Elon Musk Plans to Introduce Advertising into X's AI Chatbot, Powering the Platform's Ads Business

Strategic Insights -

During a live discussion with advertisers, Elon Musk announced plans to introduce advertising into the answers of X's artificial intelligence chatbot, Grok, and power the social media platform's struggling ads business with AI. This decision comes after the departure of chief executive Linda Yaccarino and follows a live discussion with advertisers broadcast on X this week. Musk's AI start-up xAI, which acquired X in March for $45bn, has developed Grok, the platform's chatbot, which has been plagued by difficulties in displaying advertisements to their intended audience.

Key Takeaways:

  • Musk plans to allow marketers to pay to appear in suggestions from Grok, the platform's chatbot.
  • The billionaire entrepreneur aims to automate the advertising process for brands and improve the targeting of ads using xAI's technology.
  • X's advertising technology team had been plagued by difficulties in displaying advertisements to their intended audience before the merger.
  • Multiple advertising executives have expressed interest in AI companies selling ad slots in their chatbots.
  • Brands and advertising agencies have been experimenting with promoting their products in chatbot search results organically.
  • Musk's announcement comes as some advertisers continue to steer clear of X over moderation issues, including a recent controversy surrounding Grok's praise for Adolf Hitler and antisemitic rhetoric.
  • X has been diversifying its revenues beyond advertising into premium subscriptions, boosted by the introduction of Grok as a feature for paying users.
  • Musk has been frantically fundraising to keep pace in a costly AI race against rivals such as Meta, OpenAI, and Google.

Statistics:

  • Grok has seen a 40% increase in the volume of conversions (when a user buys a product seen on an advert) since June for web advertising.
  • The average cost of advertising has decreased by 7% quarter on quarter "across all brand objectives" according to X.
  • xAI and X executives have improved ad auctions, resulting in "significantly lowered costs" for companies bidding for slots.

Sources:

  • "Elon Musk plans to introduce advertising into the answers of X's artificial intelligence chatbot and power the social media platform's hard-pressed ads business with AI." - Financial Times
  • "Multiple advertising executives have told the Financial Times they want AI companies to sell ad slots in their chatbots, while groups such as OpenAI, the maker of ChatGPT, have openly denied any plans to do so amid fears of a consumer backlash." - Financial Times
  • "In a rare charm offensive with marketers, Musk also outlined plans to further automate the advertising process for brands and improve the targeting of ads using xAI's technology." - Financial Times