Google Loses Free Pass With Ad Buyers

For nearly two decades, Google search has been a staple in media plans, but recent changes are prompting advertisers to reassess their spending. According to Digiday, Google's introduction of AI Overviews has altered the way users interact with search results, reducing the need for clicks and affecting ad pricing.

As a result, media buyers are putting Google under the microscope, examining the effectiveness of their ad spend and considering alternative channels. This shift is particularly significant in the fourth quarter, when seasonal advertisers drive up costs per click (CPCs).

Advertisers are looking beyond Google's search ads, exploring options like Meta and Local Services Ads. Lindsay Marty, founder of Above the Bar Marketing, noted that clients are willing to shift 10% to 20% of their Google budget if performance weakens. This trend is driven by the growing use of marketing science, AI, and incremental measurement, which is prompting advertisers to question the value of their Google search spend.

Google's own numbers reflect this slowdown, with search ad revenue growing 12% in the third quarter, the company's slowest pace this year. Executives attributed part of the decline to AI Mode, Google's chatbot-style search tab. The numbers indicate a broader shift in how people use the internet, with more users relying on AI agents for search and purchase decisions.

Media buyers are responding to these changes by reevaluating their media mix and allocating budgets more strategically. Bryce Hamlin, vp of data intelligence at Power Digital, said that media mix modeling and geo-testing are showing a greater impact from upper-funnel media, leading advertisers to question the value of their Google search spend. As a result, dollars are being reallocated to alternative channels, with some advertisers shifting 10% to 30% of their Google search budget.

The size of these budgets varies, but search remains a significant line item in most media plans. According to the Interactive Advertising Bureau and PricewaterhouseCoopers, search took $114.2 billion of U.S. digital ad spending last year, or 38.8% of the total. However, with CPCs rising and ROI under pressure, advertisers are seeking more efficient channels, such as Meta and TikTok, to build awareness and drive conversions.

While some advertisers are not abandoning search altogether, they are reassessing their approach and considering a more balanced media mix. Casey Sheehan, vp, group director at RPA, noted that paid search is becoming increasingly important as organic traffic comes under pressure. However, fewer buyers treat it as the bedrock of a media plan, instead seeking to build awareness and consideration earlier in the discovery journey.