A big story that most people are missing in the AI race for the consumer (ChatGPT vs Claude) is ads. Right now, most consumer AI revenue is coming from power users who are willing to pay high cost subscriptions. This currently skews positive for products like Claude - but this will not be the end state. Google makes ~$460/ user/year in the U.S., mostly on ads. Meta makes around ~$250. I would argue ChatGPT’s ad-based ARPUs will be even higher as they will ultimately have deeper / more frequent user engagement. Even at the $460 level - monetizing everyone in the U.S. via ads is $152 billion in annual revenue. By contrast, if you’re able to monetize even 5% of the population on a $200/month subscription (which is a stretch!), that’s only $40 billion 🤔 I suspect this will be even more drastic outside the U.S. where users are even less willing or able to pay directly for subscriptions. And, the earliest data from a very small rollout shows ChatGPT ads are already outperforming Meta in effectiveness - this just gets better over time. TL;DR - I would not count ChatGPT out on consumer AI revenue. Once ads start working, that can quickly become a massive machine.

h/t @illscience for thinking through this with me 😊

@omooretweets the ad angle is interesting but the switching cost story matters more long-term. Claude users who've encoded workflows into CLAUDE.md and Projects don't switch for cheaper. that's a different retention curve than ad-supported models counting on casual users.

One underappreciated angle here is that consumer AI won’t just compete on model quality or subscription ARPU. Distribution economics will matter just as much. If ads become a serious acquisition channel for AI products, the winners may be the teams that turn usage into repeatable growth loops, not just better demos.

@omooretweets The ad vs subscription split may end up defining two distinct markets: consumer chatbots monetized like search (frequent, shallow), and workflow-embedded assistants that can't be ad-interrupted without destroying value. ChatGPT wins consumer. Enterprise/pro stays subscription.

@omooretweets the interesting counter-bet is Anthropic going all in on $200/mo pros who'd pay specifically to avoid ads. same split that happened with Spotify vs radio.

@omooretweets ChatGPT gets 10 minutes of your attention per session, sometimes multiple times a day. If they can monetize that without making the experience worse, it's a completely different kind of business.

@omooretweets This is a big shift If ads outperform search/display, AI products stop being SaaS → become distribution platforms Feels like we’re replaying Google/Facebook playbooks but inside chat

Yeah. Industry leaders think more when it comes to Ads models but consumer market is completely different. And with the competition - the one that gives for free and yet monetise is clear winner. I take this thought to next level and believe even if you throw ads in Cursor and make it free - most devs will chose that.

@omooretweets the real unlock is that chatgpt ads have intent signals google doesn't — you're mid-thought, not mid-scroll that +256% lead quality vs meta makes complete sense when you think about it that way

@omooretweets thanks for sharing, great insights. What do you think this will do to marketing spend in general? Like you see companies diverting marketing spend from social media and similar channels to ChatGPT? Like do you expect that as OpenAI gains ads marketshare the overall market size will grow or that it will come at the expense of Google/meta/etc

Even with the current Claude hype I wouldn’t consider them serious threat in consumer. I believe ChatGPT ads will monetize meaningfully higher. If I describe a really specific problem over 5-10 turns and it turns out a software for it exists, how much is that ad worth? Finding niche softwares in old school google search wasn’t easy.

Ads win consumer AI. Full stop. Claude’s riding premium power-user cash today → cute. ChatGPT flips the script tomorrow: deeper sessions + god-tier targeting = $460+ ARPU ad machine. $152B US revenue ceiling vs $40B sub fantasy. The moat isn’t better model. It’s the money printer everyone pretends isn’t coming. 💸🔥 Claude better build enterprise yesterday.

@omooretweets Do you think this means prices will stay the same for gptPlus and other services or will everything go up for dews as well?

