Samuel Shepherd
For the first time in this current age of the internet, Google is facing pressure from viable alternatives that threaten to impact the proverbial monopoly that the tech giant has in the online search space. With advertising making up approximately 77.8 percent of Google’s revenue in 2024, this growing trend of businesses like OpenAI becoming viable as Google alternatives in the search space has forced Google to continue experimenting with new features in order to maintain competitiveness.
As AI development companies continue to reshape the digital landscape, Google’s decision to adapt its advertising strategy is an understandable one. However, the way in which they have gone about this change has come as quite a surprise to many in the tech space.
Advertising in Google AI
The company has announced that it will be experimenting with embedding advertisements into its AI-driven search features, including the new AI Mode as well as the existing AI Overview functionality, marking a significant evolution in how it monetises user interactions. This move reflects Google’s response to growing competition from AI-powered search alternatives and shifting user behaviours, while ensuring its advertising revenue, aka its primary financial driver, remains completely secure.
For those who have been paying attention over the past few months, Google’s decision may not be quite as surprising. They have discussed plans to test the waters with AI chatbot advertising in late April, with the question primarily revolving around whether or not this change will impact Google’s main Gemini service, the monetisation of which has been somewhat uncertain regarding which direction Google will take next.
The AI Search Revolution: Google’s Look to the Future of Search Advertising
As discussed in their official blog outlining the next steps of their strategy, Google processes over 5 trillion searches annually. AI Overviews, which synthesises and summarises answers to user queries, has driven a 10% increase in search usage in major markets like the United States and India, according to Google’s own data.
This feature has proven particularly successful, with users reporting higher satisfaction and engaging in more frequent searches, including a rise in commercial queries. AI Mode, designed for complex questions, allows users to dive deeper through follow-up queries and links to relevant websites. It has, however, come with a considerable amount of concern from businesses on Google, as new reports have shown a click drop of approximately 34.5% due to AI Overviews taking clicks away from those who are supplying the data which Google provides.
As users increasingly turn to conversational AI tools for faster, more intuitive answers, Google faces competition from platforms like OpenAI, Perplexity AI, and others. These rivals are experimenting with their own monetisation models, with Perplexity AI, for instance, establishing direct advertiser relationships and sponsoring follow-up queries. To stay ahead, Google is leveraging its advertising expertise to integrate ads seamlessly into these new AI-driven interfaces.
Changes to AI Mode & AI Overviews: What it Means
Google has confirmed that advertisements will now appear in AI Mode and AI Overviews, with Search and Shopping ads being tested in the United States on both desktop and mobile platforms. Ads in AI Mode may be integrated directly into, or provided below, AI-generated responses, tailored to the context of the user’s query.
Advertisers using Google’s Performance Max, Shopping, and Search campaigns with broad match settings are automatically eligible to have their ads displayed in these AI-driven features. From Google’s perspective, they intend for these ads to be useful quick resources, connecting users with relevant businesses, products, or services at critical moments in their decision-making process. The company has also released Google AI Essentials, a guide to help advertisers optimise their campaigns for these new formats.
Looking Ahead
With advertising generating $66.89 billion in revenue for Google in the first quarter of 2025 alone, as reported by Yahoo Finance, comprising nearly 60% of Alphabet’s total sales—the stakes are high. As AI continues to transform how users search for information, Google’s integration of ads into AI Mode and AI Overviews demonstrates its commitment to maintaining its advertising dominance. By embedding relevant, context-driven ads into these experiences, Google aims to enhance user engagement while creating new opportunities for advertisers.
As the digital advertising landscape evolves, Google’s ability to balance innovation, user satisfaction, and advertiser needs will determine its success in this new era of AI-powered search. For now, the company is continuing to lay foundations to ensure that advertising remains a profitable cornerstone of an AI-developed future.
