A shopper can take a picture of an item they see on the street and a digital assistant can retrieve the page where it is being sold online. A cooking app can find the right recipe for the ingredients the cook has on hand, tailored for that person’s tastes and dietary restrictions. A decorating program can design a room using items ready for purchase.
Artificial intelligence now makes users capable of managing in seconds what would have taken many searches across multiple websites and pages. For users, it is a great savings of time and effort, but for advertisers who depend on search advertising, it will be a challenge to adapt.
AI is now powering most of the major search engines. OpenAI is now testing SearchGPT, a search engine prototype it plans to integrate into ChatGPT assistant. Meanwhile, investors are backing a number of AI-native search engines including Perplexity and Claude, while established tech companies have all weighed in with their own AI-based search, including Google, Meta and Microsoft.
This summer, Google revamped its search results to lead with AI Overviews, a feature that gathers the relevant information surfaced by the search and presents it to the user in actionable form, rather than a list of websites to visit. The feature, powered by Google’s Gemini chatbot, can be adjusted to assist in tasks, such as meal planning or shopping.
This could be bad news for search advertising, since the users now bypass the listings of websites where marketers can, though paid search and SEO, improve their visibility. Gartner is already predicting that search engine volume will drop by quarter by 2025 as users turn to virtual agents. It’s too soon to see how it will affect marketers, but Gartner has also predicted that by 2028, brands will see organic site traffic drop by by 50% or more.
A Washington Post headline threatened “carnage” among publishers and creators and quoted one estimate that forecast publishers will lose about $2 billion in revenue and some websites could lose up to two-thirds of their traffic. The CEO of the News/Media Alliance, a trade group, called the AI surge potentially “catastrophic” to publishers. The organization wrote to the U.S. Congress, which is attempting to regulate AI, calling the new search features the “latest overreach by AI companies” and saying “the tech platforms have regularly introduced more and more features that keep users on their platforms without having to click through.”
The advent of AI is “another major reset,” said Tim Huelskamp, CEO & Co-Founder of 1440, a digital newsletter publisher. “A few years from now, people will be like: ‘Mom, you used to do that? Oh, wow. Was that when you used to look through the phone book?'”
Quantity versus quality
But reports of the death of search could be greatly exaggerated, say some insiders. AI may lead to a reduced volume of searches, but some argue it becomes an issue of quality vs. quantity, and the resulting search results, being more targeted and personalized, will also be more valuable. Marketers are not falling asleep on the job: a report from McKinsey & Co. found “personalized marketing” is one of the top uses of AI in business.
Search advertising is already seeing disruption, but also experimentation in how to integrate advertising in those searches, said Jeffrey Bustos, VP of measurement, addressability and data Center at IAB. More advertising integrations, partnerships and product placements are likely, he said, noting Microsoft’s Copilot is testing contextual advertising in its AI-based answers.
“I think we’ll see search advertising continue to evolve,” said Bustos. But he cautioned that “it’s a little early to say search will lose its relevance.” He noted AI still faces hallucination issues, which can affect the accuracy of results, it struggles with localization and faces transparency issues about sourcing its information that will have to be cleared up as the technology evolves.
Search is still the largest segment in digital advertising, but its growth rate has slowed, especially in comparison with emerging channels such as voice and video advertising. The IAB’s annual Internet Advertising Revenue Report found search ad revenues grew 5.2% in 2023, down from 7.8% growth in 2022. But at $88.8 billion, it is still the largest portion of digital ad spend.
“They’re much more mature, so you’re not going to see those same double-digits you were seeing,” he said, but added: “it’s still very competitive.”
Search engines are evolving into “answer engines” and eventually will become “solutions engines” with help from AI agents embedded into their functions, said Amit Deshpande, global chief marketing sciences officer of RAPP.
Search companies such as Google are adapting the technology because search is still a key part of their business model, said Deshpande; he noted many are testing ad placements based on AI searches and using AI to parse data signaling consumer intent and context to make more dynamic ads. Hueslkamp noted Perplexity—the AI search engine backed by “a bunch of really smart people including Amazon’s Jeff Bezos and former Tube CEO Susan Wojcicki—has already announced it will offer sponsored answers.
It becomes a quality versus quantity argument, say insiders. Richer, more contextual results will likely show better engagement and higher conversions, which in theory should command higher rates. “There is definitely a tug of war that is going on,” said Deshpande.
“There’s going to be less clicks and more answers being delivered,” Huelskamp said. “That answer is so much more valuable now, so as a brand that wants to buy that attention, that awareness, maybe the prices go way up and there’s equilibrium.” Advertisers still need to reach those consumers, he said: “It’s Supply and Demand Economics 101.”
The rise of AI is only the latest innovation that search has had to adapt to as digital advertising evolves. Deshpande compared the situation to how mobile advertising evolved as the flip phone gave way to the Blackberry and then to the smartphone. “Sometimes the mirror for the future is in history,” he said.
Bustos compared the reaction to AI with the panic caused when Microsoft released Excel a few decades ago. Now the software is an integral part of most businesses. AI will likely continue to command attention, he said.
“It’s a tool that we should approach,” Bustos said. “We should be testing, but we should also be doing it responsibly and with the idea of a problem to solve.”
