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Is Google’s Advertising Dying, due to AI? Geeklab blog google vs ai Is Google’s Advertising Dying, due to AI? Geeklab blog google vs ai
ByJared - Designer & Developer
March 2, 2025

Is Google’s Advertising Dying, due to AI?

Google’s core business – online search, advertising, and cloud services – remains dominant but is facing new pressures from artificial intelligence. Alphabet (Google’s parent) is still financially robust, with Google holding an around 90% share of global search engine usage​ and generating enormous advertising revenues (about $237.8 billion in 2023, roughly 80% of Alphabet’s total revenue)​

Google’s advertising division continues to be the “cash cow,” even as growth has slowed to single digits in recent years​. Meanwhile, Google Cloud is a distant third in the cloud market (≈10% share vs. Amazon’s ~33% and Azure’s ~20%​, but it’s growing fast. Overall, Alphabet’s recent financials show resilience – for example, Q4 2024 revenue hit $96.5 billion (up 12% YoY) with $26.5 billion in net income​ – underscoring that Google remains highly profitable even as AI disruptions emerge.

Is Google’s Advertising Dying, due to AI? Geeklab google search

Search Dominance vs. AI-Powered Alternatives

Google Search has long been the undisputed gateway to the web, but the rise of generative AI models like OpenAI’s ChatGPT is starting to challenge that primacy. Unlike a traditional Google query that returns pages of links (with ads), ChatGPT delivers a single, conversational answer​. This new experience has attracted hundreds of millions of users, prompting speculation that AI chatbots could “replace traditional search engines.” Google entered 2023 with ~84% of the search market​, so any erosion of this share is significant for its business. Surveys now indicate small but notable shifts: by late 2024, about 5% of users surveyed said ChatGPT is their “top search provider”, up from just 1% in mid-2024, while Google’s share as the first choice slipped from 80% to 78% in the same period​

In absolute terms, Google still dominates – StatCounter data shows roughly 90–91% global search market share (only a slight dip from ~93% a year prior)​

Microsoft’s Bing, even after integrating OpenAI’s GPT-4 into its search, remains below 4–5% share globally​.

Still, these early cracks signal that Google’s status as the internet’s default search engine is no longer unquestioned. Generative AI is “changing how millions of people access digital information,” raising debate about the sustainability of Google’s search dominance​.

Importantly, AI-driven search threatens not just user habits but also Google’s economics. Serving a lengthy AI-generated answer is far more computationally intensive than serving ten blue links. Estimates suggest an LLM-based response can cost on the order of 4 cents per query, roughly 10× the cost of a standard web search (and potentially up to 50× more if multiple AI calls are needed)​

This means if Google simply replaced traditional search with ChatGPT-style answers at scale, its operating costs could skyrocket, squeezing margins. In short, generative AI represents a new kind of competition: one that could chip away at usage and force Google to rethink the cost structure of search.

So far, the impact on actual search traffic and revenue appears limited – daily Google search volumes and ad revenues have remained stable despite ChatGPT’s viral growth​

Early 2023 analysis by BofA Global Research found “no slowing in Google search revenues that could be attributed to [ChatGPT’s launch]”​

However, the threat is more about the long-term: if users begin bypassing Google for AI assistants, even a few percentage points of shift could undermine the foundations of Google’s empire. For example, Evercore ISI analysts noted even a 1% loss of search market share could equate to roughly $2 billion in annual revenue – assuming a rival can monetize as well as Google (a big “if”)​

In summary, Google Search remains the default for the vast majority of users, but generative AI has introduced the first credible challenge to that dominance in decades. Google can no longer take its search monopoly for granted.

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Advertising Revenue and Generative AI

Because search ads are Google’s profit engine, AI’s biggest threat to Google is arguably advertising. Google earned nearly $238 billion from ads in 2023​, dwarfing any competitor, but this revenue is tied to the current search model. Generative AI upends that model by delivering a single answer or chat conversation, which is “far less conducive to digital ads” than a page of search results​

Traditional Google search results often include multiple sponsored links at the top and throughout the page. By contrast, a ChatGPT query returns one answer with no obvious place for ad impressions (at least in its current form). In other words, if users shift from googling to chatting with AI, Google faces a double hit: fewer queries to show ads on, and each AI answer providing fewer advertising slots. As one analysis put it, “the greatest threat ChatGPT poses to Google is ad revenue,” since about 80% of Alphabet’s revenue comes from ads​

Thus far, Google’s ad business continues to hum along – in fact, search advertising revenue grew 13% year-on-year in Q4 2024 to about $54 billion for that quarter​

This surge, which beat expectations, was partly credited to AI-driven features boosting user engagement in search​

However, overall ad growth for 2023 was modest (just +5.9%, one of Google’s slowest years)​, reflecting both a maturing market and rising competition on the margins. Big advertisers are diversifying budgets to other platforms like Amazon and TikTok, and if AI-based search alternatives gain traction, marketing dollars could follow. Industry watchers note that if ChatGPT or similar AI bots “begin carrying adverts, it could cut into Google’s leading position” in search advertising​. Microsoft has already started inserting ads into its Bing AI chat results, testing whether an AI chat can be monetized without driving users away.

