: “This is a paid placement” (users know) AI Citation: “This is what the AI thinks is best” (perceived as neutral)

AI recommendations carry implicit endorsement. Paid placements won’t have that same trust.

Strategic shift:

We’re moving budget from paid consideration campaigns to:

• Content that earns AI citations
• Third-party presence building
• Brand awareness that influences AI training

The goal: Be what AI recommends, not what AI advertises.

Startup perspective on AI advertising:

Our challenge:

We can’t compete with big brands on Google Ads (too expensive).

AI search initially seemed like a level playing field - best answer wins, not biggest budget.

Our concern:

If AI advertising develops, will we get squeezed out again?

Big brand with AI ad budget > Small brand with great content?

What we’re doing:

Racing to build organic AI visibility NOW, before advertising becomes mature.

If we establish strong citation patterns organically, we’ll have a base that doesn’t depend on ad budget.

The window:

2024-2026 might be the golden window for organic AI visibility before paid options dominate.

Similar to early SEO before paid search became essential.

Startups should capitalize on this window.

Google’s strategic position here:

Google can’t abandon advertising:

• $200B+ annual ad revenue
• 80%+ of company revenue
• Entire business model depends on it

Google’s likely AI advertising approach:

1. Integrate AI Overviews with existing ads - Already happening
2. Maintain traditional results below AI - Users can still click
3. Develop AI-native ad formats - Sponsored AI suggestions
4. Premium AI ad placements - Higher prices, limited inventory

The Google advantage:

Google already has:

• Advertiser relationships
• Ad infrastructure
• Targeting data
• Measurement systems

They’ll adapt AI advertising faster than startups building from scratch.

Implication:

Google AI advertising will likely be the biggest AI ad platform initially. If you’re preparing for AI ads, start with Google’s evolving products.

My predictions for AI advertising evolution:

2026:

• Experimental ad formats across platforms
• Limited inventory, high prices
• Organic citations still dominant for visibility

2027:

• Perplexity and ChatGPT launch proper ad products
• Google AI ads become more sophisticated
• 10-15% of AI queries have ad elements

2028-2030:

• AI advertising matures to similar sophistication as search ads
• Bidding systems, targeting, measurement all developed
• 30-40% of AI queries monetized

The constant:

Organic AI visibility will always have value. Even if advertising becomes prevalent:

• Users distinguish between organic and paid
• Organic citations carry trust advantage
• Cost to compete organically remains lower

My advice:

Build organic AI presence now. Add AI advertising later as it matures. The organic foundation will make paid more effective anyway.

This discussion has helped me think about our strategy.

Key takeaways:

1. AI advertising is coming but immature - Perplexity testing, Google adapting, ChatGPT TBD

2. Higher costs expected - AI compute costs mean premium pricing for ads

3. Organic value increases - If ads are expensive and limited, organic citations are gold

4. Window of opportunity - 2024-2026 is the time to build organic presence before ads dominate

5. Google will lead - Their ad infrastructure gives them an advantage in AI ad development

Our strategy:

Near-term (2026):

• 95% budget stays in traditional search ads
• 5% experimental AI ad testing where available
• Significant investment in organic AI visibility

Medium-term (2027-2028):

• Rebalance as AI ad inventory becomes available
• Evaluate ROI of AI ads vs traditional
• Maintain organic AI presence as foundation

Long-term view:

Organic AI visibility is the equivalent of domain authority in traditional SEO. Building it now creates lasting advantage.

Paid AI advertising will be a complement, not a replacement for organic presence.

Thanks everyone for the thoughtful perspectives.