Red alert activated! OpenAI suspends advertising business to focus on optimizing ChatGPT, intensifying competition with Google Gemini.

In response to the severe threat posed by the surge in Google Gemini users and its technological leapfrogging, OpenAI has announced the activation of an internal ‘Code Red’ alert. The company will postpone new projects such as advertising services and AI agents, concentrating all resources on optimizing the core experience of ChatGPT, including enhancing personalization, image generation capabilities, and response speed. This move aims to solidify the moat protecting its over 800 million users and lay the groundwork for the anticipated approximately $100 billion in the next crucial round of financing.

Facing $Alphabet-C (GOOG.US)$ ‘s fierce competition, OpenAI CEO Sam Altman can no longer stay idle. After acknowledging the presence of ‘temporary economic headwinds,’ he announced the activation of the highest-level ‘Code Red’ alert within the company!

According to an internal memo obtained today by The Information, OpenAI CEO Sam Altman officially announced to all employees on Monday (December 1st) that the company is entering a ‘Code Red’ status.

In the memo, Altman stated bluntly: ‘We are at a critical moment for ChatGPT.’

In response to Google Gemini’s strong counterattack and indications of slowing growth, OpenAI has decided to urgently adjust its strategic direction: postponing the launch of new commercial projects, including advertising services and AI agents (AI Agents), reallocating all core resources to fully optimize the user experience and performance of its flagship product, ChatGPT.

This move marks a shift in OpenAI’s strategic focus from ‘exploring diverse monetization’ back to defending its ‘core territory.’

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Strategic U-turn: Sacrificing short-term monetization to protect 800 million users

To address the crisis, Altman issued clear instructions: everything must give way to ChatGPT.

Delaying ad monetization: Despite OpenAI’s ongoing testing of shopping ads targeted at millions of ChatGPT users based on their search behavior, this highly promising revenue stream has been put on hold.
Slowing new projects: The development progress of the “AI Agent” project aimed at automating shopping and health tasks, as well as the personalized morning newsletter project “Pulse,” has been postponed.

During the ‘Red Alert,’ OpenAI identified five core pain points that must be prioritized to solidify its base of 800 million weekly active users. Specific objectives include:

Personalization: Providing customized interaction methods for over 800 million weekly active users.

Image generation: Enhancing the Imagegen feature to compete with newly released rivals like Google’s Nano Banana Pro. This feature allows users to create a variety of images, from interior designs to animating real-life photos.

Model behavior: Optimizing model performance to surpass competitors in popularity on public leaderboards such as LMArena.

Speed and reliability: Improving the response speed and operational stability of ChatGPT.

Reducing excessive refusals: Minimizing the phenomenon of ‘overrefusals,’ where the model declines to answer well-intentioned questions.

A hundred-billion-dollar gamble: The key battle for the next round of financing

This ‘Red Alert’ is not only a product defense battle but also a capital survival fight.

OpenAI anticipates spending tens of billions of dollars in the coming years on technology development and computing power reserves. Current financial projections indicate that ChatGPT’s subscription revenue for this year will reach approximately $10 billion, with plans to increase it to $20 billion next year and $35 billion by 2027.

However, to support this ambitious plan, OpenAI needs to raise a massive sum of around $100 billion. Altman is acutely aware that if the company fails to effectively counter Google’s momentum at this stage and demonstrate that ChatGPT remains the world’s best AI product, its subsequent fundraising capabilities could be significantly compromised.

The arrival of new models awaits, while the prospect of raising tens of billions of dollars remains to be tested.

Despite the mounting pressure, OpenAI continues to aggressively advance its technological iterations. Altman revealed that the company plans to launch a new reasoning model next week. Internal assessments suggest that this model outperforms Google’s Gemini 3 in terms of performance. Nevertheless, Altman acknowledged that more work is needed to enhance the overall user experience of ChatGPT.

The performance of this new model, along with the overall optimization results of ChatGPT, will be pivotal in determining OpenAI’s future fundraising prospects. The company expects to spend tens of billions of dollars on technology development and operational activities in the coming years, making its ability to secure funding crucial. According to forecasts released earlier this summer, despite significant cash burn, the company projects ChatGPT’s subscription revenue to reach $10 billion this year, increase to $20 billion next year, and hit approximately $35 billion by 2027. Maintaining leadership amidst fierce competition will be central to validating the feasibility of this ambitious vision.

Intensifying Competition Raises Concerns Over Growth

The immediate trigger for this “red alert” lies in increasingly fierce market competition and growing concerns over growth potential. Three years ago, it was the groundbreaking debut of ChatGPT that forced Google to initiate its own “red alert” in response to threats posed to its search business. Today, however, the dynamics between offense and defense appear to be undergoing subtle shifts.

In October, Google disclosed that the monthly active users of its Gemini chatbot had surged from 450 million in July to 650 million. Additionally, Google has introduced an “AI Mode” within its search application, bringing its functionality closer to that of a chatbot. Although Gemini still trails behind the user figures reported by OpenAI for ChatGPT, its rapid catch-up momentum cannot be overlooked. Meanwhile, AI models from companies like Anthropic have also garnered widespread acclaim from developers.

Nevertheless, OpenAI continues to dominate the existing market. On Monday, company executive Nick Turley revealed that estimates indicate ChatGPT currently handles 70% of global AI assistant activities and 10% of search activities.

Against this backdrop, Altman has issued warnings to employees, stating that Google’s strong resurgence could pose economic challenges to the company. Chief Financial Officer Sarah Friar has also mentioned the issue of slowing growth to investors, though she did not specify which growth metric was being referenced. For a company that relies on continuous large-scale financing to sustain operations and research and development, any signal of slowing growth could test investor confidence.

Editor/Liam

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