OpenAI is launching ads on ChatGPT in Europe with a consent-first approach, avoiding the legal pitfalls that led to Meta's $451.9M GDPR fine. The new privacy policy, effective later this month, marks a significant shift in OpenAI's ad strategy.
TL;DR
- OpenAI will ask European users for consent before serving personalized ads on ChatGPT, unlike Meta's 'legitimate interest' strategy that resulted in a $451.9M GDPR fine.
- Users can choose between personalized and contextual ads, with free and Go users having more control over their ad preferences.
- This move could pressure free users to upgrade to paid plans to avoid ads, but OpenAI is proactively complying with GDPR requirements.
What happened
OpenAI is introducing ads on ChatGPT in Europe with a new privacy policy that prioritizes user consent, according to a policy posted on August 14. This approach is a direct response to the General Data Protection Regulation (GDPR), which requires a legal basis for processing personal data used in personalized ads.
The policy outlines that OpenAI will ask users for consent to serve personalized ads, which could theoretically enable more targeted advertising. Users can choose between personalized ads, based on their data, and contextual ads, based on the current conversation and rough location.
Free and Go users will have access to advertising controls in their account settings to manage their ad preferences. Users who do not consent to personalized ads will still see contextual ads.
OpenAI's ad pilot is currently available in nine markets, including the U.S., Canada, Australia, and the U.K., with Europe being the next major expansion.
Why it matters
This move is significant because it proactively avoids the legal issues that Meta faced with GDPR. Meta was fined $451.9M in 2023 for using 'legitimate interest' as a legal basis for personalized ads, which was later rejected by EU regulators.
For developers and startups, this highlights the importance of prioritizing user consent and data privacy in AI-driven advertising. It also sets a precedent for other companies looking to expand into the European market.
Investors should note that OpenAI's consent-first approach could impact ad revenue, as users may opt out of personalized ads. However, it also demonstrates OpenAI's commitment to compliance and user privacy, which could be a positive signal for long-term growth.
The policy could pressure free users to upgrade to paid plans to avoid ads, but the breakdown of users per tier is not publicly available. According to The Information, around 35 million of ChatGPT's 900 million global users were paying for Plus or Pro subscriptions as of last month.
Key facts
- OpenAI's new European privacy policy for ChatGPT ads goes into effect later this month.
- The policy requires user consent for personalized ads, unlike Meta's 'legitimate interest' strategy.
- Users can choose between personalized and contextual ads, with free and Go users having more control.
- Meta was fined $451.9M in 2023 for non-compliance with GDPR regarding personalized ads.
- OpenAI's ad pilot is currently available in nine markets, with Europe being the next major expansion.
- Around 35 million of ChatGPT's 900 million global users were paying for Plus or Pro subscriptions as of last month, per The Information.
- Users have the right to withdraw their consent for personalized ads at any time.
- OpenAI declined to comment on this article.
Context
OpenAI's consent-first approach to ads in Europe is a significant shift from Meta's strategy, which relied on 'legitimate interest' as a legal basis for personalized ads. This approach was rejected by EU regulators, leading to a $451.9M fine for Meta in 2023.
The move highlights the importance of user consent and data privacy in AI-driven advertising, setting a precedent for other companies looking to expand into the European market.
For developers and startups, this underscores the need to prioritize user consent and data privacy in AI-driven advertising. It also demonstrates OpenAI's commitment to compliance and user privacy, which could be a positive signal for long-term growth.