Google plans to integrate advertisements into search results generated by artificial intelligence, as announced by General Advertising Manager Vidhya Srinivasan on the company’s blog.
AI Integration and Advertising Plans
A week ago, at its annual I/O developer event, Google announced the addition of AI to its search engine. Initially, AI Overviews was launched in the USA and later expanded to other countries. Now, the company aims to incorporate advertising into its AI search engine. This will first be tested in the US before being rolled out to other regions. According to the blog, early testing revealed that users responded positively to ads appearing above and below the AI-generated responses. These ads will be clearly marked as “sponsored,” and a screenshot in the blog shows what this will look like.
“We’ll keep you updated as we continue to test and explore new formats with feedback from advertisers and the industry,” writes Vidhya Srinivasan.
The Impact and Future of AI Ads
AI Overviews will utilize ads from existing advertiser campaigns. This means advertisers cannot opt out of the experiment and do not need to change their ad settings or design for them to appear in this feature.
The motivation behind this move is twofold. Google aims to prevent users from switching to alternative search engines like ChatGPT or startup Perplexity. Additionally, search advertising remains Google’s largest revenue source, and even minor adjustments in ad placement or design can significantly impact revenue. Despite the growth of Google’s cloud and hardware businesses, which makes the company less dependent on search revenue, search advertising still constitutes a substantial portion of their income. In 2019, over 60% of Alphabet’s revenues came from search advertising. By last year, this figure had decreased to 57%, with profits reaching nearly $74 billion in 2023, notes NIXsolutions.
Regardless of how AI review ads perform, traditional search ads will remain crucial for Google. The company is exploring other AI-driven methods to enhance its advertising business. Several AI-based tools for advertisers have already been announced and detailed in the blog.