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By Jon Swartz

Google appears to be in a good position to compete for digital advertising against OpenAI

OpenAI’s ChatGPT loomed over Alphabet Inc.’s Google earlier this year, threatening the search giant’s core business of advertising.

But the menace, which seemed so dire in April, hasn’t materialized. Analysts increasingly believe Google GOOGL, +0.55% GOOG, +0.59% is well-positioned to compete for digital advertising against the initial outsize influence of startup OpenAI and its major investor, Microsoft Corp. MSFT, +0.18%, this year.

“As Google incorporates more [artificial-intelligence and machine-learning] tools … we have not seen any evidence of share shifts to [Microsoft’s] Bing, and in fact see ad budgets shifting back to [Google] Search as indications are that ad spend tailed off after the initial bump at Bing,” Deutsche Bank analyst Benjamin Black said in a note this month.

Black maintains a buy rating on Google shares, with a price target of $125.

Google’s brightened advertising outlook extends to rivals Meta Platforms Inc. META, -0.79%, Pinterest Inc. PINS, -2.00% and Yelp Inc. YELP, +3.02% as ad agencies loosen spending after a cautious start to 2023 because of economic uncertainties, Black said.

Analysts also anticipate Google search resilience despite the Bing threat, and they expect faster YouTube growth following several down quarters, with hopes high around the launch of NFL Sunday Ticket on YouTube TV this year.

Here’s what to expect when Alphabet’s numbers hit after Tuesday’s closing bell.

What to expect

Earnings: Analysts tracked by FactSet expect Alphabet to report $1.34 a share in earnings, up from $1.21 a year before. On Estimize, which crowdsources projections from hedge funds, academics and others, the average projection calls for $1.34 a share in earnings.

Revenue: The FactSet consensus calls for $72.8 billion in total revenue, up from $69.9 billion the previous year. Those contributing to Estimize expect $72.8 billion in revenue. Excluding traffic-acquisition costs, analysts from both FactSet and Estimize forecast $60.25 billion in revenue.

Stock movement: Alphabet shares have gained 36% so far this year. The broader S&P 500 SPX, -0.28% is up 18% in 2023.

Of the 50 analysts tracked by FactSet who cover Alphabet shares, 38 have buy ratings and four have hold ratings, with an average share-price target of $135.94.

What to watch for

Investors are keeping a close eye on Google Cloud, which accounts for a sliver of the company’s overall revenue.

Why? As most enterprises hash out their generative-AI strategies, it’s unclear how much benefit Google Cloud may reap in the second quarter and going forward. A second-half tailwind could offset ongoing cost-optimization headwinds, Jefferies analyst Brent Thill said in a note last week.

Goldman Sachs analyst Eric Sheridan maintained a buy rating on Alphabet shares with a price target of $140. “Broader industry conversations have continued to increase our conviction that [Alphabet] will be a long-term AI winner,” he said in a note last week.

“We think [Alphabet’s] potential for margin outperformance (especially into 2024), YouTube revenue reacceleration [and] sustained cloud computing growth (with improved margins) remain underappreciated,” Sheridan said.

Feature Image Credit: Getty Images

By Jon Swartz

Jon Swartz is a senior reporter for MarketWatch in San Francisco, covering many of the biggest players in tech, including Netflix, Facebook and Google. Jon has covered technology for more than 20 years, and previously worked for Barron’s and USA Today. Follow him on Twitter @jswartz.

Sourced from MarketWatch

By Laurie Sullivan

Brands can expect more targeted ads closer to the point of sale as generative artificial intelligence (GAI) continues to roll out at Google and Microsoft, according to insights from Insider Intelligence.

Evelyn Mitchell, an analyst for Insider Intelligence, wrote in a post that ads within chat answers are prominent, and fewer high-impact placements could cause ad prices to rise.

“Despite being labelled as sponsored, these ads may also get confused for chatbot responses by users,” Mitchell wrote. “That could be good for brand marketers, whose advertisements will now look more organic. But it also clutters the search experience, and may lead to users hesitating to click any links.”

And as of today, she says advertisers on Google can’t opt out of showing ads within the search generative experience (SGE).

NP Digital Co-Founder Neil Patel in an interview in April said AI will be a huge part of the future — especially search and content.

But companies that are concerned about misinformation have good reason to be. Much of the information that is being spit out in queries is scraped from the web.

“If your inputs are off, the outputs will be off,” he said. “If they haven’t been able to figure out what’s misinformation, and that’s being inputted into AI, for a portion of the queries and responses, you’ll get misinformation, as well as inaccurate, wrong and whatever it may be.”

Companies are advertising around this information. The real revenue, Patel said, will come from the transitional keywords. It’s not “how does Google’s algorithm work,” he said, adding that NP Digital manages billions of dollars in ad spending for companies and the majority is for transactional keywords for search.

Patel also outlines in a post the seven top misunderstandings when it comes to how companies use AI, which he writes is often due to lack of understanding of what technology and what it can do.

The company surveyed 1,000 digital marketers in the U.S., including those who actively work in digital marketing, including 229 freelancers, 394 who have in-house digital role, and 377 who have an agency role.

Lack of search engine optimization (SEO) is a major concern. There were a lot of answers for “what do you think is the biggest risk/issue of using AI technology in digital marketing?” The biggest, according to 149 respondents (14.9%) is the concern that content would not be optimized for SEO. In fact, it is a concern for all from freelance, in-house, or those within an agency.

Of our respondents, 12.66% of freelancers, 16.75% of in-house marketers, and 14.32% of digital marketing agencies felt similarly that SEO was the biggest risk.

The biggest risks in AI marketing include:

14.9% – content not optimized for SEO
11.8% – AI providing incorrect information
12.1% – content sounding too similar
12.8% – content sounding too robotic
14.8% – legal and ethical
14.5% – over dependence on the tools
9.1% – lack of personalization
10% – other

By Laurie Sullivan

@lauriesullivan,