Google’s AI search overhaul raises ‘more questions than answers’ for its dominant advertising business
By the end of the year, more than a billion people around the world will benefit from a different Google search.
New generative AI capabilities will provide users with more comprehensive and direct responses, providing conversational insight powered by AI technology.
This transition marks an overhaul of Google’s core search product. And since many people use the Internet through Google, these changes amount to an overhaul of how millions of people use the Web and the billions of dollars that companies make from it.
Google’s transition to an AI-powered response engine provides a bulwark against an emerging AI threat.
It’s also a strategic bet: disrupting the lucrative search ecosystem that Google has built will be rewarded by giving way to a new world order influenced by AI.
“There are still more questions than answers about how Google’s search ad revenue will change with the introduction of AI insights,” said Evelyn Mitchell-Wolf, senior analyst at eMarketer.
But rivals OpenAI and Big Tech are pulling ahead. They are deploying new AI services to counter Mountain View’s search empire. For Google to stand idly by while others move forward carries its own risks.
While Google’s AI initiatives are designed to make Internet queries work better, many sites that rely on traditional search results could suffer under a new paradigm. The same goes for Google’s ad-supported search business, the heart of its money-making operations.
That Google has established itself as a common verb, the dominant way to access information on the Web, is a testament to its enduring power as a global gatekeeper.
More than two-thirds of the company’s total annual revenue comes from online advertising. And the research sector is a big part of it. Google controls more than 90% of the market, eclipsing the 4% claimed by Microsoft (MSFT) rival Bing, according to Statcounter data.
In both an obvious and subtle way, if something isn’t discoverable through Google, it may as well not exist. Google claims the status as default across all browsers and devices. And for most internet users, Google search is the path of least resistance; there is too much friction to look for something elsewhere.
This is what makes Google’s move to AI-powered search so important. “The average consumer wasn’t going to adapt their search behaviors to generative AI until Google rolled it out,” Mitchell-Wolf said.
Facing criticism that Google’s AI push could cannibalize existing business, executives compared AI initiatives to other technology changes that have led to growth and new formats and engagements for businesses. advertisers. Search, according to Google, is more than just a list of blue links, and people turn to the service with their questions, ranging from quick checks to in-depth explorations.
“We have a deep understanding of information needs and a strong technology foundation, and we continue to rethink what search can be to serve users in new ways,” Google said in a statement.
The company relies relentlessly on data, so it’s likely that internal testing will show that AI summary summaries lead to different types of clicks and activities, not necessarily less overall web usage , said John Wihbey, professor of media and technology at Northeastern University.
Early findings that Google has shared publicly suggest that AI insights can boost engagement.
At Tuesday’s Google Marketing Live event, the company said links included in AI previews generate more clicks than if the page had appeared as a traditional web listing for that query. Google also said that people who use AI previews use search more and are happier with their results.
At least for now, AI Overviews offers an improved version of search advertising.
Echoing Google’s earlier move to place ads at the top of search results, thereby selling prime digital real estate, the company announced Tuesday that it would begin placing ads in a section labeled “sponsored” in the AI overview.
Rand Fishkin, CEO of SparkToro, an audience research software company, said Google probably believes two things: that they reduce the risk of disruption or competition with other AI-based response engines by implementing theirs; and they view the risks to their core business, paid advertising, as relatively light to non-existent.
It could be that AI Overview’s features don’t negatively impact paid search volume, perhaps because they rarely interfere with the average number of clicks on paid results, he said. declared. Or, they have a positive effect on the average number of searches carried out by Internet users, thus canceling out any drop in clicks on adverts.
In a less flattering light, Google’s AI efforts look like a desperate scramble.
Scott Jenson, a former Google employee who left the company last month, said the AI projects he worked on “were unmotivated and driven by this panic that as long as there was AI in it, that would be great.” In a LinkedIn post earlier this week, he said the company’s short-sighted approach was fueled not by user needs, but by “a cold panic that they would be left on account.”
But what some critics see as clumsy and reactionary posturing, others describe as urgent defense.
If AI models are the next platform, like the transition to mobile phones and apps, Google can’t afford to miss out.
Another way to think about Google’s approach is to recall the beginnings of social media and other burgeoning but now established technology platforms. Their sales pitch to the market was based on growth. At least for a while, gathering users and carving out territory was more important than making money.
“Every time a consumer opts for another search destination, it’s a missed opportunity for Google,” Mitchell-Wolf said. “If it remains behind in the AI-powered search race and consumers end up preferring AI-powered search experiences, there will be fewer queries to monetize. How monetization will happen is secondary to whether or not it’s possible. »
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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