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AI’s threat to Google is more about advertising income than being the number one search engine

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By Andy Tattersall

Google’s ad revenue accounts for 80% of its income. Its biggest challenge yet might come from Microsoft’s Bing, currently the third biggest search engine behind Google and Baidu, and its new AI chatbot

Google’s dominance as the most visited website has been undisputed since it rose to prominence as the leading search engine in the early 2000s. However, that position could now be facing its biggest ever threat, with the arrival of new artificial intelligence (AI) chatbots such as ChatGPT, which can answer people’s questions online.

Google is countering by developing its own AI products. But its chatbot, Bard, didn’t have the most auspicious start. This month, a Google advert showed that Bard had provided an inaccurate answer to a question about the James Webb space telescope.

Plus, being the most popular website in the world comes with much more than prestige, namely incredible wealth from advertising revenue. But recent, sudden shifts in the technology landscape have created uncertainty for the likes of Google.

The advertising revenue stream that aided its success may no longer be a given. If AI chatbots such as ChatGPT begin carrying adverts, it could cut into Google’s leading position in the world of search engine advertising.

People’s reliance on Google has often been without question, so much so that people may not click beyond page one of a Google search results page. But the emergence of new AI platforms has shown that search as we know it does not have to end with a set of ordered links to websites. Instead, as the chatbots are showing, it can take the form of a conversation.

Such AI has not been without controversy. Concerns have been raised that it could lead to issues regarding plagiarism or even worse, the loss of jobs and income for a multitude of professions, from lawyers to journalists.

The chief executive of OpenAI, which developed ChatGPT, has said the company is developing tools to help detect text that has been generated by an AI. In a video interview, he added: “We hear from teachers who are understandably very nervous about the impact of this on homework. We also hear a lot from teachers who are like, ‘Wow, this is an unbelievable personal tutor for each kid’.”

Linguist and activist Noam Chomsky called the use of AI tools like ChatGPT “a way of avoiding learning”. Google meant we no longer needed to recall knowledge, we could just search for it. Now, with AI, the problem will be whether we can be bothered to question the answers we get back.

This paradigm shift in how we access and interact with knowledge goes much further than these concerns about how we search, and raises questions over Google’s revenue model, which has been instrumental in keeping it at the top of the technology pile.

Gateway to the web

Once-popular search engines such as Ask Jeeves, Lycos and Excite became the internet’s “also rans” as Google became synonymous with the word “search”. The agreement in 2000 between a then more popular Yahoo! website to host Google as the default search engine, ensured the search engine’s international status.

Being the gateway to the rest of the web came with one huge benefit through the capture of new internet-based advertising revenue. With every Google search result came the obligatory sponsored content which helped the company grow to where it is today.

Google’s annual revenue has continued to grow year-on-year because two decades ago it mastered search better than its aforementioned competitors. Its ability to combine this service so succinctly with income generation from advertisements is largely why it has been able to hold competitors like Microsoft’s Bing at bay.

If you want your company or product to appear as part of a web search, then Google is the place to be.

The company has invested that advertising income to build a massive infrastructure to handle billions of search queries in addition to hosting lots of popular cloud-based tools such as Google Mail, Drive and the acquisition of platforms such as YouTube. The video-sharing platform turned out to be a particularly fruitful investment in terms of generating advertising revenue.

Google’s sheer scale means its dominance will continue. But once advertising income starts to leech to new AI platforms that return results with sponsored content, it may find itself scaling back.

Masters of AI

A key to Google’s continued success will be mastering artificial intelligence and incorporating it into its services. But there are no guarantees for a company that has failed on at least five occasions to master the art of social media. For now, there is no doubt that Google can handle the traffic, it is really a question of whether it can deliver the goods.

Whether new contenders such as ChatGPT are anywhere close to handling the number of queries that Google does is open to debate. The evidence is that they are not, as ChatGPT had various issues earlier in the year when it was unable to accept new users or run queries due to excess demand.

ChatGPT is the platform that has gained most of the media attention of late. However, it might be established rivals like Bing that ultimately provide Google’s biggest headache. Bing is the third biggest search engine globally behind Google and Baidu.

That position could change with the launch of its own AI search, which will no doubt capture more income for an established company. Unlike Google, Microsoft does not have the same reliance on advertising revenue thanks to its business model, which is diversified across software, hardware and cloud computing.

According to the consumer and market data service Statista, Google’s income from advertising revenue has fallen in recent years, but it still accounts for 80% of the company’s income. Many might consider Google to be a search engine but it is largely an advertising company that was built on the back of search.

Without this advertising revenue, it could not have achieved many of its previous successes such as acquiring YouTube in 2006, or helping develop the Android mobile platform. Google’s failure to launch multiple social media platforms highlighted the company’s frailties and left the door open for the likes of Facebook and its parent company Meta to eat into that massive revenue pie.

