New engines power search advertising for brands & consumers

The search advertising landscape is massive and still growing, both in India and globally. In India, digital advertising is expected to hit around Rs 50,000 crore (a little over $6 billion) by the end of 2024, with a substantial chunk coming from search ads.

Globally, Google dominates with a lion’s share of the market, raking in over $160 billion annually. Other players like Microsoft’s Bing, and the new(er) kids on the block—AI-driven tools like SearchGPT and Perplexity—are trying to challenge Google, but for now, it's a ‘David vs Goliath’ scenario, where Goliath still has a home field advantage.

That said, search advertising is in the midst of a paradigm shift, driven by AI-powered tools that are changing not just how users interact with search engines but how advertisers approach their campaigns. Google’s long-standing supremacy in search is being tested, not only by new entrants but by its own evolution in how it serves ads and content.

Preetham Venkky, Chief Digital Officer at DDB Mudra Group, highlights how dramatically Google's strategy has shifted over the years.  “A few years back, Google search result page's KPI would be to have a high bounce rate and minimal time spent,” he says.

The original goal was simple: get users off the search results page as quickly as possible, efficiently directing them to external websites through blue links.

But things have changed. “Now, the KPI is no longer to keep you there for a short period but to increase time spent on the search results page,” Venkky notes, pointing to features like blurb cards and the Search Generative Experience (SGE) that encourage users to stick around on Google's platform .

This change speaks to a broader shift in how Google approaches monetization. “They're going to optimize more for revenue and less for user experience,” Venkky continues. “Google is serving the late majority of users, who rely heavily on basic information, rather than early adopters seeking detailed research.” The deeper, more complex searches that users once expected are now flooded with ads, and while Google remains unparalleled for quick, L1 (level 1) content searches, more in-depth inquiries—L2 (Level 2) and L3 (Level 3) content—are increasingly skewed towards paid promotions.

“When you're going in depth of research, it's only 20% of the time we do that,” Venkky explains. "For L1 content, Google is still king. You cannot beat Google. But where Google fails is in L2 content.” This creates a new balancing act for the platform, one that prioritizes the needs of the many over the demands of power users.

Venkky also points out the vital role advertisers play in this new model, as sponsored content becomes an even more critical part of Google’s monetization strategy. “Google is building a search engine for the 95% use case, not for the 5%,” Venkky remarks.

The majority of users will still find Google to be highly effective for basic searches, even as the deeper, research-based searches become more cluttered with advertisements.

Amit Verma, Co-founder and CEO of DigitUp, further elaborates on this shift, noting that search behaviour has increasingly moved above the fold, especially for certain types of queries. “For basic queries like ‘How to drill a hole’, you don’t see sponsored links. Google’s AI already knows when it’s pointless to show ads.” But for more product-oriented searches like ‘steel pipe,’ sponsored ads tend to dominate, demonstrating the platform’s continued reliance on ad revenue for more commercial queries.

Verma emphasises that Google's AI isn’t fully able to decipher search intent yet, leading to an over-reliance on ads for certain types of queries. “AI doesn’t fully understand intent, so it prioritises sponsored content just in case,” Verma explains. While this may not bother most users yet, Verma cautions that it could become an issue if the balance between ads and organic content tilts too far in the wrong direction.

The balance between serving ads and serving users is delicate. Verma points out that while some users might get frustrated by the prominence of ads, most don’t mind—yet. “Let’s hypothetically assume Google alienates its users. To whom? ChatGPT? I tried searching ‘steel pipe’ on ChatGPT—it’s just a boring definition, no images, nothing. If I want to buy something, I’ll go back to Google. Perplexity might show some cards, but it’s not ready to play the advertising game yet.”

Jacob Joseph, VP of Data Science at CleverTap, highlights a similar concern, noting, “As ads take up more space above the fold, there’s a growing risk of alienating users who find it harder to access organic results.” He acknowledges that AI and machine learning have reshaped search advertising, with a focus on monetization and relevance from an advertiser's perspective.

Shailendra Singh Mehta, Head – Paid Media, AdLift, notes, “AI helps tailor ads more precisely, boosting advertiser success, but it often means fewer organic results at the top. While this is beneficial for advertisers, offering better ROI and more visibility, it can alienate users who expect quick, organic results. The dominance of ads at the top might frustrate users, making them feel overwhelmed by promotional content rather than receiving relevant information quickly.”

That said, Joseph still believes in Google’s resilience. “Google’s vast resources, extensive data access, and integration within its broader ecosystem provide significant resilience,” he says. The challenge will be how Google adapts its AI technologies to retain user loyalty while still catering to advertisers.

Mihir Mehta, Managing Partner at 0101.Today, adds that Google’s Search Generative Experience (SGE) could offer some relief to users. “SGE provides AI-generated summaries above search results, which might draw attention away from ads and improve user experience. It could help balance the increasing prominence of ads.”

Venkky also recognizes the competitive pressures from new AI-powered search engines but believes Google still holds the upper hand. Despite the rise of platforms like SearchGPT and Perplexity, Venkky argues that Google remains the most convenient and fastest tool for L1 content. “For L1 content, Google is still king,” he insists. While AI tools are gaining traction, Google's ability to provide quick, basic information keeps it relevant to the vast majority of users.

Mehta agrees, noting that while alternatives may provide quick answers, they lack the comprehensive ecosystem that Google offers. “Google isn’t just about answering questions—it’s about discovering relevant products, brands, videos, images, and people,” Mehta says. “Google’s strength lies in its ability to integrate various forms of media and information, creating a more holistic search experience that goes beyond just answering queries.”

Ultimately, Google remains the undisputed leader in search advertising, but the road ahead will require careful navigation. Whether through AI-powered features like SGE or its ability to balance ads with organic content, Google will need to continuously innovate to keep its user base engaged while satisfying the demands of advertisers.

And let's face it: until ChatGPT or Perplexity starts offering you attractive steel pipe deals alongside that "boring definition,” Google’s grip on search advertising seems pretty secure.