💯 Ads are underrated as monetization layer. For marketplaces like eBay ads are now a key profit driver with ~18% of high margin revenue flowing through ads. Vintage classifieds monetization comeback. Opportunity: C2C marketplace that is solely relying on ads and offering zero-take: a) transactional cost benefits to users b) reduced friction for buyers and sellers, as they or their personal agents can route with 1-tap through any payments/logistics option that suits their needs across categories/borders (no UX lock-ins). c) surface-light regulatory burden compared to merchant-of-record business models as additional tailwind for rapid global roll-out. Many are doing the opposite (building out secondary infra) instead of utilizing the full breadth of accelerating next-gen payments/(autonomous) logistics options. One of their main (questionable) assumptions is that trust requires proprietary infra, when verified identity paired with reputation and AI are the asset light alternative that is increasingly underpinning trust on social networks like LinkedIn. The irony in all of this is that ads also make the value add for subscriptions stronger (e.g. YouTube subscriptions use case is mainly to avoid ads)

@omooretweets Sure, but the privacy concerns will always make them vulnerable. Second guessing what you ask your AI because it’ll sell it to Eve to advertiser in the world ain’t going to win you a loyal user base.

@omooretweets For ads to work, they need to figure out how to keep people engaged longer, without burning lots of tokens. I think this is achievable. But they also need to figure out how to reach more people. Can they get to 2B DAU like Meta or Google?

@omooretweets the ad game is so under the radar now people dont even see how fast this market is changing

When Leadership Doesn’t Step In first-year-visionary.ghost.io/when-leadershi…

@omooretweets i’ve been exploring ad models too, and the best results we saw came from letting users customize how ads felt within the experience

@omooretweets I'm gonna quote @realGeorgeHotz here: "The era of purposefully frustrating humans is over. The Chinese open source model running on the box under my desk can pass the Turing Test. When you call, e-mail, text, or show me an ad, you’ll never know if it’s me or my model seeing it."

@omooretweets The shift from subscription to ad-supported models in AI mirrors the early evolution of search engines High-intent conversational data provides a much denser signal for advertisers than traditional keyword queries

@omooretweets I have a feeling the users who are paying for these LLMs are are of the upper income class. The ads ROI is going to be through the roof!

@omooretweets how do you think about this in terms of they're newfound focus on enterprise.

@omooretweets It does seem like a disproportionate gap if Google's lead quality is higher and is still cheaper. If ChatGPT's lead quality is lower, that just speaks to the consumer base, no?

@omooretweets Claude products being ad-free is a deliberate choice and a real differentiator for users who don't want their conversations monetized. Whether that's enough to compete with free at scale is the actual question.

@omooretweets Hmm… We go to Google to find something we know we’re looking for…insert ad for that thing. We go to FB/Meta to discover something new…insert ad for that thing. We go to ChatGPT/Claude to help us think…insert ad for that thinking? Not sure if it’ll work.

@omooretweets Integrating ads into a conversational AI feels like interrupting a helpful friend. That friction is real.

@omooretweets This is actually a counter point to OpenAI winning the market. Ads aren’t as bad as people think but an ads free experience > ads experience and Google will prob bleed OAI out since they to monetize asap

@omooretweets The real story isn't ads vs subscriptions. It's about who builds the habit first. Whoever becomes the daily default wins, no matter the business model.

@omooretweets Solid read, most people really will refuse to pay for anything.. even Spotify with intrusive ads. Wild to me considering how annoying I find them

@omooretweets @grok can you size the amount of money companies spend on white collar workers in the US vs. the US ad industry size?

@omooretweets The biggest moat is not ads alone. It is becoming useful enough that people come back before monetization even starts to matter. That is why we are building @Teraaiguide to win on trust, learning value, and daily usefulness first.

@omooretweets cool

@omooretweets 你认为控制仓位难不难~ 💰

@omooretweets @aleximm Slop ads in the slop app - what can go wrong !

@omooretweets Very much agree

@omooretweets @ShanuMathew93 I think open source is going to nuke both options