AI search tools are failing to impress marketers

AI-powered search tools face skepticism from marketers: The introduction of new AI-powered search tools has sparked interest in the industry, but many marketers remain cautious about their adoption and effectiveness.

• Recent launches like Perplexity and Google’s AI Overviews have generated buzz, but marketers are hesitant to invest due to uncertainties surrounding reach and return on ad spend.
• The search advertising landscape is evolving, with new entrants like TikTok and potentially Reddit challenging Google’s dominance, which has faced recent antitrust scrutiny.
• Despite the emergence of AI-powered alternatives, Google still holds approximately 80% of the search market share, according to Statista.

Measurement challenges and new metrics: The integration of AI into search advertising has introduced new considerations for marketers in terms of measurement and key performance indicators (KPIs).

• Traditional search advertising metrics like cost-per-click (CPC) are being replaced by new models, such as Perplexity’s reported use of cost-per-thousand-impressions (CPM) pricing.
• This shift in measurement approach could potentially impact how search is utilized within the broader media mix and how it is purchased compared to other channels.
• Marketers are calling for additional measurement tools to gain confidence in allocating budgets to these new AI-powered search platforms.

Brand safety and consumer concerns: The rise of AI in search advertising has raised questions about potential risks and consumer perceptions.

• There are worries about the accuracy of AI-generated content and the potential for “hallucinations” or false information.
• Data privacy issues remain a concern for both marketers and consumers.
• The blurring of lines between AI-generated ads or sponsored posts and genuine content sources could lead to consumer backlash and impact ad performance.

Budget allocation and testing strategies: Marketers are approaching AI-powered search tools cautiously, with limited budget allocation for testing and learning.

• Some agencies, like TandemTide, are allocating between 25% to 50% of existing search budgets to test AI-powered tools within major platforms like Google.
• Others, such as Modifly, have chosen to exclude these new tools from their Q4 plans, focusing instead on more established and effective channels.
• The ongoing economic challenges and pressure to do more with less are influencing marketers’ decisions to stick with proven platforms for now.

Factors hindering adoption: Several key factors are contributing to the slow adoption of new AI tools among marketers.

• Pricing and performance uncertainties make it difficult for marketers to justify shifting budgets away from established platforms like Google.
• The lack of a substantial user base for new platforms limits their appeal to advertisers who follow audience reach.
• Unclear success metrics and difficulty in determining return on ad spend for these new tools create hesitation among marketers.

Future outlook and potential for change: While current adoption is slow, marketers remain open to future possibilities with AI-powered search tools.

• Agencies are monitoring the market closely and maintaining flexibility to pivot if compelling use-cases emerge.
• Some are prepared to allocate experimental budgets or dedicated spend if these new platforms demonstrate clear value and effectiveness.
• The evolution of AI in search advertising could potentially reshape the industry, but marketers are waiting for more concrete evidence of success before making significant investments.

Balancing innovation and caution: As the search advertising landscape continues to evolve, marketers are striving to find the right balance between embracing innovation and maintaining a cautious approach.

• While the potential of AI-powered search tools is recognized, the current sentiment leans towards a “wait-and-see” approach rather than early adoption.
• Marketers are prioritizing proven effectiveness and clear ROI metrics before committing significant resources to these new platforms.
• The industry remains poised for potential shifts, but for now, established players like Google continue to dominate due to their reach and track record.