One question that looms over Google’s AI embrace is how it impacts the way ads are served. Many have rightly speculated that AI’s user experience – usually involving one answer rather than 10 links – means that the SERP model will phase out. And Google’s sponsored results are chained to that model.
The decibel level around this particular question was amplified last week when Google’s AI mode had its Oprah moment with a widescale U.S. rollout. AI Mode, for those unfamiliar, replaces the traditional search model with a conversational dialogue that can handle natural language and follow-up questions.
Our high-level take is that the above chain of events could cause SERP-driven ad quantity to diminish. But does AI Mode offer an opportunity to offset those declines with ads and offers of a higher quality? For example, AI-Mode’s follow-up questions noted above mean greater engagement and intent signals.
Or as we wrote last week:
Though there might be less ad inventory – one result versus several – it could be an opportunity for sponsored results that carry much higher premiums than a typical cost per click. AI-driven dialogues with a user can infer deeper levels of intent and thus higher-value leads for businesses.
Those leads – when delivered RTB-style – can carry higher premiums to the point where the value offsets the erosion of the current SERP model. This is aligned conceptually with the “cost-per-qualified lead” model that was recently theorized in our discussion with SearchMAS co-founder Juan Pablo Nieto.
Tactical Query
Google has already started to answer some of these questions. And though it’s vague – to be expected from a tech giant like Google – it’s conceptually relevant and aligned with our theories above. This includes things it has written in the past week on the Google blog, and a podcast with Digiday.
Taking those one at a time, Google wrote in its blog post that it’s already testing ads in AI mode. Though this will evolve as its tests bear fruit, its thinking so far is that AI-mode dialogues will be peppered with opportunities to suggest related products and services. This includes things like how-to queries.
In fact, these types of tactical queries account for a large share of AI interactions. The topical applicability is broad, but Google offers the example of a user query in AI Mode about the steps required to launch a website. It asserts that this is a prime opportunity to serve promotions for a website builder.
“In some cases, a website builder might be a good next step [in an AI Mode query], so we may show a helpful ad that can help [users] get started,” Google stated in its blog post. “From there, [the user] can ask questions to explore possible business ideas, what type of content they should develop, and even learn about their target audience.”
Cost Per Acquisition
On to the other piece of evidence in Google’s ads strategy in the AI era, it revealed a certain amount in a Digiday Podcast episode, as noted. Here, the gist is similar to what was explored above, where Google sees an opportunity to lean into AI-mode’s deeper intent signaling to serve higher-performing ads.
“Being able to have an ongoing conversation and understand the context of the queries that came before it will be part of the user experience and thus can also inform the advertising experience that comes with it,” Google VP of Global Ads, Dan Taylor said on the Digiday Podcast (full episode embedded below).
Several questions and speculations flow from there, such as ad economics and our speculations about how “premium” AI-mode ads could be. Taylor addressed that to a certain degree, outlining a scenario that’s aligned with Nieto’s aforementioned vision for a “cost-per-qualified lead” model.
“They’re the same pricing models that we have historically had in Google Ads,” Taylor said. “There’s cost-per-click. We also offer the opportunity to buy on a cost-per-acquisition basis, focus on a target return on ad spend, and multiple other models.” (This is as much clarity as we’ll get at this stage.)
Again, this comes down to a quality versus quantity tradeoff. Google loses ad inventory as the traditional SERP is phased out. But can it offset or even exceed that lost value with ads that are more targeted and higher-performing? AI-mode’s conversational interface may have the elements needed to pull it off.
Header image credit BoliviaInteligente on Unsplash
