Consumers Don’t Mind Ads in AI If They Are Relevant
One of the monetization strategies AI companies have been trying has been digital advertising. That raises the question of whether ads are a viable way for AI companies to raise revenue or whether they just alienate users.
Empirical Intelligence and ND Research partnered on a choice-based conjoint survey to test how consumers react to various AI plan features, including ads.
Study Design
We recruited a representative sample of 314 U.S. consumer respondents through online panels. They went through 12 choice tasks where they were asked to select one out of three AI plans. They could also select none of them. They were told these AI plans were for their personal use and that they would have to pay for them themselves.
The conjoint included a variety of features and prices. For ads, there were three options:
- no ads
- ads that are personalized based on a user’s chat history
- ads that are not personalized
Note that it was not clear a priori whether respondents would prefer personalized or non-personalized ads. The fact that personalization is based on chat history suggests a reason not to want personalized ads: they are based on the conversations users have had with the tool in the past. Users may prefer to keep their conversations confidential. On the other hand, they may prefer ads that are relevant.
Key Findings
Surprisingly, respondents did not react negatively to ads in general. They just want ads to be relevant.
- Ads were not a dealbreaker: Respondents were no less likely to select an AI plan if it included ads.
- Relevance beats privacy concerns: Respondents are more likely to select an AI plan if it includes personalized ads than if it includes non-personalized ads.
When looking at specific market simulation scenarios for ChatGPT Go (a popular entry-level paid plan), the dynamics become even clearer:
- Introducing non-personalized ads does nothing to the share of preferences.
- Making those ads relevant leads to a 9% relative increase in share of preferences.
- Respondents are willing to pay $0.90 extra to get personalized ads over non-personalized ads.
Strategic Takeaway
Ads are a viable revenue-raising strategy for AI companies.
Because consumers are already used to seeing ads online, seeing ads on AI tools seems perfectly normal to them.
However, ads are an even better revenue-raising strategy for AI companies when they are personalized based on users’ chat histories. AI companies can boost revenue and improve the user experience by leveraging chat histories to deliver tailored ads.