Is OpenAI Running Out of Cash!?

[music] Hey, hey, hey. Hello and welcome to the dojo, a search marketing podcast from Exposure Ninja. I'm Charlie Exposure Ninja CEO and today I am joined by special guest Luke Nicholson who is COO and coming out from behind the scenes for his very first podcast appearance. Hey Luke, welcome to the podcast. Hey, thanks for having me. Thanks for allowing me to step out of the shadows and into the limelight. I'm very excited to be here today. Great. Looking forward to our conversation. So, we're talking about this $14 billion hole that is the predicted loss for OpenAI, which is Chat GPT's parent company, and actually just what the hell's going on over at OpenAI. So last week there were reports that OpenAI has closed Sora, their video generating software, which was costing around a million dollars every day to run for what is for OpenAI a very small user base of 500,000 users. Luke, what do you think's going on? Why have they closed Sora? How much money are they losing? Yeah, so we're seeing reports that Open AAI is losing three times more than it makes at the moment. So although OpenAI has an absolute ton of money, like a pile of cash that they're sitting on, it isn't infinite. And also, I think the real underlying story here is OpenAI, we've seen them instruct their lawyers. They're thinking about their IPO in quarter 4. I think that they want to have the public investors, they want some good news for those guys. They want to be able to point to some some revenue increases. And I think that the real story here is is finally OpenAI is going to start focusing on the ad side of things. And there are a couple of different reasons why we can think that that's pretty much going to be the case. And why is that? Why do you think they're suddenly doubling down on the ad side of things? Especially, it was only the week before last that they decided to close their instant checkout, which was allowing e-commerce checkouts to happen directly in the chat GBT chats managed by OpenAI. And now we think they're pushing even harder towards the ad side. Yeah, it's time for OpenAI to start making some proper money. So, at the moment, they are making um much less than they're spending. So that's a that's a situation that no business wants to be in indefinitely. And although OpenAI isn't in a hurry to be super profitable, uh reports are saying that they're targeting profitability by about 2029, there are signs now that they're beginning to take it much more seriously than previously. And the moves that we're seeing are around advertising. And there are two in particular that really show us that they're taking it seriously. Um and that's two people that they've hired. They've hired Dave Dugen um who will be the new VP and head of global ads at OpenAI and they've also hired Fij Zimo who it will be CEO of applications. Um both of those guys are veterans from Meta. They were instrumental in building Meta into the juggernaut that it is now uh especially the ad side of things. And the fact that Open AI has gone after those two tells us that their top priority at the moment is building that ad platform. We're also seeing um OpenAI it's launched its beta ads uh feature at the moment. So, uh, one of our clients actually is on the weight list to get in on that and I think that they want to have that up and running and at least having those early signs of growth uh, ahead of the IPO in Q4 of 2026. It's funny though because they've come under fire in the news very recently about those ads that they've been running, the ones they've been testing in beta so far, not actually providing an ROI. And one of the big big news stories that hit was that uh Walmart's VP Daniel Dankov was like, "These ads are just not working." Uh he basically the TLDDR is called them a flop and said that shoppers were just not completing those purchases inside the chat GBT interface. They would rather just navigate to Walmart's website. News like that is absolutely terrifying for OpenAI. That is not what you want to see as a CEO ahead of an IPO that was at one stage rumored to be, you know, the biggest in world history. Um, and that huge IPO that they're going after is completely dependent on having an ad platform that uh functions. I think that previously OpenAI has underestimated how difficult it is to make ads a functioning uh part of the overall system. Um, and now they're beginning to realize, oh wait, this is not just a nice add-on that we can put on at any moment that suits us. This is actually something that is a major part of the overall experience for the user and it has to really drive results for the advertiser. If you remember early on when Open AI started talking about ads, they were really really focused on the user and how the ads wouldn't really interfere with the experience for the user. But you know as a somebody who works a lot with advertisers I was thinking you know this is really you've got to make sure there's something for the advertiser there as well is otherwise there won't be advertisers on the platform at all. If you make the ads so unobtrusive that they don't work then no advertiser is going to be on the platform. And so I think that this is this is what we're seeing now is the