Before you take a gamble on the future of advertising in a world of AI agents, it would be wise to consider how ads have supported various breakthroughs with media and technology to date.
The recent news that Perplexity is pausing advertiser onboarding sent ripples through the industry since it runs counter to the notion that ads on AI agents are an inevitability.
Let’s be clear. This is a Perplexity thing, not an ‘ads don't work on AI agents’ thing.
The bottom line is that it’s too soon to create new ad formats for AI as a media channel.
Advertisers aren’t ready for sponsored prompts nor any type of CPM model on AI agents.
If Perplexity simply took standard search text ads and sold them on a CPC basis, it would see much better adoption.
The key to success for paid search platforms has always been having enough advertiser demand to be able to show highly relevant ads for every consumer query.
It’s unlikely Perplexity has enough scale to cross that chasm. Same goes for OpenAI, for that matter.
ChatGPT may have hundreds of millions of users, but it doesn’t have millions of advertisers – in fact, it doesn’t have a single one since it hasn’t launched ads yet.
But you know who does? Google.
The big G has millions of advertisers and hundreds of millions of people using Gemini each month.
With a flick of the switch, Google could start running search ads on agentic AI surfaces en masse.
Same goes for Facebook.
So what are they waiting for?
The big tech companies are furiously locked in an arms race to get the most consumers using their LLMs.
It’s not (yet) worth it to Google or Facebook to disrupt adoption of their AI surfaces by inserting ads.
But in the words of the band Goose, give it time.
The arc of (content) history bends towards advertising, and every breakthrough eventually bows to paid media.
It’s like how new radio stations launched in markets with commercial-free airtime to rope in listeners and drive ratings that, in turn, would be used to sell ads.
It’s not so much a bait-and-switch as a well-understood trade-off.
Consumers get something free for now but eventually will have to pay for it, either directly or through ads.
See Netflix. It always said it wouldn’t run ads but got to a point where it maxed out the number of people willing to pay for a subscription.
As I called out in my piece on AI AND ads, if you want to have a product used by billions of people around the world, you have to make it free.
And if you make your product free, the best way to make money is through ads.
The bottom line is ads always win!
Ads fund content on TV, radio, print, web, mobile, et al.
Ads fund entertainment via streaming, gaming, etc.
Ads fund commerce on retail media networks like Amazon, payment platforms like PayPal, transportation apps like Uber, and many more. (As Eric Seufert says – everything is an ad network.)
Ads fund communications on social media and messaging platforms.
Ads fund information on search engines and directories.
AI agents are all of the above. They provide access to content, entertainment, commerce, communications, and information.
They may not have ads now, but they will – and AI agents will be the most lucrative advertising channel of all time.
It will start with cannibalizing paid search and then we’ll see full-funnel formats as AI agents become ‘everything apps’ and go ALL IN on ads.
