OpenAI’s Code Red: Protect the loop, delay the loot
In a recent internal communication dubbed “Code Red,” OpenAI CEO Sam Altman has acknowledged that the company has spread itself too thin and is now refocusing its efforts on enhancing ChatGPT, the AI assistant that has captivated nearly a billion users weekly. This strategic pivot comes at a time when OpenAI is under increasing scrutiny regarding its financial health. Notably, the company has decided to pause lower-priority initiatives, including the introduction of advertising, which could have provided a lucrative revenue stream. Altman’s rationale for this delay is straightforward: in the tech industry, user experience reigns supreme. By prioritizing the improvement of ChatGPT, OpenAI aims to deepen user engagement and retention, creating a robust feedback loop that is crucial for the platform’s evolution.
The significance of this feedback loop cannot be overstated. Much like Google’s Search engine, which thrived on user interactions that informed its ranking algorithms, ChatGPT’s vast user base offers OpenAI invaluable insights into human behavior and preferences. Each interaction serves as data that can enhance the AI’s capabilities, creating a compounding effect that fortifies ChatGPT’s position in the market. However, this dominance is not guaranteed; competitors like Google are already making moves to attract users to their own AI offerings, such as the recently launched Gemini 3. Altman understands that introducing ads could risk alienating users, potentially leading to a decline in engagement. Even minor frustrations can push users toward seemingly more appealing alternatives.
For the time being, OpenAI is banking on the release of new models to reignite ChatGPT’s growth trajectory. While the company has ambitious plans that could eventually lead to monetizing its services similarly to Google’s advertising model—potentially generating around $50 billion annually—the immediate focus remains on enhancing user experience. As the company invests heavily in infrastructure to support ChatGPT’s global reach, the pressure to monetize will inevitably increase. Altman’s strategy reflects a keen awareness of the delicate balance between user satisfaction and revenue generation, emphasizing that while advertising may be a future consideration, the priority must be to make ChatGPT an indispensable tool for its users today.
OpenAI CEO Sam Altman attends a State Banquet in Britain
Andrew Caballero-Reynolds/via REUTERS
A version of this story originally appeared in the BI Tech Memo newsletter.
Sign up for the weekly
BI Tech Memo newsletter here
.
OpenAI
spread itself too thin, and CEO
Sam Altman
knows it.
His “Code Red” to employees this week marks a reset: Focus on improving
ChatGPT
, and pause lower-priority initiatives. The most striking pause is advertising. Why delay such a lucrative opportunity at a moment when OpenAI’s finances face intense scrutiny?
Because in tech, nothing matters more than users.
Google
built its Search empire on this principle. Every query and click fed a
feedback loop
: user behavior informed ranking systems, which improved results, which attracted more users. Over time, that loop became an impenetrable moat. Competing with it has proven nearly impossible.
ChatGPT occupies a similar position for AI assistants. Nearly a billion people now interact with it weekly, giving OpenAI an unmatched new window into human intent, curiosity, and decision-making. Each prompt and reply can be fed back into model training, evaluations, and reinforcement learning to strengthen what is arguably the world’s most powerful AI feedback loop.
Altman’s Code Red aims to protect that advantage. If ChatGPT becomes more useful, people will use it more, which strengthens the loop, which improves the product again — a compounding cycle that could make ChatGPT as unassailable in AI answers as Google is in search.
But that dominance is no longer assured. Google’s Gemini 3 rollout has lured new users. If ChatGPT’s quality slips or feels cluttered, defecting to Google becomes easier. Introducing ads now risks exactly that. Even mildly irritated users could view ads as one annoyance too many.
For now, OpenAI is betting on new model releases to reaccelerate ChatGPT’s growth. Ads can wait, but not forever. Generative AI is expensive to run, more so than Search or social networks. OpenAI has already committed to spending hundreds of billions of dollars on infrastructure to serve ChatGPT at a global scale. At some point, those bills will force the company to monetize more aggressively.
If OpenAI manages to build even half of Google’s Search ads business in an AI-native form, it could generate roughly $50 billion in annual profit. That’s one way to fund its colossal ambitions.
But that future depends on the strength of today’s feedback loop. For now, the priority is clear: make ChatGPT undeniably better, pull more users in, and keep the flywheel spinning. Ads can come later. User growth can’t wait.
Sign up for BI’s Tech Memo newsletter
here
. Reach out to me via email at
abarr@businessinsider.com
.
Read the original article on
Business Insider
