OpenAI has signed Smartly as its first creative adtech partner. The partnership will develop and pilot conversational advertising formats for ChatGPT.

Smartly, a 13-year-old adtech company led by CEO Laura Desmond, will provide real-time ad performance tweaking services to OpenAI advertisers. The company, which helps clients like Spotify and Uber adjust their ads based on performance, has signed entertainment, retail, and sports clients to participate in a pilot program.

OpenAI started running basic ads to some users in its free and $8-a-month Go tiers in February. The company announced a partnership with adtech company Criteo to help brands place ads in ChatGPT. OpenAI said it is on track for $100 million in annualized recurring ad revenue and is working with more than 600 advertisers.

Smartly's ultimate goal is to help OpenAI build interactive ad formats that let brands mimic ChatGPT's conversational interface. The company previously created conversational ads for UK retailer Boots on Meta platforms like Instagram. In those ads, a chatbot pops up in a new window when users click it and serves gift recommendations in response to a series of questions. Smartly said the Boots ad format was nearly five times as effective at driving sales as Meta's basic ads.

"The experience for people will get way more relevant, way more personal, and hopefully be seen as a much better value exchange. All of the research indicates people want to be known," said Desmond.

ChatGPT's initial ad offerings are basic and contextual. According to Sensor Tower, more than 100 brands advertised on ChatGPT in its first few weeks, with 44% being retail companies. Mark Mahaney, internet research analyst at Evercore ISI, wrote in a research note that "OpenAI could reasonably generate several billion dollars in ad revenue this year and as much as $25 billion by 2030."

OpenAI said ads in ChatGPT will be separate, clearly labeled, and will not influence ChatGPT's organic answers. The company said it will keep user conversations private from advertisers and will not sell user data to them. Users under 18 will not see ads, and ads will not appear near topics including politics and health.

While OpenAI expands its advertising efforts, competitors have taken different approaches. Anthropic said it has rejected ads in its chatbot Claude, saying they would undermine its mission to be helpful. Google shows ads in its AI overviews but not in its Gemini chatbot.