Google is keenly aware of this risk and is proactively adapting its ad strategy for the AI era. The company has stated that even as it rolls out new generative AI search experiences, “Search ads will continue to appear in dedicated ad slots throughout the page.”​

In Google’s experimental Search Generative Experience (SGE), for example, the AI-generated answer is accompanied by clearly labeled sponsored links, much like a traditional results page. Google has emphasized that ads will remain a “critical role” in helping users find information in an AI-powered search context​.

In addition, Google is leveraging AI to help advertisers create and target ads more effectively – from automatically generating ad copy and imagery, to using machine learning to optimize campaign performance. These measures aim to ensure that Google’s ad ecosystem stays robust even if the search interface changes.

It’s worth noting that Google’s core strength in advertising is not just its user base but its decades of data and targeting capability. So far, no AI-centric challenger has built a comparable ads business. ChatGPT itself is currently unmonetized via ads, and while OpenAI has launched a paid subscription, it lacks an advertising platform or network. This gives Google some breathing room. As of now, Google’s grip on “commercial queries” – searches by users looking to buy products or services – remains as strong as ever​, which means the high-value ad revenue attached to those queries is “probably safe for now.”​

In short, generative AI presents a conceptual threat to Google’s ad monopoly, but has not yet materially undermined Google’s advertising dominance. The real test will come if and when users begin favoring AI answers at scale – and if rivals manage to effectively monetize those AI interactions. Google’s strategy is to blend AI into search in a way that preserves the lucrative ad ecosystem, rather than cannibalizing it.

Is Google’s Advertising Dying, due to AI? Geeklab google and ai for ads

Google’s AI Integration in Search and Ads

Far from standing still, Google has responded to the AI wave by deeply integrating AI into its own products. In early 2023, the company rolled out Bard, its conversational AI chatbot, as a direct answer to ChatGPT. Bard’s debut was rocky – a factual error in a demo video wiped $100 billion off Alphabet’s market value amid worries Google was “losing ground” to Microsoft​

This stumble underscored the pressure Google felt to “catch up” in deploying AI to consumers​. Since then, Google has rapidly iterated on its AI models (launching the advanced PaLM 2 model and later Gemini in 2023) and baked these into search. The company introduced AI-generated summaries at the top of search results – known as “AI overviews” in Search Labs – which synthesize information from multiple sources. By late 2024, these generative search features were rolled out to over 100 countries, reaching over a billion users.​

The early feedback on Google’s AI-enhanced search is encouraging. In one survey, 71% of Google users reported that the new AI tools (like Gemini-powered overviews) made search more effective than the traditional experience​.

Rather than driving people away, the integration of generative AI has actually increased engagement: users in the survey said the AI summaries helped them explore topics in more depth, and 53% of those using tools like ChatGPT or Google’s AI assistance indicated they are searching more than before​. Google’s CEO Sundar Pichai affirmed this trend, noting that in countries where AI overviews launched, overall search activity rose as people asked more complex questions and discovered more content​. In essence, Google is aiming to use AI offensively – to make its search product richer and stickier – rather than allowing AI rivals to poach its users.

Crucially, Google is tackling the cost and scalability challenges of AI. Pichai revealed that through custom hardware (TPUs) and model optimizations, Google slashed the cost of generating AI search responses by over 90% in 18 months​.

Google achieves this by “matching the right model size to query complexity” so simple searches use lighter models while complex ones invoke powerful models​.

These efficiency gains are vital if Google is to roll out AI across billions of searches without ballooning expenses. Internally, Google has also reorganized to double-down on AI: in 2023 it merged the Google Brain research team with DeepMind (its UK-based AI lab) into a unified division called Google DeepMind.​

This consolidation aims to accelerate AI breakthroughs and streamline the path from research to product. Google is effectively marshaling its vast resources – from cutting-edge research talent to data center infrastructure – to ensure it leads in AI, not lags. As CEO Pichai put it, Google sees AI as a profound “platform shift” and is moving aggressively to “build for our AI future” across all its products.

Is Google’s Advertising Dying, due to AI? Geeklabs ai cloud services

AI in Google Cloud Services

Artificial intelligence is also reshaping Google’s cloud computing business. Here, AI is more of an opportunity than a threat, as cloud clients worldwide race to adopt AI capabilities. Google Cloud has positioned itself as a provider of AI infrastructure and services, competing with Amazon AWS and Microsoft Azure to host the next generation of AI applications. Recent results show Google Cloud benefiting from the AI boom: in Q4 2024, Google Cloud revenue jumped 30% year-over-year to $12 billion, growth “fuelled by demand for its artificial intelligence (AI) infrastructure and generative AI propositions,” according to Alphabet’s financial statements​.

