Google’s Latest AI Feature is All About the Bottom Line

Another week, another generative AI feature being tested by Google. Although this time, we’re not talking about using Google's AI image generator or an AI security update to Google Workspaces, but rather new developments in its ads business.

On an earnings call this week, Google confirmed that it's working on creating different ad formats for its generative AI-powered search experience.

While no introduction date has been discussed, it's speculated that the rollout is imminent. Which is just as well, as Google’s attempt to diversify its revenue has not been as successful as hoped, meaning ads are more important now than ever.

The Shift From Traditional Search is On

Alphabet and Google CEO Sundar Pichai led the 2023 third quarter earnings call in which the new native ad formats were announced. He stated that the company plans to ensure customers’ Search Generative Experiences (SGE) are “customized” at every step of the search journey.

While specifics around the formats weren’t shared, Chief Business Officer Philipp Schindler said “advertisers [will] still have the opportunity to reach potential customers along their Search journeys.”

Despite it being early days for the project, Pichai said he felt confident that a shift from traditional search to a new one was underway, leaving plenty of opportunity for AI innovation within the space:

“We’ve always worked through these transitions, be it from desktop to mobile, or from now mobile to an AI-enhanced experience. I feel very comfortable that as we go through it, the strength of our teams – both on the organic side as well as on the ad side – to drive the right experience for users, including ads, will pay dividends.” 

Customization at the Heart of Google's Ads Model

Google first introduced its AI-powered search experience back in May, at the Google I/O developer conference. The new functionality meant generative AI would do “a lot of the heavy lifting” of search, helping users understand information faster and with better context, viewpoints, and insights. 

A single search question would provide key information along with links to dig deeper and the opportunity to ask follow-up questions, in a new conversational style. The feature was first available to users in US and later to those in Japan and India.

This latest announcement is set to build upon that functionality by embedding customized ads with a sponsored tag. The example Google gave was if you were searching for a surfing experience in Maio, the SGE may show you a customized ad for related travel experiences in the area.

You Can Rely on Ad Revenue

While Google has made several recent attempts to diversify revenues source – through Cloud, hardware, and services – ads are its failsafe area. In Q3 2023 alone, the majority of the overall $76.7 billion revenue was made up of $59.7 billion from ads.

Ads are quite simply big business, so it pays to be invested.

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