Good morning. Today, marketers face fallout from OpenAI’s contest with Google; Estée Lauder smells money in chatbots; and retailers have a stake in the scrutiny on BNPL. Plus: What happens if brands get their tariff costs back?

OpenAI CEO Sam Altman has declared a “code red” to improve ChatGPT and delayed other key products as a result, notably including advertising.

His directive to staff, first reported by The Information, is the kind of leadership decision that makes winners and losers, here during an AI race with an unknowable payday and high risk of wrecks.

It comes after Google Gemini last month passed OpenAI on industry benchmark tests, Berber Jin notes in The Journal’s story. That raises the urgency for OpenAI, but also its need for any revenue that ads could create.

CMOs that count on traditional search marketing meanwhile will have to wait even longer to buy their way into ChatGPT replies.

For now they need to be experimenting both with ads in Google’s AI products and optimizing their visibility and utility to large language models. For some that may mean following basically the same practices as in regular search optimization; others may have more to do (and secrets to unlock).

A final thought on the “code red”: Given all the ads that now crowd traditional search-result pages, could a little more runway for an ad-free ChatGPT eventually pay off in consumer market share?

While the titans of generative AI duke it out, marketers can deploy chatbots on their own properties.

Estée Lauder, for example, believes it has developed an AI chatbot that can help sell perfume online.

That’s remarkable because—unlike finding discounts or giving style advice, jobs where people can gauge results before they buy anything—the AI Scent Advisor’s task requires consumers to take its word for it. (And in a subject in which the nose-less AI can’t directly be trained.)

The result is a bot that’s prone to ethereal adjectives and references to the English countryside, Isabelle Bousquette reports for The Wall Street Journal Leadership Institute:

“When you can’t smell something, you have to be really evocative with language,” said Jose Gomes, vice president, retail and consumer goods at Google Cloud, which helped crack the code for Estée Lauder’s Jo Malone.

Online shoppers who used the tool since October have made purchases nearly twice as often as those who didn’t, Estée Lauder says.

Homework for marketers: Brainstorm everything that a chatbot couldn’t possibly do for your customers, then pick one to try.

Attorneys general from seven states are launching an inquiry into buy now, pay later lenders including Affirm, Klarna and PayPal.

They want to know whether the companies may be putting consumers at financial risk and—harkening back to Katie Deighton’s CMO Today story on consumer rage—how they handle customer service and disputes.

Marketers, too, should hope that the sector does right by shoppers:

• People spend more money when they use BNPL services, research suggests.
• And they sometimes choose brands based on its availability. Aaroh Mankad, a 27-year-old software engineer in Seattle, recently told The Wall Street Journal he chose a $1,904 mattress from Casper partly because the company offered BNPL at checkout.
• For businesses, “it’s a proven advantage to win,” PayPal said as it released its latest annual Holiday shopping survey.

But buy now, pay later is prevalent among less-affluent shoppers, and increasingly used for necessities like groceries.

Forty-one percent of BNPL users reported paying late in the past year, up from 34% in the previous year, according to LendingTree. And 48% said they have regretted a BNPL purchase—some more than once.

Those customers may get stuck with late fees and start spending less again, potentially feeling bruised in the process.

Klarna said in a statement it has implemented safeguards for consumers. “We rigorously assess eligibility before purchases, pause use if a payment is missed, and as a result, over 99% of our lending is repaid,” it said.

Costco became the latest and one of the biggest companies to sue the Trump administration over tariffs in an effort to secure a full refund should the Supreme Court rule the sweeping duties illegal, Sarah Nassauer and Gavin Bade reported last night.

Costco, the country’s third-largest retailer by revenue, has said it is working to offset the cost of tariffs and is raising product prices only selectively.

But customers who hear about a tariff refund for the chain might think Costco owes them some of that money in turn.

If the money comes back, how will Costco frame that news to shoppers?

That’d be one of those “nice to have” problems, of course—and also a potential marketing opportunity.

The community where marketing leaders drop the corporate speak and share what’s actually happening. The WSJ CMO Council unites leaders from the world’s most influential brands including Adobe, Audi, Google, IBM, Intel, Johnson & Johnson, Meta, Taco Bell, P&G and Verizon.

Tap into the connections and WSJ intelligence that move careers forward and separate the prepared from the scrambling.

Request Information

Disney’s CEO succession has entered its final stage as Bob Iger’s reign draws to a close, with the current heads of TV and parks looking like top contenders. [WSJ] 

Kim Kardashian will promote Skims for the holidays by hosting a shoppable, variety show-style live-stream on TikTok. [Fashion United]

The products on TikTok Shop are moving upmarket. [Modern Retail]

Irish discount airline Ryanair stopped taking new signups for the £79-per-year membership program it debuted last March, saying the subscription fees generated were outweighed by the discounts provided in turn. [Independent]

Are we sure traditional media’s turn toward Substack is very different from its previous pivot to video? [Puck] 

Target’s giveaway bags for the first shoppers through the doors at 6 a.m. on Black Friday left some who lined up underwhelmed (and griping on TikTok). [BI]

Some people don’t like the logo for the 2034 Utah Olympics, but give it credit for planting a striking flag early. [Fast Company]

“Chive lord” is a reminder to brands: Don’t forget about Reddit. [Ad Age]