🌟 Editor's Note

This edition focuses quite heavily on ads and monetisation. All of the tech companies investing in AI need to figure out how to cover their spiraling costs, and subscriptions alone is not going to cut it.
The browser wars is something we have focused on in previous editions. This edition focuses on ads. Google are most at threat from the new GPTs and browsers: if people use Google to search less, there is less opportunity to show ads.
The battle for the future of how people search - and which companies will make money from this - is the frontier where the big companies are aligning their tanks just now.

Get the popcorn ready….

OpenAI’s Advertising Plans

Whilst no official statements on the full launch of advertising have been made by the makers of ChatGPT, the recent moves (and leaks) indicate that ads are on the way. From the appointment of Fidji Simo (ex Meta and more recently head of Instacart) to job postings for monetisation engineers, all signs point to ads coming early in 2026.

This week, a leaked Android app beta for ChatGPT included references to advertising. So the speculation begins of the format ads will take. Reports mention “sponsored answers” “highlighted links” or “promoted content”, but it will remain unclear for some time whether OpenAI will choose a traditional “ad-inserted” model like a search ad, or more subtle “partner content” type of contextual ad.

There will still need to be the decision over whether the ads will run in free versions or subscription versions, and how their user base will feel if a paid subscription includes ads.

^{Takeaways For Leaders}

• With systems built that potentially knows more about their users than Google knows about theirs, GPTs pose an existential threat to the incumbent search ecosystem.

• If ads / sponsored content becomes part of ChatGPT’s ecosystem, it opens new channels for promotion, giving advertisers new options and things to figure out in terms of effectiveness.

• The business of ‘organically’ appearing in ChatGPT answers (the Search Engine Optimisation game equivalent) will continue. For content producers/publishers, this could shift competition again: not just SEO or social media, but AI-assistant placement will matter. Several companies claim to have cracked this - be very cautious believing them, no matter how good their snake oil may look in the bottle.

Google Start Revealing Their Own AI Ad Hand

After looking like they were behind the curve on AI this year, Google have come out with several ad products in quick succession.

Google have been pushing back on claims that search traffic is tanking, claiming in recent earnings calls that AI is actually expanding search volume. Many publishers have stated that they are getting significant drops in site traffic referrals citing that users may now be completing their information search without having to visit a site.

As more users switch to GPTs to seek out information, Google’s ability to charge the same price for search placements is reduced. Their answer so far has been the use of AI mode to provide answers, free from sponsored results. Now, Google are further rolling out the inclusion of sponsored results inside AI mode alongside the other ads and normal search results. This has been experimented with in the US for a while and is now hitting other markets.

^{Takeaways For Leaders} 

• This is a natural move for Google in preparation for offsetting the decline in traditional search ad revenue. Their future path certainly looks to include AI enhanced experiences to help consumer searching - alongside which advertisers will spend handsomely - an example of their new AI flight search can be found here 

• What is unclear is how consumers will react. The results Google displays in response to a search have become less and less impartial over time. If ChatGPT or Claude or even Gemini provide a more balanced approach (i.e. less influenced by advertising), will we see consumers shift from the Google search experience over time ?

• With ChatGPT, Perplexity etc. also showing ads in one form or another, perhaps none will be seen by consumers as unsullied in their responses.

• Behavioural inertia is also a powerful force. The bet Google are making is that people will keep rocking up and searching the way they always have.

  For now, Google’s moat seems well formed enough to put ads into AI overviews - our bet is that the way these ads look will be very different this time next year. Google’s suite of AI products is broad, they certainly have a lot of resources to throw at maintaining their dominance of the advertising world. But the current threat from GPTs may just be the most significant threat they have seen in their 27 year history.

Perplexity Announces AI Try on and Virtual Shopping

If you’ve ever wondered how something you’re looking at online will actually suit you, Perplexity have released a new AI try on feature to help you find out. Taking your photos and building a digital twin, it then enables you to see how you look wearing real clothes from online stores. It integrates with platforms like Shopify and large retailers sites directly and with their PayPal integration enables users to complete purchases directly within the interface.

Currently the integration is available with over 5,000 merchants, and the Perplexity Merchant program is open (for free) for companies to ensure their products are included in the AI index.

How Does This Compare To Others?

Google have been playing in this space for a while and in October rolled out their offering of virtual try on beyond the US, but there is a different approach as far as consumers and stores are concerned. They have a huge volume of product listings (Google says AI Mode pulls from over 50 billion product listings refreshed very frequently), but the transaction is completed within the merchant’s website. Whilst the listing the merchant has is free, realistically it costs money (via ads) to get traffic and avoid being buried on page 2 or 3 of the listings.

OpenAI are also in this space, with their recently launched Shopping Research tool - like Perplexity, they are enabling consumers to purchase direct in the chat, without having to visit a new website.

^{Takeaways For Leaders} 

• Merchants are flocking to Perplexity right now because it is "free organic reach" with high-intent buyers (people who already decided to buy).

• Merchants stay on Google because that is where 90% of the volume still lives, even if they have to pay for it.

• Whether consumers will choose to complete transactions inside a GPT or still rely on traditional website visits remains to be seen, but anyone in the ecommerce space would be wise to be preparing for both possibilities right now

🔥 In Case You Missed It…

Yann LeCun and FeiFei Li Work on Real World Models

Outside of the world of AI, the potential significance of this may be underestimated. Yann LeCun is a Turing prize winner, one of the founding figures of deep learning, and helped to pioneer neural networks. His work is the foundation of how many computer vision processes work, from smartphone cameras to facial recognition.

LeCun has announced his departure from Meta to focus on building models that understand the world around them. He has been critical of the limitations of LLMs for some time famously calling them a "dead end" for achieving true human-level intelligence. His new company (in which Meta will be a partner) is focusing on his vision for Artificial Model Intelligence (AMI) - reasoning models that understand the physical world and has persistent memory.

LeCun is not the only high profile person talking about the limitations of LLMs. Fei-Fei Lei, another of the foundational figures in modern AI and a professor at Stanford University is in the same camp, with her company working on ‘real world models’ that she terms ‘Spatial Intelligence’. Read more from Fei-Fei Li explaining this development here

^{Takeaways For Leaders} 

With heavy hitters such as Yann LeCun and Fei-Fei Li moving in this direction, this could well herald the next era of generative AI. The work for developing the next iteration of AI will take some time and is not likely to affect most of us any time soon.
We are still very early in the journey of transformation towards the AI future and for most companies there is so much value to be derived from the existing forms of generative AI. Leaders should focus on the here and now capabilities of AI, and build their teams to take advantage of the multiplying effects on their business. We can think about the developments in real world models when we’ve mastered the current forms !

🏆 Tools, Podcasts, Products Or Toys We’re Playing With This Week

Nano Banana Pro (Gemini 3)

The speed with which Google has moved over recent months has been quite something to behold. At the start of the year they were looking slow compared to their rivals, but these past few weeks have certainly changed that. It is less than three months since we first reported Nano Banana 2.5 in the September 1st issue, and already a new, more powerful model is here. The capabilities are streets ahead of the images being produced by these models a year ago.

Did You Know? 

Till next time,

And The Rest Is Leadership