The new age of ad-supported AI, brought to you by DeepSeek

DeepSeek’s splash onto the scene with a lower cost and comparable AI model last month caused a moment of reckoning for the industry. While major competitors haven’t yet reversed course on their huge AI capital expenditure outlays, some have made changes to how much money they’re taking in, offering more of their wares to individuals for free.

Baidu reacted by offering its Ernie chatbot free to individual users. OpenAI, which had been losing money on its most expensive $200 per month ChatGPT Pro offering and has 400 million weekly active users, is now promising users of its upcoming GPT-5 unlimited chat access for free. Even before DeepSeek, this had been the trend. Elon Musk’s Grok AI had been only available to paying X users, but in December the company rolled it out free to everyone on the site and it’s now available as a free standalone app for everyone else.

The idea that Amazon or Google or Meta, which are cramming generative AI for free into their existing products, would put up a paywall for regular consumers is more remote than ever.

Meanwhile, tech companies are shelling out hundreds of billions a year to furnish their AI ambitions. And the more people use these services, the more it costs the companies who offer them. Generative AI has yet to afford its creators the shrinking computing costs of earlier web technology.

It seems unlikely that typical consumers would choose to pay for something they can get for free, and currently there’s a variety of comparable options. Though OpenAI’s ChatGPT was the first out of the gate for American consumers, it’s not clear that consumers have particular love for any particular gen-AI model. And every other day a different company says its model is better or at least comparable to the last.

“ChatGPT was significantly better than anything else out there two years ago as far as consumer experience goes,” Arun Sundararajan, a professor at NYU Stern, told Sherwood News. “Now there are plenty of very good alternatives.”

Indeed, in the last month a number of options — DeepSeek, ChatGPT, and now Grok — have traded places at the top of the app stores. Popularity seems to follow whoever has the newest, freest model.

Generative AI, it seems, has become a commodity for typical consumers. (There’s certainly a lot more potential — and money — in enterprise use cases, but even there it seems people are still searching for the killer use case.) As far as consumer generative AI, you have a situation where there’s more and more money going out and now potentially less coming in. Something has got to give.

It’s likely we’re about to see the end of truly free gen-AI chatbots. To help recoup costs from consumer models, ad-supported generative AI is likely coming soon.

“Maybe advertising is on the horizon,” Columbia Business School professor Olivier Toubia said. “Maybe this will become just like search.” He added that perhaps advertising could work in concert with specialized applications and consulting as different types of revenue sources.

Sundararajan said that it’s impossible to know where generative AI and its business model will be in the future, given the uncertainty of what large language models’ performance and price will be even a year from now, but added that advertising has a habit of creeping up on technology.

“Advertising seems to be the fail-safe of the internet era,” he said.  “Advertising always comes to the rescue.”

Meta has already signaled that once it hits a billion users of its gen-AI products, it will monetize with ads. Google, which already has an existing user base of people using its sites to find information and which has its own AI model as well as a giant ad business, is also an obvious candidate for launching ad-supported AI.

Of course, there are many technical and ethical implications to consider regarding ad-supported AI. Promoted ads that were clearly labeled were controversial on Google’s Search. What happens when the motivations behind a gen-AI chatbot’s responses or recommendations are even more obscured?