How paid placements will evolve alongside AI-powered search

Google’s ad business will celebrate its 23rd year this fall, but not before paid search undergoes massive changes. As traditional search evolves with the advent of AI-powered functionality, so will pay-per-click (PPC) advertising.

It’s unlikely Google will sit idly by and take massive revenue hits as paid placements decline. We don’t yet know what they will roll out to capitalize on AI-powered search – or when exactly users will see ads in this AI-powered experience.

We do know there will be fewer advertising opportunities, increased competition and higher costs. But AI will also help advertisers better target consumers – and it could help them optimize campaigns, too.

Here’s a closer look at how paid search will remain relevant, but advertisers must adjust their strategies to reach their targets in this new era.

The new search

AI assistants like Google Bard will help search evolve from transactional to conversational, according to Aaron Levy, vice president of paid search at performance marketing firm Tinuiti.

“Historically, each query would yield a series of answers and that’d be the end of the relationship,” he said. 

“ChatGPT/Bard is asking that we shift from repeating and tweaking searches toward refining with a human-esque conversation. It’s the same task, but a different way of getting there.”

In other words, there’s a new UI on the horizon for search.

“The usual list of links you get will be replaced by a chat box where you can converse with an AI bot and get direct responses to your queries,” said Trifon Tsvetkov, head of growth at online code interview tool CodeInterview. 

“To an extent, this will be similar to the featured snippet functionality we can see now, but with a lot more detail.”

To what extent this experience will overtake traditional search remains to be seen.

Nevertheless, Tsvetkov noted that some portion of traditional search will decline, so businesses should expect their paid search acquisition channels to be negatively impacted in at least some capacity.

That means brands that rely on paid search should also be prepared to evolve.

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The new paid search

This could theoretically be troublesome for search giant Google, which Jon Clark, managing partner of digital agency Moving Traffic Media, noted has built its entire model around paid search.

“But I can’t imagine Google’s just going to blow up their ad model tomorrow,” he added.

Indeed, Tsvetkov noted the odds are good Google will instead create new offering(s) to capitalize on AI-powered search functionality. 

“Fundamentally, these will still be driven by the user’s input and online behavior, just like it is now,” he added. “One example is referring products and services related to your AI-powered search, such as attraction tickets when asking the AI bot to create a travel itinerary.”

Levy, however, questioned at what point a query will be refined enough to deliver a relevant ad experience.

“Are platforms going to deliver an ad on the first question, embed it in the conversation … or as part of a conclusion?” he asked.

“My expectations are they’ll be interspersed but closer toward the ‘conclusion’ of the chat experience.”

That means ChatGPT/Bard will spend time understanding a consumer’s preferences and budget before presenting sponsored ads.

“This, to me, feels natural and won’t be too ‘in your face,'” Levy added.

In a similar vein, Eduard Dziak, CMO of B2B marketing site B2BDigitalMarketers, pointed to potential in “a more sophisticated version of pay-per-click (PPC) advertising” that is more natural and interactive and presents “a list of organizations that have paid to be featured, along with relevant information such as reviews, testimonials and experience.”

With more graphics and information, he said, “I believe it will provide an even better return on investment (ROI) than the current version of paid search ads, which can only provide information formatted in a limited way.”

He also envisions search engines incorporating display ads into search results to compensate for the loss of revenue from decreased web traffic.

“These display ads can be seamlessly integrated with chatbots, using images, animations and even pre-selected frequently asked questions by advertisers,” Dziak said. 

“This will make the search experience more interactive and natural for less technical users, such as my grandma, who can simply talk to chatbots about PPC or display ads.”

The new paid ads

That said, fewer links mean fewer ads.

“Companies need to recognize that if AI is driving more efficient search results that deliver more accurate results to consumers, fewer searches will be necessary, leading to less overall ad exposure,” said Rob Silver, executive vice president and head of media at interactive agency Razorfish. 

“This could lead to higher ad costs for sponsored listings and more competition for fewer placements.”

Hamza Hanif, SEO executive at web design agency Objects, agreed costs might increase as competition for top results intensifies.

“Advertisers may need to pay more to achieve the same level of visibility on search engine results pages, especially if AI-powered algorithms favor organic search results over paid ads,” he added. 

“This is because AI algorithms may be better at matching user intent with organic search results, making it more difficult for paid search ads to compete for visibility.”

Zaira Céspedes, junior SEO executive at digital marketing firm GA Agency, agreed.

“Due to the improvement in the accuracy and relevance of organic search results that appear for users, it will become more challenging for paid search ads to stand out,” she said. “This can lead to higher costs for PPC campaigns.”

Iu Ayala, founder of AI consulting company Gradient Insight, pointed out the potential for greater competition from larger companies with more resources and “an advantage in developing and implementing AI-powered strategies.”

At the same time, Silver noted this evolution makes SEO even more important since AI chatbot results increase the prominence of organic search results.

As consumers interact with fewer links, Casey Jones, head of marketing at digital marketing company CJ&CO, expects to see an increased focus on upper-funnel ads in particular.