Offerings like Google’s Tensor Processing Unit (TPU) hardware and its Vertex AI platform (which lets companies build and deploy ML models) have attracted businesses looking to leverage AI. Pichai noted that the “AI-powered Google Cloud portfolio” is seeing strong customer demand.​

Thanks in part to AI, Google Cloud and YouTube together reached a $110 billion annual revenue run rate by end of 2024, exceeding expectations​.

Despite this momentum, Google Cloud faces fierce competition in the AI era. Microsoft’s partnership with OpenAI has made Azure the home for many high-profile AI services (OpenAI’s models run on Azure, and Microsoft offers Azure OpenAI Services to enterprise clients).

Amazon, for its part, invested $4 billion in Anthropic (maker of the Claude chatbot) and offers a menu of AI models on AWS. Google has responded by forming its own alliances – it committed $2 billion to Anthropic and is reportedly investing another $1 billion​ – ensuring Anthropic’s AI models are available on Google Cloud as well.

This multi-front “AI arms race” means cloud providers are competing on who can offer the best and cheapest AI solutions. Google’s strategy is to leverage its in-house AI breakthroughs (like its Gemini foundation model and state-of-the-art image and language models) as a selling point for Google Cloud.

In 2023, Google Cloud even achieved a milestone of profitability, signaling improved efficiency as it scales. Still, it remains the #3 cloud provider (≈10% share) behind Amazon and Microsoft​, and its growth slightly decelerated to 30% in late 2024 from 35% the quarter prior​, partly due to capacity constraints. Google is massively increasing capital expenditures (plan of $75 billion in 2025 on data centers and servers) to keep up with AI demand​.

In summary, AI is a tailwind for Google Cloud – driving usage and giving Google a chance to close the gap with rivals – but it also raises the stakes in an already-competitive cloud market. Success will require Google to continue innovating and investing so that when businesses think “AI cloud,” Google is top of mind.

Is Google’s Advertising Dying, due to AI? Geeklab google stock value

Is Google Declining or Adapting in the AI Era?

The advent of generative AI has undoubtedly ended Google’s long era of uncontested dominance, but the evidence so far suggests Google is adapting – not declining. AI alternatives like ChatGPT and new AI-driven search engines have begun to nibble at Google’s edges (e.g. small drops in self-reported usage and slight dips in market share​.

However, these challengers have not dealt a significant blow to Google’s core business yet. Google’s search and ad revenues remain near record highs​, and importantly, the most lucrative parts of its business (commercial searches and the associated ad dollars) remain intact​.

In fact, generative AI has so far been a double-edged sword: while it introduces new competition, it also offers Google opportunities to enhance its own services. Google’s swift roll-out of AI features in search is blunting the threat by keeping users within the Google ecosystem (with many finding the new AI-powered search even more useful​.

At the same time, competitors face hurdles that Google does not – monetizing an AI chatbot like ChatGPT at Google’s scale is extremely challenging (even OpenAI acknowledges making money on AI queries is tough, and “monetize as well as Google” is “highly unlikely in the near term”.​

There are also distribution advantages Google enjoys: it remains the default search on billions of devices and browsers, whereas using an alternative like ChatGPT typically requires extra user effort (downloading an app or visiting a separate site)​.

All of this suggests that Google is not being “undermined” in any drastic sense at present – rather, it is responding and evolving. The company has poured resources into AI research and infrastructure to ensure it can compete head-to-head with AI-first upstarts. From merging internal AI teams to investing in startups and launching its own cutting-edge models, Google is leveraging its scale to stay ahead.

This proactive adaptation is paying off in continued user engagement and strong financial results. As of now, Google’s dominance in search and advertising is holding, with AI acting more as a catalyst for Google’s transformation than a harbinger of its decline. That said, Google’s future in the AI era will depend on execution.

The tech landscape is arguably more competitive now than it has been in decades – rivals like Microsoft (with OpenAI), and even newcomers, are determined to capture a piece of the search and AI market. Google will need to continuously innovate and not grow complacent.

The early signs, however, indicate that Google is meeting the AI challenge head-on. In summary, Google appears to be successfully adapting to the AI era: fortifying its core products with AI, maintaining its market leadership, and turning a potential threat into an opportunity to once again reinvent how we find information. So far, AI has spurred Google to evolve rather than causing an existential decline, but the race is ongoing – and Google’s ability to retain its crown will hinge on how skill-fully it navigates the next waves of AI-driven competition.

Sources:

ByJared - Designer & Developer
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