Recently, OpenAI added a new role to its C-suite by appointing Fidji Simo, a current board member of the company as the ‘CEO of Applications’. She is expected to join the company later this year, after transitioning away as the CEO of Instacart, a grocery delivery company based in San Francisco.
Simo will report directly to OpenAI’s CEO, Sam Altman, who issued a statement saying, this move will allow him to focus more on research, safety, and infrastructure.
Altman, however, stated that he will continue to directly oversee success across all pillars of OpenAI – Research, Compute, and Applications – ensuring we stay aligned and integrated across all areas. “ I will work closely with our board on making sure our non-profit has maximum positive impact,” Altman said.
While OpenAI has undergone key leadership changes in the recent past, analysts believe that Simo’s appointment indicates the company may expand its focus towards advertisements and the application layer, which can be decisive in increasing revenue.
Will ChatGPT Get Advertisements Soon?
Simo’s work experience, especially the ones that had the most impact on the establishments she worked at, indicates where she may be headed with OpenAI.
Sequoia, an investor in OpenAI, said in a February 2024 blog post that Simo worked to ‘pivot the company towards profitability’ at Instacart. Following her appointment as CEO in 2021, Instacart was said to have had more than 5,500 advertising partners last year.
“Instacart reported that ad campaigns drive an average 15% incremental sales lift—an almost unheard-of number,” read the blog post.
Her role at Meta (formerly Facebook) also essentially involved the advertising space. For instance, in 2013, she led the team in charge of monetising mobile and growing advertisements on Facebook’s news feed, which happens to be the app’s majority revenue source.
OpenAI has hinted in the past that it will integrate ads. In an interview with the Financial Times in December last, CFO Sarah Friar said the company is considering an advertising model and wants to implement it ‘thoughtfully’. The Financial Times also added that, according to sources and their independent analysis, OpenAI is hiring advertising talent from Meta and Google.
Source: The Information
In a Lex Friedman podcast a year ago, Altman expressed his dislike of integrating advertisements into products. And Simo’s appointment might counter that.
Her appointment comes at a time when multiple studies show AI-driven platforms rapidly eclipsing traditional websites as the public’s primary source of information. This trend threatens the foundation of publishers and ad-supported sites that depend on page views for revenue.
As more users bypass conventional articles for instant answers from AI apps like ChatGPT, advertisers may naturally follow where most of their audience lies.
Frederick Vallaeys, CEO of Optymyzr, took to LinkedIn to say that Altman’s stance on ads is similar to that of Larry Page and Sergey Brin, Google’s co-founders, who believed that advertising-funded search engines would be inherently biased toward the advertisers. But today, advertising is a significant revenue generator for Google.
“We’ve seen this before: criticise ads until you figure out how to make them fit in with your mission,” said Vallaeys.
He further explained that when people make specific requests online, it creates a valuable opportunity for advertisers. OpenAI has built a system where these clear intent signals are even more helpful than the keywords that Google relied on initially for advertisements.
While ChatGPT has over 500 million weekly active users, integrating advertisements is indeed a promising opportunity to drive revenue from non-paying users.
To sustain its success, industry analysts believe OpenAI should onboard more users to its platform and increase the capabilities of its applications. Currently, research from Sacra suggest that OpenAI makes more revenue from ChatGPT, than the enterprise sector.
AIM reached out to OpenAI seeking a response on Simo’s potential impact on the company’s advertising, and product roadmap, but did not elicit a response.
Will OpenAI Own the Application Layer Soon?
While many argue that large establishments, or AI incumbents, may not be able to meet all use case demands, thus securing the position of startups, OpenAI might accelerate its focus on an increasing number of use cases, with a ‘CEO of applications.’
For instance, the native image generation feature with GPT-4o was overwhelmingly successful. In the first week of launch, OpenAI said that over 130 million users worldwide generated over 700 million images. The feature was also made available to free users.
Over the years, ChatGPT has also been updated with more features that were once only available with other dedicated apps built by startups. For instance, the application was recently updated with improved search results related to shopping, a feature highly touted by apps like Perplexity.
Additionally, the release of the o3 and o4-mini models, along with the Codex CLI agent command line tool, enhanced the coding capabilities available through OpenAI’s products.
However, in a key development, reports indicate that OpenAI has reached an agreement to acquire the AI-enabled coding platform Windsurf for $3 billion. The acquisition is expected to enhance OpenAI’s products with superior AI coding capabilities.
Furthermore, OpenAI is also reportedly working on a social media platform, which may directly rival the one released by Meta.
With ChatGPT’s existing capabilities, its position as the most popular AI app, a steady stream of new feature releases, an upcoming major acquisition, and the appointment of a dedicated CEO for its apps, it might now move into markets it once avoided—posing a serious threat to startups building products in those spaces.
This may also contradict what Altman once said. In an interview last year, he said that as the company continues to enhance its models, founders who build startups that leverage these capabilities will likely continue to thrive. He emphasised that developers who avoid competing with the core functionality of the AI model are more likely to remain successful.
Anish Acharya, an investor at Andreessen Horowitz (a16), said on X that, given that OpenAI provides the most powerful AI models today, the company is essentially aiming to capture all of the ‘economics in the ecosystem’ to achieve its goal of artificial general intelligence, or AGI.
“We’re now living in a world where consumption layer apps are multiplexing and routing to different foundation models, which is disadvantageous for (foundation models) suppliers [like OpenAI] and limits their ability to extract down-funnel economics,” said Acharya.
“In that world, OpenAI must vertically integrate and own the consumption layer to protect their economics, thus the recent focus on AI Applications,” he added.
