Google Plans to Integrate Various Ad Formats in Its Generative AI Search Features

Google has confirmed during its recent earnings call that it is developing innovative ad formats for its generative AI-powered search experience. Early ideas were shared earlier this year, and the mention during the earnings call suggests a potential rollout could occur soon. This initiative is crucial for Google, as a significant portion of its revenue still derives from advertising. Although the company has made several efforts to diversify its revenue streams through Google Cloud, various services, and hardware, ads remain a primary focus.

In the third quarter earnings call for 2023, Alphabet and Google CEO Sundar Pichai stated that the company intends to test a native ad format tailored for its Search Generative Experience (SGE), designed to complement every phase of the search journey.

While it may still be in the nascent stages, Pichai expressed confidence in the transition from traditional search methods to AI-enhanced experiences. “Transitioning is something we’ve navigated before, whether moving from desktop to mobile or now from mobile to an AI-driven environment. This is not unprecedented for us. I am assured that our talented teams—both on the organic search and advertising sides—will create valuable user experiences, including effective ad placements,” he noted during the earnings call.

Google first introduced its AI-enhanced search experience at the Google I/O developer conference in May, beginning with user access in the U.S. and later expanding to Japan and India by August.

Currently, ads appear above the SGE results on desktop and below on mobile devices. Additionally, Google has showcased examples of customized ads within the SGE at a marketing event in May. For instance, if a user searches for surfing experiences in Maui, they might see a tailored ad for a travel package displayed in the SGE with a “sponsored” label. Similarly, search queries related to shopping could also trigger relevant sponsored results.

The company did not provide further details about the new ad formats during its latest earnings call, but Chief Business Officer Philipp Schindler emphasized that “advertisers still have the chance to connect with potential customers throughout their search journeys.”

Google reported a revenue of $76.69 billion for Q3 2023, an 11% increase year-over-year, with the advertising segment contributing $59.65 billion. The Cloud division earned $8.41 billion, falling short of analysts’ expectations of $8.64 billion. The company noted a significant increase in engagement, with over 70 billion Shorts being viewed daily, up from 50 billion earlier this year. In Q2 2023, over 2 billion monthly logged-in users watched Shorts, a figure that has remained consistent in the latest report. Schindler revealed that the company is set to make its video reach campaigns available for distributing ads across different formats, including Shorts, as of November.