Google confirmed on its earnings call that it is working on different ad formats for its generative AI-powered search experience — Google shared some ideas earlier this year and the mention in the earnings call could indicate that a rollout could happen sooner rather than later. This project is particularly important for the company as the majority of Google’s revenue still comes from ads despite several attempts to diversify its revenue sources through Google Cloud, services, and other bets including hardware.
In its earnings call for the third quarter of 2023, Alphabet and Google CEO Sundar Pichai said that the company plans to experiment with a native ad format suitable for its Search Generative Experience (SGE) that is “customized to every step of the search journey.”
While it’s early days for its generative AI-based search experience, Pichai also said that he feels confident about the shift from traditional search to a new one.
“We’ve always worked through these transitions, be it from desktop to mobile, or from now mobile to an AI-enhanced experience. And so it’s nothing new, and I feel very comfortable that as we go through it, the strength of our teams — both on the organic side as well as on the ad side — to drive the right experience for users, including ads, will pay dividends,” he said on the earnings call.
Google introduced its AI-powered search experience during Google I/O, the company’s developer conference that took place in May. The feature was first made available to users in the U.S. and later expanded to users in Japan and India in August.
The company already shows ads above (on desktop) and below (on mobile) the SGE results box. But it has also shown examples of customized ads within the SGE and how they might look like at a marketing event in May. For example, if you are searching for a surfing experience in Maio, it might show a customized ad for a travel experience within SGE with a “sponsored” tag.
Alternatively, Google could show you sponsored results when you are searching for an item to shop for.
The company didn’t elaborate on formats during its latest earnings call. But its Chief Business Officer Philipp Schindler said that “advertisers still have the opportunity to reach potential customers along their Search journeys.”
The company registered a revenue of $76.69 billion for Q3 2023, which represents 11% growth year-over-year. The advertising business accounted for $59.65 billion of revenue and Cloud brought in $8.41 billion — a figure below analysts’ expectation of $8.64 billion.
Google said people are watching over 70 billion Shorts every day — up from 50 billion daily views announced earlier in February. During Q2 2023 earnings, the company mentioned over 2 billion monthly logged-in people watch shorts. That figure was unchanged in the latest earnings. Schindler said that the company is making its video reach campaigns to distribute ads across formats, including Shorts, generally available in November.