realization this is a huge huge piece of work. It actually has a massive set of implications for our business and we're on a bit of a timeline here because we're running our money so quickly and we want to get these ads up and running and uh generating revenue in in a in a sustainable way ahead of the Q4 uh IPO. Uh because without that then the valuations could be you know nowhere near as high as as the guys at OpenAI are expecting or hoping for. So, it sounds like they're finally maybe just getting under control the billion different things that they've been running internally to find out, okay, where are we actually making money and where are we going to be successful? And I think ad revenue is still going to be really difficult for them because platforms like Google Ads, Bing Ads, Meta Ads, they are comparatively much more sophisticated. Like they've had so much more time in market. They know what they're doing. There's really clear analytics. people make good at least rowass if not ROI on their Google ads and I mean for e-commerce businesses for sure they rely so heavily on their Google ads at the moment that I think OpenAI's got a big big game ahead of it if it wants to be catching up as an ad platform for those but it kind of makes sense I guess if it's leaking a million dollars daily on Sora for just 500,000 users it's clearly not worth the investment for them um one of interesting things has been this rise of uh Shopify agentic storefronts which we knew Shopify was going to be releasing an integration so that there's aic storefronts in chat GBT what we didn't know was that chatbt was going to be shutting down its instant checkout which happened last week and these storefronts essentially mean that users who are having a chat in chat GBT can then check out but they're actually checking out still via Shopify. So Shopify is still the merchant. It still owns that customer data and that actual purchase rather than chat GBT. So is your thinking Luke that this is just another version of chat GBT deciding look we don't we don't want to get involved in becoming the merchant here that's another really costly thing. There's loads of platforms like Shopify that already do this. Why are we even getting involved in those transactions? Yeah, I agree. I think that over excitement is probably been the name of the game from OpenAI uh since the very early days. And it felt like the vibe about 6 months ago was you know will we even need websites? Will we the idea was we would never have websites anymore because everything that you would do you would just do via a chatbot and there was going to be no need for humans ever to go on the internet itself ever again because uh you can you can just use your chat GPT agent to do all of your tasks for you. I think that that kind of uh excitement has now faded a little bit and people are realizing you know what the internet is pretty great and we like uh using it the way that it is. We are just going to be empowered by chat uh GPT's agents or or whoever's agents uh to to amplify our internet experience. And so this uh dialing back so that um the checkout still happens on on an actual website is part of that broader story I think. And and I think it makes sense if you think about what Google has been doing successfully for many years. People have been using Google as part of their customer journey, right? That that process of becoming customers. Um they interact with Google and then they visit a website and then they they check out. It can be just the same with uh open AAI. You use uh chat GPT to um find your product and then uh you make the product purchase on uh on a third party website perhaps with the assistant of an agent but not directly within Chat GPT's application. So I yeah that that's how I see things going at least in the kind of next three to five years. Long term we might be in an internet or a websiteless world but um but not in the short term. My understanding is of Shopify's agentic storefront is that what it's actually going to look like is you're going to be in chat and you're not necessarily if you're the user, you're not necessarily going to know what what is what what is Shopify and what is chat GBT. So, it will actually be Shopify that you're checking out in or you can navigate to the the e-commerce website the way that you used to, but it's still going to be in chat. It's just all of it is owned by Shopify instead. Like the merchant process is owned by Shopify. It's not owned by a chat GPT. The interesting thing about it though, which I think is going to cause a bit of a kickback. So, at the moment, it's opt out. If if you're a Shopify seller and you don't want to sell via AI, you don't want a Gentic storefront selling via Chat GBT, you can opt out of it. But at the moment what they're saying is cost is going to be around an additional so on top of your Shopify fees already 4% per transaction on chatbt but no additional fees for Google's AI modes Gemini and Microsoft co-pilot for now at least. But I think some retailers some retailers especially in the US where card fees are high are going to be like right fine 4% more per transaction. But I think there's going to be a lot of retailers who are like that is huge. And I think it's going to