By Hyunsoo Rim
The tech giant’s tight grip on the search-ad market is slipping as competitors like Amazon and AI tools lure users and advertisers away.
While Google’s latest woes seem to centre on the DOJ’s antitrust efforts, the search-engine giant may soon face another — perhaps even greater — threat to its moat: losing its dominance in search ads.
In 2023, GoogleGOOGL $197.46 (0.30%) earned over $175 billion (or 57% of Alphabet’s total sales) solely from search advertising, where revenues are generated by people clicking on the sponsored ads displayed alongside search results. However, Google is gradually losing ground in the $300 billion-strong global market for search ads, as both users and advertisers shift to competitors like Amazon and AI tools, The Wall Street Journal reports.
According to data from eMarketer, Google’s share of the search-advertising market is forecast to drop below 50% next year for the first time since tracking began in 2008, with revenue growing at a modest 7.6% year over year. Meanwhile, Amazon’s search-ad revenue surged by 17.6% over the same period.
Indeed, users are increasingly turning to platforms like AmazonAMZN $222.71 (-2.15%) or TikTok for their shopping searches and general queries, according to WSJ. The seemingly inevitable rise of AI is also playing a role: a survey from New Street Research found that nearly 60% of US consumers used a chatbot to help them decide on a purchase in the past 30 days.
This shift means fewer users are clicking on Google’s ads, driving precious ad dollars away from the tech giant and toward its rivals. Advertisers’ spending on search engines like Google grew a modest 3% year over year in Q3… while spending on retail media like Amazon was up 28%, and social-media platforms like MetaMETA $610.88 (-3.07%) were up 5%, per marketing agency Skai’s latest report.