Facebook too, will have concerns that Bing and new start-ups will lure marketers away to what is likely to be a slew of new AI knowledge tools. However, if Google fails to master AI search in the way Lycos and Excite failed to build upon their early success, we might find ourselves Googling a lot less and chatting much more. – Rappler.com

This article originally appeared in The Conversation.

By Andy Tattersall

Information Specialist, University of Sheffield

Sourced from Rappler

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BuzzFeed Ad Revenue Remains Flat as User Engagement Falls

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By J. Clara Chan

Total revenue reached $103.7 million for the quarter, representing a 15 percent year-over-year increase.

BuzzFeed Inc. saw user engagement drop by 32 percent during the third quarter as ad revenue remained flat compared to the previous year.

In total, users spent 151 million hours with BuzzFeed’s content across the company’s owned and operated sites, YouTube and Apple News. Total revenue for the quarter hit $103.7 million, representing a 15 percent year-over-year increase — beating company forecasts of a 4 to 8 percent yearly increase — but a slight quarterly decline.

Ad revenue, which has taken a hit across the digital advertising–reliant industry as marketers contend with smaller ad budgets, amounted to $50.4 million during Q3.

To close out the year, BuzzFeed has set Q4 revenue expectations between $129 to $134 million while  adjusted EBITDA is expected to land between $12.5 to $17.5 million.

“Looking ahead, we are on pace to deliver our strongest performance of the year in the fourth quarter. As we continue to navigate the dual dynamics of the rapid rise of short-form vertical video and an uncertain macroeconomic environment, we are focused on preserving cash and leveraging a deep understanding of our audience to direct resources toward the opportunities with the highest potential for monetization,” BuzzFeed CEO Jonah Peretti said in announcing the company’s Q3 earnings.

The media company last reported Q2 revenue at $106.8 million and noted that total time spent by users dropped by 19 percent, compared to the previous year, down to 154 million hours. BuzzFeed also said it had spent roughly $5.3 million in restructuring costs as of the end of June, in large part due to layoffs at HuffPost and voluntary buyouts and departures at BuzzFeed News.

BuzzFeed is set to host ComplexCon, a streetwear-focused festival and marketplace, in Long Beach this weekend.

Feature Image Credit: BuzzFeed CEO Jonah Peretti Spencer Platt/Getty Images

By J. Clara Chan

Sourced from The Hollywood Reporter

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This 1 Number Explains Why Amazon’s New Ad Business Is Going to Be Huge

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By James Brumley

Brands have only begun to explore the potential of this new feature for an old sales platform.

Investors keeping close tabs on e-commerce giant Amazon ( AMZN -2.11% ) will likely know it’s getting into the web advertising business. Indeed, it’s already deep in the market, driving $31.2 billion worth of ad revenue last year. For perspective, Alphabet‘s ( GOOGL -1.91% ) ( GOOG -1.80% ) Google brand — when including YouTube — collected $209.5 billion worth of advertising dollars in 2021. Alphabet’s been doing it a lot longer and had more time to tweak its offering than Amazon has, of course, but Amazon’s lesser tally is still an impressive figure.

Furthermore, Amazon has only scratched the surface of its opportunity in this segment of its business. Early users of Amazon’s promotional platform are finding a shockingly high return on their investment in the advertising program. Other companies that regularly run ads should achieve similarly strong results once they try it out.

Yes, Amazon is in the ad game

If you’re not familiar with Amazon’s newest project, it’s not complicated. Amazon.com is one of the world’s busiest websites (the 11th most-visited site, according to Alexa). The company is simply looking to monetize all that traffic by selling a bit of space on its web pages to advertisers looking to draw attention to their products.

It’s not exactly a new business; the company’s allowed advertisers to “sponsor” a particular product for some time now. Back in 2020 though, Amazon really started to turn the idea into a major profit center. Jungle Scout suggests the company did $21.5 billion in advertising business that year, up more than 40% from 2019’s tally, en route to 2021’s 45% growth. And the stage is set for more of the same.

In its recently published report “Brands, Amazon, and the Changing Landscape of E-Marketplaces,” e-commerce consulting outfit Feedvisor lays out some compelling information regarding Amazon’s advertising product. One of these data nuggets is the fact that, according to its findings, Amazon.com is the most commonly used sales venue for all brands surveyed, including e-commerce sites owned and operated by that brand itself.

All told, 45% of companies that sell physical goods count on Amazon’s reach. That’s near twice the 25% of brands that utilize Walmart‘s or Google’s online-selling tools.

And well they should. An incredible 64% of the consumer goods companies using Amazon.com to sell their products say they’ve seen increased sales because of it.

