Google has announced its plans to develop and implement new advertising formats for its generative AI-powered search experience. This move was confirmed during the company’s recent earnings call, suggesting that a rollout of these ad formats may be imminent. While Google has made efforts to diversify its revenue sources through various ventures, including Google Cloud and hardware, the majority of its revenue still comes from advertising.
Key Takeaway
Google plans to introduce new ad formats for its generative AI-powered search experience, aiming to customize ads for each step of the user’s search journey. This move highlights Google’s commitment to enhancing the user experience while generating revenue through advertising.
Experimenting with Native Ads in Search Generative Experience
In the third quarter of 2023, Alphabet and Google CEO Sundar Pichai disclosed that the company intends to experiment with a native ad format specifically tailored for its Search Generative Experience (SGE). Pichai emphasized the importance of customizing ads at every step of the user’s search journey. He expressed confidence in Google’s ability to navigate this transition, drawing on past experiences of successfully transitioning from desktop to mobile and now to an AI-enhanced experience.
Early Developments in Generative AI Search
Google initially unveiled its AI-powered search experience at the Google I/O developer conference in May. The feature was initially launched in the United States and later expanded to Japan and India in August. Currently, Google displays ads above (on desktop) and below (on mobile) the SGE results box. However, the company has also presented potential customized ad examples within the SGE, showcasing how sponsored ads might appear during a search for travel experiences or shopping items.
Advertising Opportunities for Advertisers
During the earnings call, Google’s Chief Business Officer Philipp Schindler acknowledged that advertisers still have the opportunity to reach potential customers throughout their search journeys. While specific ad formats were not discussed, Schindler’s statement indicates that Google remains committed to providing advertising solutions within its generative AI-powered search experience.
Revenue Growth and Shorts Viewing Metrics
Google reported a revenue of $76.69 billion for Q3 2023, marking an 11% year-over-year growth. Of this, $59.65 billion came from advertising, while $8.41 billion was generated from Google Cloud. Notably, the revenue from Google Cloud fell short of analysts’ expectations. Additionally, Google highlighted the significant increase in daily Shorts views, reaching over 70 billion views per day. However, the company did not provide an update on the number of monthly logged-in users watching Shorts.
Overall, Google’s plans to introduce new ad formats for its generative AI-powered search experience solidify its dedication to improving user experiences while continuing to drive revenue through advertising.