give some people cold feet about having those Shopify agentic storefronts switched on particularly if you are selling anything where the profit margin is kind of narrow because that's really not leaving much left to be much left right at the end of the day in total. Um but I guess we'll see. Yeah, I completely agree. I think that um profit margins are razor tight in uh some verticals. So the idea that they can simply just slap a 4% fee on there and not get push back from people I think is wishful thinking. I I I yeah, it'll work in some cases. In some some kind of more buoyant sectors and industries, they can probably handle that. But in others, I think that that will put off business owners um quite substantially and leave an opening for those other uh competitors. You you mentioned uh Gemini, you mentioned Copilot, you me you know OpenAI are not the only game in town and one of the problems that they face is anywhere that they drop the ball even slightly they've got people nipping at their heels uh who you know from a from a user perspective people people like anthropic and and they're a perfectly good alternative if there's a a financial incentive for them to uh to use that. Yeah. Yeah. And let's talk about this market share actually because chatbt at the moment is still holding the majority of the AI chatbot market share. So figures are around 64 to 68%. So around 65% we can say is chatbt dominating in terms of the amount of users and traffic that it actually gets. But Gemini has been the underdog in this race in the sense chatbt was able to grow rapidly, rise rapidly, hold a really strong user base and Gemini has been incredibly slow given that it's a Google product, but now has grown in at the end of 2025 and early 2026 has finally managed to command around 20% of the market, which is great. But TGBT is still dominant. in order to overtake it, it's going to have to sustain some of that growth. And arguably, it's unlikely that growth is going to go at that same rate. It's more likely that it's going to taper off. So, it' be a really slow burn in order to take Chat GBT's market share. chat GBT would have to be continuing in decline from well it's actually quite a strong position in terms of the the traffic that it's actually got and getting people I think to switch between different AI models unless you are a really keen being AI user and you have access to lots of different models in your workplace or your workplace allows you to use lots of different models for the average user who's just using it to search outside of work getting people to switch between apps getting people to switch over to Gemini from ChachiBT or to Claude from ChachiBT. I think it's not that easy for the average searcher when we're not thinking about work. I completely agree. Open AAI consciously made a play for the mass market and they really went for being the consumer choice for um open for for generative AI and you know that has worked so far and they they they I mean they're approaching 900 million uh weekly active users which is phenomenal. You know they're they're they're close to that billion which which would be a huge achievement. That being said, we have seen a quite an explosive growth uh from from Gemini in particular. Uh I'm I'm I'm really excited. We're we're recording at the end of March. Um I'm looking forward to seeing data from our clients for March because both in January and February, we saw Gemini's users rise in general on average across our client portfolio um getting up to around 20%. I'd be, you know, interested to see if we can see that hit 25% in March. Um so yeah there's there's enough there to be spooking the guys at uh OpenAI and you know we saw the code red go out um a few months back and the thing is is the competitors are being more focused in the sense that they're going after enterprise right um yes it's difficult to convince users to switch between multiple tools uh just for pure generative AI uh experience But maybe you can convince your users who are already in uh a Google product, already inside a Microsoft product to use the AI features that are integrated inside of that and therefore they will use the chat GPT option less. Right? That I think is a very very plausible scenario um that could affect OpenAI's market share. And Luke, what do you reckon Chat GBT's plan is with the market that they're actually going after? Because like you've just said, they're feeling the heat from enterprise focused competitors like Claude. They've gone Anthropic owns Claude. They've gone really really strongly after that enterprise market. They've got Claude code. So they've got the developers using it. Now they've got Claude Co-work, which for anyone who hasn't used co-work essentially an agent that live can access your browser and complete tasks for you. It's definitely not perfect, but it's definitely comparably very powerful to what we're seeing with the other AI tools. It's very much a tool you would be using at work, a tool that you're using if you've got lots and lots of tasks you're trying to get out of the door, particularly if you want something doing background research for you without you needing to have a consistent manual conversation. But what's Open AI going to do? Where