Jun 21, 2023

The Future of Paid Search Is Generative AI (Here’s What Advertisers Need To Know)

Authored by:

Yosi Botzer

CTO at Perion Network

Generative AI is already having a revolutionary impact on search advertising, but keeping up with developments is quickly becoming a challenge.

ChatGPT reached 1 million users in 5 days (it took Instagram 2.5 months), there are new tools being released every day and seemingly thousands of Linkedin posts talking about how it will change the AdTech industry. The truth is no-one knows exactly what the future will look like, but one thing is certain, change is on the horizon and in many industries AI leaders are already starting to pull ahead.

In this post, we’ll explore the implications, opportunities and questions yet to be answered so you can start adapting your search strategy for an AI driven future.

Let’s get started.

What is generative AI?

Generative AI is an advanced technology that allows users to quickly generate new content by using various inputs such as text, images, sounds and other data types.

The most prominent examples of generative AI in the search space are ChatGPT and Bard (created by OpenAI and Google respectively). Both are chatbots that excel at tackling natural language processing challenges, such as providing answers to queries.

With the ability to aggregate and present instant results, both individuals and advertisers alike are now questioning the future of information retrieval and how it may reshape search in the years to come.

What are the potential implications for paid search?

The use of AI in search is nothing new, for years it has been used for bidding and optimization purposes, but the introduction of generative AI has opened the door to new opportunities and behaviors. Advertisers need to be mindful of the following:

Search will become more conversational: when users search for content online today they write in a way that gives the algorithm the best chance of returning the right results. The inputs are keyword based and investigative in style. Given generative AI has the potential to generate human-like responses and understand contextual cues, it’s likely that user interactions will more closely mimic natural conversations.

Complexity of outputs: AI chatbots have the ability to handle complex queries and provide advanced responses. They can generate code, replicate text, and even create business plans (given the appropriate instructions). These capabilities go well beyond what search engines currently offer. Considering the impressive creativity shown by users since the launch of ChatGPT, it is clear that search habits will undergo a significant transformation beyond our current understanding.

The SERP (search engine results page) will evolve: the integration of chatbots into search engines will likely change the SERP as we know it. On the one hand, users will have a more complete and detailed experience, but on the other it may add complexity and divert focus from organic and paid listings. It’s likely that search engines will continue to utilize the SERP, but this may result in users staying within it instead of having to leave to publisher websites that contain the answers.

Business models: If users are spending more time talking to chatbots and less time visiting ad-supported websites then current monetization models may need to be redesigned.

Five ways generative AI can improve search advertising:

  1. Improved accuracy and relevance – the shift to conversational search may make search engines more intuitive and user-friendly, enabling users to ask questions in a conversational manner instead of using keywords. This will enable search engines to better understand the intent behind a user’s query, allowing for more targeted and relevant ad messaging.
  2. Performance Prediction – through the analysis of historical data, AI can discover patterns of effective ads and leverage this knowledge to predict the success of upcoming ad campaigns.
  3. CPM opportunities – as users potentially spend more time on the SERP, this could lead to an expansion of display formats and a transition towards CPM bidding in search.
  4. Ad production – with tools like ChatGPT, tasks like keyword research, ad copy research and optimization become easier and more efficient. This may be especially helpful as searches move towards longer, more detailed questions, making long-tail keywords even more important in the future.
  5. Improved competition – Bing’s revival has reinvigorated competition within the search advertising industry. This heightened competition will likely bring forth lower costs and superior products, delivering benefits to both users and advertisers.

The limitations of generative AI

Whilst generative AI has many advantages, there are still limitations to its applicability. Although capable of providing detailed answers, it has been known to produce inaccurate and sometimes biased responses. Without proper sourcing tools, there’s a risk that it becomes a hub for misinformation. It also doesn’t (yet) offer specific products, services or local results like a search engine, so does not currently fulfill all of a user’s needs.

Experts also highlight computing challenges, estimating that it would require ‘four or five times more computing per query’ to integrate generative AI into search engines. This increased energy demand may make it difficult to sustain the current ad-based funding model used by companies like Microsoft and Google for their search services.

So, how can advertisers start preparing?

Given the pace of innovation, it’s important that advertisers stay up to date with developments in the AI space. Here are three things they should do to remain competitive:

  1. Utilize broad match keywords: thanks to tools like ChatGPT, consumers can now search in a more conversational way. As search queries evolve, broad match keywords will play a vital role in capturing lengthy searches that could be easily missed.
  2. Reconsider Bing: the incorporation of ChatGPT has the potential to attract numerous new users to the search engine. Advertisers can take advantage of this shift by reassessing budget splits and ensuring they are also advertising on Bing.
  3. Use the tools: we are still in the very early stages of the technology. Advertisers should have an experimentation mindset and continue to test how tools like ChatGPT and Bard can be used to improve both the efficiency and effectiveness of their search campaigns.

Be on the right side of innovation.

Generative AI represents a significant leap forward in the world of paid search advertising, and its impact will likely continue to grow in the coming years. Yes, there are still questions and uncertainties that need to be addressed, but the pace of innovation and level of investment in this space means more and more advertisers will start to incorporate this technology into their paid search strategies.