Sales Conversion and ChatGPT Searches
Researchers at the University of Hamburg and The Frankfurt School of Finance and Management report in a new working paper that referral traffic from ChatGPT results in fewer sales conversions than traditional marketing channels like Google Search, affiliate links, and email.
For 12 months, researchers analyzed first-party data from 973 e-commerce sites generating more than USD 20 billion in revenue combined. Over 50,000 transactions from ChatGPT referrals were examined and compared to 164 million transactions from mainstream channels. The results show that Large Language Model (LLM) traffic was outperformed by other channels with the exception of paid social. However, LLM performance improved over the course of the study.
Cross-Comparison of Conversion Rates by e-Commerce Traffic Source
A Work-in-Progress
The paper’s extract stresses that “time-trend analyses suggest gradual convergence with traditional channels, but projections indicate LLM will not achieve parity with organic search within the next year. These findings challenge narratives of LLMs as immediate ‘Google killers,’ while suggesting potential for long-term channel evolution.”
Alternatively, Similarweb’s research on LLM’s effect on e-Commerce paints a much rosier picture, estimating the conversation rate for traffic originating from ChatGPT at 11.4% versus 5.3% for organic search.
Measuring the effectiveness of LLM in converting traffic into sales is still a work in progress, and this working paper is one of the first to analyze concrete data. However, Open AI is betting on its Instant Checkout feature to improve conversions as more users turn to AI for shopping. The most significant hurdle dissuading users from relying on AI for their purchases is, at its core, a lack of trust.
ChatGPT Dominance Over Other LLM
According to Kaiser and Schulze, authors of the working paper, ChatGPT accounts for more than 90% of e-commerce traffic originating from LLM. Nevertheless, the volume of these traffic referrals is till 200 times smaller than Google’s organic search. Furthermore, affiliate links are 86% more likely to convert into sales compared to ChatGPT links, and organic search outperformed ChatGPT by 13%. Interestingly enough, ChatGPT’s revenue per session was higher than paid social media across all key financial indicators.
Even so, the conversion rate for e-commerce traffic stemming from ChatGPT referrals seems to be improving, and Open AI’s Instant Checkout will most likely have a positive effect on growth.
ChatGPT and Instant Checkout
ChatGPT Instant Checkout is already active for Etsy sellers and will soon be available to all Shopify merchants and Walmart listings. It remains to be seen, if the tool will overcome the existing trust gap between users and the LLM.
According to Schulze, ““If people don’t really trust ChatGPT yet, then having Instant Checkout is not a meaningful feature, because they will leave the platform anyway, in order to find other sources of information outside of ChatGPT.”
For OpenAI, Instant Checkout might be the only path towards profitability, since despite having millions of users, only a fraction of these pay for ChatGPT Plus. By commercializing ChatGPT, OpenAI would be generating revenue by charging merchants a small transaction fee, thus justifying the billions of dollars needed to run the agent and the data centers needed to keep the platform running.
Sell on ChatGPT - Shopify