Perhaps the most impressive piece of information from Feedvisor’s study, however, is this: More than half the companies selling goods through Amazon.com that also advertise their goods at the site say the return on investment is seven times their cost, if not more. In other words, for every $1 spent on promoting their product on Amazon, that company gets at least $7 back in increased revenue.

That’s impressive. It puts Amazon right up there with the venerable Google when measuring their fiscal upsides to advertising. Indeed, the two companies are tied for top honors in terms of making the most of money spent on digital ads.

Room and reason to keep growing

Don’t look for this rate of return on advertising dollars deployed through Amazon.com to persist indefinitely. A little less than half of all the brands Feedvisor reviewed use any sort of digital marketplace to sell their goods right now.

More are sure to step into the fray, though. In fact, Feedvisor’s report indicates that 74% of the brands finding success with advertising at Amazon.com say growing competition for consumers’ attention at the e-commerce site — through ads — is their biggest concern going forward. It’s not an unmerited worry. That competition for Amazon’s ad inventory, however, is ultimately good news for Amazon itself.

All of a sudden, eMarketer’s expectation that Amazon’s advertising revenue could grow on the order of another 30% this year and 24% more next year doesn’t seem far-fetched at all. That’s especially true given eMarketer’s figures suggesting Amazon’s ad revenue growth so far has largely come at the expense of Google’s share without even requiring any actual net market growth. Google, meanwhile, has a lot more business it could end up giving up to Amazon.

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Feature Image Credit: Getty Images.

By James Brumley

Sourced from The Motley Fool

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PremiumMedia360 Aims To Help Sellers With Their Ad Revenue Leakage Woes

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The best-laid media plans of mice, men, buyers and sellers often go awry.

Advertising data automation company PremiumMedia360 launched a solution that reduces revenue leakage, payment issues and general reconciliation-related agita for broadcast advertising buyers and sellers.

Ad tech middlemen and agencies know the pain of slow payment. They place ads for their clients and get busy waiting, often as long as 120 days for advertisers to reconcile bids and, hopefully, pay up.

But that headache isn’t exclusively the buyer’s dilemma. TV and radio stations also feel the effect on their bottom line when errors and inconsistencies prevent buyers from paying on time.

“Before they issue an invoice, media companies make sure the ad inventory in the invoice actually ran. However, just because it ran doesn’t mean it followed the ad agency’s business rules,” said Joan FitzGerald, SVP of advanced TV global partnerships at PremiumMedia360. “That’s where reconciliation comes in: Ad agencies interrogate the invoice line by line to find ‘discrepancies’ – ads that they won’t pay for because of errors.”

PremiumMedia360 estimates that revenue leakage costs local broadcast TV companies between $600 million and $1.5 billion, and local radio between $300 million and $825 million.

“Broadcasters want to get paid for 100% of the invoice, [but] today they get paid for between 92-97%,” FitzGerald said. “Keep in mind, broadcast television is an $18 billion industry, and radio is a $16 billion industry, so 3-8% revenue leakage is a lot of revenue.”

Discrepancies are an even bigger problem for digital and over-the-top, FitzGerald said.

“Several ad agencies have reported to us that over 90% of digital invoices have discrepancies,” she said.

There are many opportunities for errors to creep in. The wrong ad might run in a time slot or two ads could run too closely together in succession. An ad may hit the air during the incorrect daypart.

In some cases, broadcasters might preempt a previously scheduled ad to run something for a higher-paying advertiser – a common and accepted business on the sell side, but a headache for buyers trying to ensure they get what they’re paying for.

“From a buyer perspective, we want to make sure that our advertisers’ slots run as originally scheduled, but if there is a preemption, that results in our client’s spot needing to get rescheduled in the form of a makegood,” said Kevin Gallagher, EVP of media and managing director at Spark Foundry, which is evaluating PremiumMedia360’s reconciliation solution.

“The best solution for us would be to change that business practice, but until we get there, we want to use automated processes to better manage this,” he said.

PremiumMedia360’s solution, dubbed CLIR, automatically ingests, combines and compares a seller’s transactional data with the data provided by the ad agency and runs interference between the two. CLIR automatically identifies any differences between the data sets.

Tracking this is usually a drawn-out, manual process with lots of back and forth.

The technology can also help broadcasters find and fix discrepancies before a campaign makes it onto the air and an invoice is even issued, which could remove the need to chase a makegood altogether. The broadcast is notified of any red flags through a dashboard and given potential solutions to fix the problems before they spiral. A buyer, for example, can be informed in advance that an ad will be preempted.

“The reconciliation process is time consuming on both sides of the desk,” Gallagher said. “Synching records electronically on the buy side and the sell side would really help eliminate some of that.”

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Sourced from ad exchanger

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