AI Chatbots and The Fall of Search Advertising

It wasn’t that long ago that marketers were thrown a major curve ball when big tech companies halted much of their tracking data in an effort to secure better privacy for users. Now it looks like they are about to be thrown another one with the rapid growth and adoption of AI chatbots.

Artificial intelligence (AI) chatbots are becoming more popular and powerful as they use large language models (LLMs) to generate natural language responses to user queries. These chatbots are designed to simulate conversations with a human and provide helpful and engaging answers. However, they may also pose a threat to the traditional online advertising industry, which relies on web searches and clicks to generate revenue.

One of the main advantages of AI chatbots is that they can access information from the web and offer sources for their responses. This means that users can get answers to their questions without leaving the chat interface or opening a new tab. For example, Bing Chat, an AI chatbot developed by Microsoft, can perform web searches, generate images, and cite references for its answers. Similarly, Google Bard, another AI chatbot, can also access real-time data from the internet and provide relevant information.

This feature may reduce the need for users to use traditional search engines or visit websites that host ads. According to a report by eMarketer, search advertising accounted for 43% of total digital ad spending in the US in 2022. If users switch to AI chatbots for their information needs, they may bypass the ads that appear on search results pages or on websites. This may hurt the revenue of advertisers and publishers who depend on these ads.

Another advantage of AI chatbots is that they can generate creative and personalized content for users. For example, ChatGPT, an AI chatbot powered by OpenAI's GPT-4 model, can write poems, stories, code, summaries, lyrics, and more. These chatbots can also tailor their responses to the user's preferences, mood, and context. This may increase the user's engagement and satisfaction with the chatbot.

Therefore, AI chatbots like Bing and Bard may hurt search ads and other digital advertising tools by providing users with alternative sources of information and content. These chatbots may offer users a more convenient, interactive, and enjoyable way of accessing the web without being exposed to ads. This may challenge the existing business models of advertisers and publishers who rely on web traffic and clicks to generate revenue.