ChatGPT ad model puts native, banner and video budgets at risk

New Delhi: Digital advertising may be heading into another reset. ChatGPT is testing ads in the United States that are bought purely on a CPM basis, priced at nearly three times what brands typically pay on Google and Meta.

There are no clicks to optimise for, no deep performance dashboards, and no guarantees of conversion. What OpenAI is selling instead is attention, context, and trust, the idea that being present inside an AI-generated answer is more valuable than being one of many links on a results page.

This shift has put Indian brands and agencies on alert. CPM-based buying is not new, but using it inside a conversational AI, at premium prices, challenges how digital media has been planned for years.

If ChatGPT succeeds, it could start pulling budgets away from existing digital inventories such as search, social, video, and native ads. As consumers increasingly use ChatGPT for research, such as comparing cars or planning travel, advertisers may shift spending first from native ads, banner ads, network advertising, and potentially video inventory, all of which traditionally carry a premium.

Indian brands weigh risks and rewards

For Indian brands, the idea of advertising inside a conversational AI is not unfamiliar, but the stakes are higher. Any new format entering the market is expected to deliver both brand safety and measurable impact. According to Pragya Bijalwann, Head of Marketing & Communications, Voltas, the appetite to test new advertising environments exists, but it comes with clear conditions.

“India continues to be an exciting market for emerging advertising formats, particularly those that offer deeper context and high intent engagement,” Bijalwann said. She added that if platforms like ChatGPT introduce advertising in India, even at a cost to existing digital channels, the willingness to test would depend on the distinct value it brings to brand building.

Bijalwann noted that higher CPMs would need strong justification. “To justify higher CPMs, the platform would need to demonstrate strong audience quality, brand safety, and clear measurement of impact across the consumer journey, supported by transparent benchmarks,” she said.

Any pilot, she explained, would likely be funded from experimental or upper-funnel digital budgets, with a defined test period to assess effectiveness.

From a brand deeply embedded in a high-trust category, Santosh Hegde, CMO at Atlys, sees both opportunity and risk in that promise. He believes user behaviour is already changing.

“Our audience is the top 2% of India. Digitally savvy Millennials and Gen Z, who have begun migrating away from traditional search,” Hegde said. “When someone goes to Google, they are looking for a list of links; when they go to ChatGPT, they are looking for a definitive answer.”

Hegde argued that this difference fundamentally alters the value equation. “If ChatGPT can position a brand as the solution rather than just an option within that answer, the value of that placement is exponentially higher than a banner ad,” he said. “We are moving from a world of ‘plain search’ to a world of ‘qualified search.’”

However, he stressed that impressions alone mean little in a category like travel. “It needs to demonstrate a reduction in cognitive load, not just an increase in impressions,” Hegde said.

However, he stressed that impressions alone mean little in a category like travel. “It needs to demonstrate a reduction in cognitive load, not just an increase in impressions,” Hegde said. He pointed out that the biggest barrier to travel is not cost but the uncertainty around visas and paperwork.

“A premium ad unit on ChatGPT cannot just be an interruption; it has to be an integration that simplifies the user’s next step,” he said. It should appear precisely when a user is anxious about documentation, not when they are casually browsing.

Trust, he warned, is non-negotiable. “If the advertising feels like a ‘hallucination’ or breaks the trust of the conversation,” the consequences would be permanent. For ChatGPT to succeed as an ad platform in India, he suggested, it must feel native to user intent, not like a disconnected digital billboard.

Weighing funnel logic and budgets

While brands remain cautious, agencies are already evaluating where ChatGPT fits within the marketing funnel. Shradha Agarwal, Chief Executive Officer, Grapes, believes the platform occupies a highly performance-driven stage. “ChatGPT sits largely at the lower funnel, reaching users who are already in the preference or purchase stage,” she said. “That makes this audience extremely valuable for advertisers.”

Because users typically arrive with strong intent, Agarwal said premium pricing may not necessarily be a barrier for advertisers.

“For someone who is that close to conversion, even paying three times the cost to test ChatGPT can make sense, because the intent is already strong,” she noted. She added that when agencies evaluate lower-funnel platforms, conversion metrics tend to become the primary lens for decision-making.

Agarwal explained that performance indicators such as time spent with the brand, improvement in conversion rates, and reductions in effective costs would determine whether the premium is worth paying. If those signals are positive, agencies would be comfortable sustaining higher CPMs.

However, she was clear about where the money would come from. “Typically, this investment would come from the mid-funnel budget, so platforms like Meta are the ones I would experiment with first,” Agarwal said. She added that agencies generally avoid diverting spends from channels that are already delivering strong performance.

“We typically do not pull money from the lower funnel because those channels are already delivering results,” she said.

Instead, agencies tend to reallocate budgets from upper-funnel or experimental spends. If investments are already being tested on news platforms, OTT services, or emerging ad networks, shifting a portion of that spend to ChatGPT would be considered a strategic move.

Agarwal also ruled out diverting budgets from search at this stage. “Search ads, for instance, are already optimised to deliver clicks and conversions. Taking budget away from search to test ChatGPT would be foolish at this stage,” she said.

She added that meaningful budget shifts from search to an always-on ChatGPT model would likely happen only if the platform consistently demonstrates stronger conversion performance.

As consumers increasingly use ChatGPT for research, such as comparing cars or planning travel, she expects budgets to shift first from native ads, banner ads, network advertising, and potentially video inventory, which traditionally carries a premium.

Carol Goyal, Chief Growth Officer at Aesthetic Intelligence Lab, described ChatGPT as a high-attention but trade-off-heavy environment. Early tests, she noted, will focus on brand exposure and learning, not efficiency.

She added that OpenAI is positioning the ads as premium and trust-first. The bet is that context, attention, and brand safety can justify the high CPM even without granular reporting. For agencies, this shifts the conversation from immediate ROI to long-term learning and strategic positioning.

India awaits

As OpenAI continues to test its ad model in the US, Indian brands and agencies are observing closely. High CPMs may be justified, but only if the platform delivers trust, relevance, and measurable outcomes. The real question for India is whether ChatGPT can replicate the premium positioning in a market where every digital rupee is scrutinised.

For now, marketers are weighing opportunity against risk. ChatGPT offers the chance to be part of the “answer” rather than just another link, potentially commanding budgets traditionally reserved for native ads, banner ads, network inventory, and even video. But the platform must fit naturally into user intent, avoid breaking trust, and prove that its premium pricing translates into real value.

As Indian brands consider pilot campaigns, the industry is bracing for a potential reset in digital media planning. If the platform succeeds, it could reshape budget allocations across channels and redefine how brands approach upper-funnel experiments and lower-funnel conversions. If it fails, the lesson will be a cautionary tale about paying for attention without outcomes.