are they going to go given that enterprise has already been cornered? Yeah. And this is they're going for ads, right? this this [laughter] every everybody apart from OpenAI knew that OpenAI were going to have to go for ads, right? Because if you're if you're the mass market, then you know the way that you monetize that mass market is by surveying the mass market ads. Um so this is this is why at the Super Bowl uh I think it was Anthropic was able to deploy those ads that said, you know, we're never going to have ads. The subtext being but Open AI will, right? because maybe even before open realized it, Claude realized that these guys are going to have to start with the ads soon and you know that's why we're seeing the ad hires uh that we have seen um because yeah uh enterprise is being nibbled at by Microsoft by Claude uh Claude code is absolutely eating the lunch of open AI in terms of that power user developer market that that is really important because these are these are Silicon Valley guys. So that's kind of bragging rights and and and kudos to them. Um so Open AI, it's not running out of cash, but it's possibly running out of time in which to convince the rest of the world that all of the investment in it is is worthwhile, right? That's that's out of Yeah, absolutely. Okay, let's wrap this up with talking a little bit about what we're seeing in our client base. So we work with businesses across B2B, BTOC, e-commerce and lead generation, websites in the SME space and in the mid-market space as well across UK and US predominantly a little bit of Europe as well. And a lot of our clients from what I've seen KGBT is still the main platform driving traffic and conversions and I think for businesses there's going to be some confusion around AI search right now because we know that Gemini is trying to grab back some of that market share. Claude, especially as you mentioned in the in the developer space, it's big. It's the one that gets talked about all the time. So, it can be quite confusing to know what platform should we be optimizing for? Should we be optimizing for all the platforms? Is that even possible? What are you seeing, Luke, from the clients that you've worked with? Yeah. So, we are seeing still chat is the the 300 lb gorilla in the room. That's maybe quite a small gorilla. is the big gorilla in the room and uh is is 80% of uh traffic and revenue for our clients. Um so and as I said, Gemini is coming up, but I I think we're we're a long way off a scenario where Gemini is a bigger source of revenue and traffic in terms of that uh AI referral traffic for our clients. We're a long way off that. What we do see is that Gemini users and Claude users in particular seem to convert at a higher rate. So um the traffic is more qualified, maybe more active, more engaged when it comes from those uh chat bots, but still just in terms of sheer volume, the OpenAI is is is absolutely bossing it still um in in day-to-day more so than even this kind of 65% number that we're seeing uh from reported in general. I'm I'm seeing 80% more likely. Huge in comparison how much ChachiBT is actually holding when it comes to traffic. The thing I would say is if you're not sure and you haven't actually looked yet into your own analytics, take a look to see what your traffic performance looks like. So in your Google Analytics, you can set up a channel group. You can separate out the traffic that is coming through from AI search platforms including Chat GBT, Gemini, Claude, Perplexity, Microsoft Copilot and all the others as well. So that you can actually see the percentage of your traffic coming from each of those. If you are using Lucer Studio, which we use custom Lucer Studio reports for our clients, you can set it up so that it shows a lovely pie chart and you can see what the biggest part of the pie is for your referral traffic from those platforms, but also more importantly from the conversions from those platforms as well. And if you are thinking about optimizing for AI search and are not yet sure what to do, we very fortunately offer AI search audits which take you through all of the traffic analysis, the analysis of where the conversions are coming from, an analysis of your key pages and the priorities to actually make sure that your business is showing up in chatbt or the AI search platform that's most important for you and most important for your bottom line. Luke, is there anything you would like to add before we jump off of the podcast? Thank you so much for joining me today. No, not at all. Just to echo what you said, you know, it's it I'd be super interested to hear from anybody who is getting a bigger share from those up and cominging uh generative AI platforms. Um, but yeah, the most important thing to do is find out what your customers are doing and making sure that you've got a system in place to track that. Otherwise, you know, whatever you hear in general may not apply to you specifically. So, it pays to know your numbers. Absolutely. And if you're seeing something different, definitely let us know in the comments because we would love to hear what businesses are experiencing on an individual level as well. All right. Thank you so much for joining the podcast today. See you later. Bye.