Display Ads vs. Context Ads: The Two Futures of AI Advertising

This Monday OpenAI announced that their ads business is now running at a $1 billion annualised run rate, just six months after launch. The milestone comes as OpenAI pushes into Europe with the next stage of its rollout of ads in the ChatGPT app. They were launched across 31 markets there earlier this month, with the self-serve rollout also occurring this Monday.

This still leaves them well behind schedule for their 2026 and 2030 goals, but it is an impressive feat and proof of huge advertiser demand to capitalize on the AI wave.

“We're at the beginning of a new chapter for advertising, with AI creating entirely new ways for businesses and people to discover one another,” said Dave Dugan, VP of Global Ad Solutions.

LLMs are now walking the same path every ad-supported medium walked before them, and the interesting fight is no longer over whether they carry ads, but how. Here a very interesting distinction is emerging: the one between Display Ads and Context Ads.

What ads in ChatGPT look like

Ads within ChatGPT look as follows: recommendation cards carrying an image and a 50-character header, a line of body copy capped at 100, and a landing URL. They sit below the completed organic response in a distinct, tinted or bounded box, never inside or mixed into the AI's actual text, and clearly marked as Sponsored.

These ads we will call Display Ads; their inventory is the space on the ChatGPT page where they can show their blocks. OpenAI has been emphatic that this separation is not just visual but structural. In Monday's announcement, the company reiterated what has effectively become the founding principle of its ads business: “Advertising does not influence the answers ChatGPT provides. Advertisers do not receive access to people's private conversations.”

Targeting occurs based on the content of that page's conversation, and if enabled based on the user's history. The revenue of these ads accrues 100% to OpenAI, regardless of whether the conversations' answers are built on external sources. Perhaps most importantly, these ads are shown only to the users in the free and Go tiers, which it logically follows are the buyers with the lowest budgets and buying propensity.

The alternative: Context Ads

All of this exists in contrast with another format, that of the Context Ads. The inventory of Context Ads, as spearheaded by Oasy.ai, is not the pixels on a screen, but the context window of the model's reasoning.

When ChatGPT, Claude, or Perplexity scrapes a publisher page to answer a user's question, Oasy detects the bot and serves it an agent-optimized version of the page with a sponsored paragraph embedded in the content. This paragraph is not shown to human visitors, and clearly marked as Sponsored to the Agent. The model ingests the paragraph, weighs it alongside everything else it retrieved, and, if the placement is relevant, cites the brand in its answer. With Context Ads, the majority of the revenue actually accrues to the publisher who produced the content.

This inverts almost every property of the Display format. Where OpenAI's ads are adjacent to the answer, Context Ads are inside it. Where OpenAI's ads are bounded by the free and Go tiers, Context Ads reach every user of every downstream model, Plus and Pro subscribers included, because the injection happens upstream at the publisher. Where OpenAI has built a Chinese wall between the advertiser and the model's output, Context Ads are the wall's deliberate absence: the whole point is that the paid signal reaches the reasoning step.

This introduces an exciting new dynamic to the online advertising market. In the previous era of banner ads, as with OpenAI's Display Ads today, the ad is shown regardless of whether it actually helps the user solve a problem. If the question is “How to fix my microwave”, the ad shown is often for “Cheap & fast microwave meals”. Related, but not contributory. In contrast, the Context Ad has an additional filter. If the reasoning engine of the LLM recognizes that the ad is not relevant to the user's question, it will not relay the paragraph it was shown, and the user is not served the ad, thereby forcing the system to produce ads that are actually of use to its recipient.

This is roughly where we are today. As OpenAI is chasing its goal of $100 billion in AI Ads revenue by 2030, and the market itself is projected to be much larger, it is worth taking a look at where the growth might come from. ChatGPT currently boasts about a billion monthly active users. This is an incredibly impressive number, but it is also pretty close to the 900 million+ they had last year. Short of OpenAI getting 100x better at showing ads, the bulk of growth is likely not to occur in Display Ads, which are bound by the number of humans to display to.

Where the growth comes from

So where does it come from? The answer perhaps lies in the latest numbers by Cloudflare. They report that Agents now make up the majority of the web visits, and more importantly, that “if the current trends continue, we think in five years, non-human traffic will be as much as 1,000 times as much as human traffic”.

There's our growth! The Agentic Web, as experts are calling it, is the next evolution of the internet where AI agents autonomously navigate, interact with, and complete tasks across websites and each other on behalf of users. Of course, Agents are blind to Display Ads. All they see is their context window. So it stands to reason that the overwhelming majority of growth will come from Context Ads.

This is great news for publishers, who stand to gain the majority of revenue in this market. It promises a more optimistic vision of the future, where humans are again rewarded for publishing fresh and helpful content on the web.

For advertisers, it probably makes sense to explore the AI Ads market by investing in both Display and Context Ads, to experiment and build expertise on this new frontier.

The Agentic Web is being built right now, and its ad layer is still up for grabs. If you're a publisher wondering what your traffic is worth, or an advertiser ready to get into the answer instead of below it, come build this future with us at oasy.ai.