Google, the long-time leader in search advertising, is facing new competition as artificial intelligence (AI) reshapes the market. For the first time in over a decade, Google's U.S. search ad market share may drop below 50%, according to eMarketer.


Google Faces New AI Competition in Advertising

AI Search Engines on the Rise

AI-powered tools like Perplexity AI and OpenAI’s ChatGPT are gaining popularity. These platforms use large language models to deliver answers in a conversational style. ChatGPT, launched in late 2022, became the fastest-growing consumer app, showing a shift in how people search. 

Perplexity AI also saw strong growth, processing 340 million queries in September and attracting top-tier advertisers.


Google’s Market Share Decline

Projections suggest Google’s U.S. search ad market share could fall below 50% next year. Younger generations, such as Gen Z and Gen Alpha, are moving away from using "Google" as a verb, instead opting for newer AI platforms. 

Analyst Mark Shmulik from Bernstein Research noted this trend, signaling a change in consumer behavior.


Google’s Response to AI Challenges

Google is adapting by enhancing its own AI tools. In March 2023, it launched Gemini, a large language model that provides search results in natural language. Google is also using AI to improve ad placement, showcasing products like Tide in response to specific search queries.

Brendon Kraham, a Google executive, expressed confidence in Google's ability to navigate these changes, pointing out that the company has adapted to major shifts before.


Related: Google Launches AI-Powered Shopping Experience

Perplexity AI’s Growth Strategy

Perplexity AI is gaining momentum with major investors like Jeff Bezos and Nvidia. The platform plans to monetize follow-up questions that engage users in a conversation. Advertisers will have control over how their brands are portrayed in these interactions, offering new opportunities for engagement.

However, Perplexity has faced criticism for not properly sourcing copyrighted content. Despite this, the platform continues to attract advertisers and build a strong user base.


The Future of Search Advertising

As AI search engines grow, the advertising market is evolving. Google remains the leader but faces increasing competition from AI-driven platforms. The future will depend on how well Google adapts and how much ground AI competitors like Perplexity and ChatGPT can gain. The battle for dominance in search advertising is heating up.

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