Target drops ads within ChatGPT

Target has partnered with OpenAI to pilot ads within ChatGPT, as the future of AI-driven shopping takes shape.

Sponsored ads from Target and its retail media arm Roundel will appear alongside shopping conversations on ChatGPT, dropping relevant products and deals based on what people are actively searching for, the company said last week. In the past, Roundel has worked with brands like Apple and Mars for its ad business.

The retailer said traffic from ChatGPT to Target grew 40% on average each month. An indicator that consumer behavior is shifting toward conversational commerce. So far, major retailers including Target and Walmart have gone live on ChatGPT.

“We believe ads play an important role in continuing to support broad access to AI,” Asad Awan, ads and monetization lead at OpenAI, said in a statement. “By working closely with partners like Target in this pilot, we’re able to thoughtfully test new ad experiences and learn together to ensure ads are separate and clearly distinct, relevant, and useful while maintaining the trust people place in ChatGPT.”

OpenAI’s ad strategy borrows from the very successful ad business Amazon has built. OpenAI has started testing sponsored ads, similar to how Amazon started by selling pay-per-click sponsored ads back in 2012.

Target’s pilot comes amid rising momentum toward agentic commerce, or agent assisted shopping. Target also introduced its app in ChatGPT and partnered with Google to co-develop the Universal Commerce Protocol, which helps people check out directly in Google’s AI products.

According to Debra Aho Williamson, founder and chief analyst at research firm Sonata Insights, ads within chats could put pressure on the clickthrough revenue generated from regular ads online.

“If ads become conversations and don’t ever link out, it will undermine the foundation upon which digital advertising was built: clickthroughs from publishers to advertiser-hosted destinations,” Williamson wrote in her LinkedIn newsletter The AI Ad Economy.

While ads that shoppers typically see while shopping online aren’t going away, at least this year, the spotlight on traditional retail media advertising is expected to move behind the scenes once agentic AI reaches enough people.