Can Advertising Fund Free AI? Evidence from ChatGPT's International Advertising Rollout

Advertising could keep artificial intelligence (AI) assistants free and make ChatGPT a Google Search competitor if advertisements do not devalue the product and justify their price. This study tests both conditions during ChatGPT’s staggered international rollout, with the European Union untreated, using data from 1,898 online shops selling $16 billion annually. The introduction of advertisements moderately reduces the volume but not the conversion of organic ChatGPT referrals, a proxy for product value. However, paid ChatGPT visits perform worst among major channels, offering less than a sixth of the value for money of paid Google Search. Current performance is not sufficient to finance free access costs. Only more valuable advertisements can bridge this gap, potentially making the product less useful. A Google competitor is not yet in sight.

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