OpenAI wants to build a social-media business. Can its Sora app take on Meta and Google?

By Christine Ji

OpenAI likely needs ads to help bridge the gap between its revenue and spending plans. But its AI video-generator app Sora faces heavy competition from Facebook, TikTok and more.

OpenAI's Sora could help the company achieve its goal of growing non-subscription revenue.

The launch of OpenAI's new video app Sora this week marked the artificial-intelligence company's debut into the social-media landscape.

The app, which allows users to generate hyper-realistic AI video clips from text prompts, could be a "direct competitor" to Meta Platforms Inc. (META) services like Facebook and Instagram, Alphabet Inc.'s (GOOG) (GOOGL) Google and YouTube, TikTok and other social-media platforms, according to a Tuesday note from Morgan Stanley analyst Brian Nowak.

OpenAI certainly has expertise in creating popular consumer offerings, as seen by ChatGPT's status as the top chatbot. However, challenging Meta and Google's social-media stronghold won't be an easy feat.

Meta and Google are actively working to defend their existing share of the market by accelerating the launch of new AI tools and leveraging their massive user-data sets. Meta's AI-powered content-recommendation systems are steadily growing time spent on Facebook and Instagram across over 3 billion users. According to Morgan Stanley, YouTube users spend over 80 minutes a day on the platform.

For OpenAI to attract millions of Sora users, it will need to "provide a substantially differentiated (and better) user experience" than incumbents, Nowak wrote. The competition is fierce, as Meta rolled out its own short-form AI-generated video app Vibes last week.

Also read: Meta's 'gravity-defying' growth means it's getting closer to this intriguing milestone

OpenAI's foray into social media is part of its larger strategy to seize a portion of Big Tech companies' lucrative digital-advertising businesses, according to Nowak. Advertising has emerged as an early source of AI monetization, as Google, Meta, and Amazon.com Inc. (AMZN) use the technology to optimize ad-campaign revenue.

OpenAI has a compelling reason to go after this business model: Its current $13 billion revenue run rate falls quite a bit short of its plans to spend over $1 trillion on data centers in the coming years. The "only way" for OpenAI to fund its spending is "by having a great plan to sell ads" to most of its 800 million weekly active users, Melius Research analyst Ben Reitzes wrote in a note Monday.

OpenAI is aiming to diversify its revenue streams with the goal of creating a roughly $80 billion business from non-consumer subscription revenue by 2030, according to The Information. Nowak believes the majority of that is likely to come from digital advertising through search and social-media avenues.

Last week, OpenAI launched ChatGPT Pulse, a new mobile feature that proactively analyzes users' chat histories to provide daily updates on relevant topics. This highly personalized canvas could be ripe real estate for sponsored content and ads, according to Reitzes.

While Pulse and Sora could be disruptive toward legacy advertising platforms, Nowak believes Google and Meta have built formidable moats around their consumer-engagement data and and distribution channels. Google has massive amounts of shopper and inventory data through its commercial search business, and Meta has over 10 million advertisers globally.

The gap between Google and Meta's industry-leading digital-ad businesses "and that of peers continues to widen," Nowak wrote. While OpenAI's ability to scale ChatGPT is impressive, becoming a top social-media platform will be a significantly more challenging endeavor.

Read on: Google's rivalry with OpenAI just got more heated as a new threat to search emerges

-Christine Ji

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10-01-25 1615ET