When planning a trip, for example, AI-powered search will eliminate many necessary queries from traditional search.

“This means businesses will need to invest heavily in building brand awareness so that when AI serves options, people will choose what they’re already familiar with,” Jones added. 

“When people know what your products and services are about, they’ll be able to distinguish and make an informed choice while buying.”

Silver agreed.

“Companies need to prioritize brand awareness through elevated content that showcases the benefits and differentiation of their offerings,” he said. 

“When one of their ads does appear, it will be that much more important for it to resonate and have an impact with the consumer who sees it.”

Meanwhile, because AI-powered search better understands user intent, it will prioritize ads that are even more relevant to a given query. It may even become more selective about which ads to display.

“This means that advertisers will need to create more targeted ads tailored to specific user needs and interests,” said Syed Sameem Rizvi, a data scientist at IT company Code Avenue. 

“[And] advertisers may need to create a variety of ad formats in order to optimize their visibility on SERPs.”

The new targeting

On the plus side, AI-powered search should yield better targeting.

“AI can analyze large sets of data more efficiently than humans can, without compromising accuracy or relevance,” said Oskar Nowik, head of SEO at point of sale software company Epos Now. 

“With this capability, search marketers are able to more accurately predict what their consumers want when they make their queries – resulting in more targeted ads that generate higher engagement rates and improved conversions.”

In addition, AI-powered search can yield more accurate insights into search behavior, which will also help target consumers, personalize content and increase efficiency/ROI from paid search campaigns, said Søren Lassen Jensen, a junior digital marketer at cybersecurity firm CyberPilot.

The new optimization

In addition, Hanif expects AI-powered algorithms will help advertisers better optimize their paid placements. 

“By analyzing user behavior and search patterns, AI algorithms can identify which ads are most likely to resonate with users and which ones are not,” Hanif said. 

“Advertisers can then use this data to tweak their ad copy, keywords and targeting parameters, improving their ad performance over time.”

Ayala agreed.

“One of the main advantages of using AI in paid search is its ability to identify the most effective keywords, ad placements and targeting strategies,” he said.

“By analyzing consumer behavior and historical data, AI-powered tools can provide recommendations on how to optimize campaigns and improve conversion rates.”

In addition, Nowik noted that AI-powered algorithms could quickly determine the best possible ad placements and the optimal time for consumers to view ads to maximize conversions and minimize cost.

Céspedes said some AI-powered search tools might not provide full transparency into how results are generated, which could be an optimization challenge. 

Meanwhile, Jensen warned algorithms and AI-powered search might not be able to capture all of the nuances within a query, which could lead to inaccurate results or costly mistakes if not monitored closely.

He expects results will be difficult to replicate and monitor due to the complexity of the AI algorithms. 

“This can also lead to skewed data insights, which can then lead to inappropriate decision-making,” Jensen added. 

“Also, how will it be facilitated? We already know that the AI bots learn from the previous chats that you have with them.”

Levy, however, noted tracking is already “very broken” and he expects it will only get muddier as cookies finally pass and Google rolls out its version of Safari’s Intelligent Tracking Prevention (ITP).

“Things will get more complicated and, if anything, rely more on AI modeling to present the most correct view of performance,” he added. 

The new keywords/bidding

Finally, expect changes in the backbone of PPC campaigns: keywords.

Nowik believes AI-powered algorithms will help automate the bidding process by detecting which keywords are most relevant so marketers don’t have to test combinations themselves manually.

“This helps save time and money since prices for each keyword need not be adjusted based on trial-and-error tests,” he said.

In the meantime, Jones expects broad match – which helps advertisers reach wider audiences without extensive keyword lists – will be more relevant than ever. 

This, he said, is good news for Bing because it uses Microsoft’s AI model, which prioritizes relevancy and will enhance the performance of broad match in paid search. 

“In the present scenario, Microsoft’s language model is better equipped to make Bing’s broad match more effective and improve paid search traffic to advertisers,” he said.

“This means Bing will have a larger paid search budget compared to Google, which will be a big positive for advertisers.”

Levy questioned whether AI-powered search will change auction dynamics from a bidding model to a commission-based/affiliate model, like Microsoft’s Hotel Price Ads and Google’s Local Services Ads.

“I envision more payment options for advertisers, which could throw things for a loop,” he added.

But, Kacper Rafalski, demand generation team leader at software development company Netguru, said it could also lead to increased reliance on automated systems and decreased control over ad targeting and bidding. 

For his part, John McGhee, owner of digital agency Webconsuls, believes keywords will become obsolete in their current form as Google Ads and Microsoft Ads migrate to a conversion-based system.

“Currently, adjusting keyword match types, keyword bids and adding negative keywords are still the primary way to improve relevancy and get your ads in front of the right users,” he said.

“In the future, those tasks will move over to adjusting various conversion actions and their values.”

That means PPC will use ROI-based bid strategies – and instead of raising a keyword bid, advertisers will adjust the value of a conversion action. 

“With AI expanding touch points massively, signals will replace search queries as the primary method of gauging user intent,” he added.