Google will ‘soon’ test search, shopping ads in AI Overviews

Google announced that ads were coming to AI Overviews at Google Marketing Live in May. We’re still waiting, but ads in AI Overviews are coming “soon,” Philipp Schindler, Alphabet’s senior vice president, chief business officer, confirmed during last night’s Alphabet Q2 earnings call.

Soon. What can advertisers expect and when? Here’s what Schindler said:

• “And as you have probably noticed at GML, we announced that soon we’ll actually start testing search and shopping ads in AI Overviews for users in the U.S., and they will have the opportunity to actually appear within the AI Overview in a section clearly labeled as sponsored when they’re relevant to both the query and the information in the AI Overview, really giving us the ability to innovate here and take this to the next level.”

Meanwhile, ads appearing above and below AI Overviews “continue to provide valuable options for people to take action and connect with businesses,” said Alphabet/Google CEO Sundar Pichai.

• “People are finding ads, either above or below AI Overviews, helpful,” Schindler added.

Why we care. Advertisers have been waiting for two months for these ads. We’ve yet to see any in testing, but now we know it’s because testing will still begin “soon.” Search ads have been a reliable source for leads, conversions and revenue for brands for decades – but ads in AI Overviews are a new and unproven format. So advertisers will be watching closely to see how this impacts ROI.

Positive trends. As has been the case in Q1 and Q4 earnings calls, Google told us about “positive trends” from AI Overviews (formerly Search Generative Experience) – specifically, how AI Overviews are resulting in more searches and greater user satisfaction.

• “We see even higher engagement from younger users aged 18 to 24 when they use Search with AI Overviews,” PIchai said.

Asked about these “positive trends,” (specifically, color around click-through rates), Pichai kept it vague, as usual, saying:

• “All the feedbacks we have seen are positive.”

Google is still planning to roll out AI Overviews to more countries this year. Pichai said Google has “taken a conservative start, focused on quality, making sure the metrics are healthy and so on.”

But what wasn’t mentioned was the nightmarish post-launch that likely contributed to a more conservative starts. That’s because AI Overviews gave bizarre and dangerous answers, such as telling users to drink urine to pass kidney stones and touting the health benefits of running with scissors.

This led to a significant pullback in AI Overviews, as we reported on:

• Google AI Overviews only show for 7% of queries, a new low (July 11)
• Google AI Overviews showing less often, with less Reddit, data shows (June 20)
• Google AI Overviews visibility drops, only shows for 15% of queries (June 4)

Quality improvements. One thing we learned from the earnings call is that Google has made some significant investments in improving the quality of AI Overviews. Pichai said:

• “Over the past quarter, we have made quality improvements that include doubling the core model size for AI Overviews while at the same time improving latency and keeping cost per AI Overviews served flat. And we are focused on matching the right model size to the complexity of the query in order to minimize impact on cost and latency.”

Alphabet Q2 2024 revenue. Alphabet reported Google Search and other advertising revenues of $48.5 billion, up 14% year-on-year. Much of the growth came from retail and financial services, Schindler said.

• YouTube ads revenues were $8.7 billion, up 13%, year-on-year. This growth was driven by brand followed by direct response advertising.

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