Google plans to integrate ads into its AI-powered Search Generative Experience

Also eyes subscription models for AI

In its recent earnings call, tech giant Google unveiled its ambitious plan to monetise its AI-powered Search Generative Experience (SGE) by integrating ads into the platform.

The move comes as part of Google's broader strategy to boost its revenue from various sources, with the SGE at the forefront of its focus.

The company says this will enhance the user experience by connecting consumers with relevant products while creating new opportunities for advertisers.

During the earnings call, Google CEO Sundar Pichai raised the possibility of adopting subscription-based business models for some of the company's new AI offerings.

He fielded questions from analysts, who enquired about the returns on investment in Google's AI initiatives.

Pichai expressed satisfaction with the user feedback on SGE and noted that they were gradually expanding its availability to more users.

"Over time, there will be newer paths, just like we have done on YouTube," he added. "I think with the AI work, there are subscription models as a possible path as well."

Google chief also spoke of the company's work with native ad formats and the integration of ads within the SGE. These ads will be designed to seamlessly integrate with the SGE's conversational and AI-driven search results.

The addition of advertisements to the SGE is expected to provide more companies with the opportunity to showcase their products to a relevant and engaged audience, Google claims.

"It's extremely important to us that in this new experience, advertisers still have the opportunity to reach potential customers along their search journeys," Google's chief business officer, Philipp Schindler, said.

While Google's intention is to provide relevant ads to users, there is a fine balance between ad visibility and user experience. During the initial ad placement demonstration in March, sponsored product placements were prominently featured in follow-up queries, which could prove annoying to many users.

Pichai acknowledged these concerns, stating, "We are making sure the product works well, and we're generating value for our ecosystem and that ads transition well."

The move follows a similar step taken by Bing Chat, which introduced ads to its platform shortly after its release, while still in the preview stage.

Despite intense competition and significant investments in AI, Google has plenty of financial wriggle room to experiment with integrating ads into its products.

The company reported revenue of $76.69 billion for Q3 2023, with an impressive 11% growth year-on-year.

Google generated $7.9 billion in revenue from YouTube ads and $59 billion from its general advertising.

The company's Cloud division brought in $8.41 billion.

With the introduction of ads in the SGE, Google is poised to further bolster its advertising revenue in the upcoming quarters.