Beyond Search: Google Eyes AI Chatbots as New Ad Territory

Core Insights - Google is testing ad placements within AI chatbot conversations to protect its $200 billion search ad business as user behavior shifts away from traditional search [1][2][4] - The company is facing the "innovator's dilemma," needing to defend its profitable legacy business while adapting to disruptive technologies like generative AI [5][7] Ad Placement Strategy - Google has begun embedding ads directly into conversations with AI chatbots from startups like iAsk and Liner, expanding its AdSense for Search network [3][10] - In the pilot program, contextual ads are inserted into real-time chats, with search ad revenue accounting for 56% of Google's total revenue [4][10] Market Position and Competition - As of April, Google held a 90% market share in search, but only 2.3% in AI chatbots compared to OpenAI's ChatGPT at 84.2% [4] - Google's move to commercialize chatbot interactions aims to maintain control over the discovery layer of the internet amid increasing competition from AI-native platforms [8][9] User Experience Considerations - There is a risk that ad placements could degrade user experience, prompting the need for selective ad categories or an ad-free option [2][11] - Experts suggest that ads should be introduced in categories where consumers expect them, such as shopping and travel, or consider an "ad-free toggle" for a fee [12][13] Regulatory Environment - Google's market dominance is under antitrust scrutiny, having lost two cases related to anticompetitive practices, which could increase regulatory pressure as it seeks to monetize AI chatbot interactions [8][9]