Google is ready to fill its AI searches with ads

While Google has been dealing with fierce competition on all sides and is investing a lot into infusing AI into as many products as it can, its ads business, the company’s bread and butter, is still humming along. The Search business earned $44 billion, an 11 percent jump year over year. 

The big question coming up is how Google’s focus on AI will impact that core business. Google’s AI-powered Search Generative Experience is still only available on an opt-in basis, so we don’t yet know how much it’ll impact the company’s ad business.

Google is already moving to head off that problem. On Google’s earnings call, CEO Sundar Pichai said that the company would be experimenting with new formats native to the way SGE works — the company has already shown off some ideas — so perhaps we’ll start to see some of those formats debut in the coming weeks and months. Later in the call, chief business officer Philipp Schindler added that “it’s extremely important to us that in this new experience, advertisers still have the opportunity to reach potential customers along their search journeys.”

As the company rolls out SGE, “we are making sure the product works well, and we’re generating value for our ecosystem and that ads transition well,” Pichai said.

Infusing AI in search is a long-term play for Google. Pichai said he sees an opportunity to “evolve search and Assistant over the next decade ahead.” Last quarter, he declared that over time, SGE will “just be how search works,” and given the comments about ads on Tuesday’s call, it seems the company is starting to think seriously about how to make its AI-powered search into more of a business.

Other parts of Google’s business are doing well, too. YouTube ads pulled in $7.9 billion, up more than 12 percent from last year. The company is adding a bunch of AI tools into its popular video service, including a “Dream Screen” feature that lets creators put AI-generated photos and videos in the background of Shorts. Google’s cloud business, which offers AI services that customers can buy for their own apps and products, brought in revenues of $8.4 billion, up 22 percent over the division’s revenues in Q3 2022. 

One thing Google didn’t address on the call was who would follow Ruth Porat as CFO. Alphabet announced during the company’s second quarter earnings that Porat would be promoted to president and chief investment officer of Alphabet and Google, a role that includes overseeing Alphabet’s “Other Bets” investments. At the time, Alphabet didn’t announce a successor, and it still hasn’t.

However, Porat did suggest on Tuesday’s call that there may be changes to “Other Bets” down the line. “Across the portfolio of Other Bets companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively,” Porat said. I’m interpreting that to hint at some future reductions of some kind in Alphabet’s Other Bets investments, but we’ll have to wait and see what the company actually decides to do.

Source: The Verge

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