Abstract
- Be prepared for change. As AI and chatbots reduce the volume of traditional search engines, advertising strategies must innovate.
- Adaptable strategies. Marketers need to focus on the upper funnel and diversify their advertising efforts to adapt to the new AI-driven environment.
- investment shift. Allocating budget to higher reach channels and investing in media mix modeling can increase your overall marketing effectiveness.
Gartner's recent report has the marketing world buzzing. The report predicts that by 2026, search engines will lose 25% of their volume to AI, chatbots, and other virtual agents. If these predictions come true, what will happen next for advertisers? Should we panic about AI in marketing? No, but we need to start innovating as soon as possible.
AI in Marketing: Monetization is inevitable
As things stand, many people are already familiar with AI as part of their home experience. Alexa answers your questions. However, it is important to note that in most cases chatbots like Alexa do not use large-scale language models. Instead, it goes to the web, collects data, and reports answers from what it collects there. There is a lot of room for improvement.
But just because it's done this way now doesn't mean it'll stay that way forever, or that search-based companies want to stay relevant, especially in light of Gartner's report. In fact, you could say that even before the report was taken down, Alexa was going through a personal transformation.
Also, remember that not too long ago, Alexa was considered a groundbreaking new product. Like all new technology, it was created to meet specific needs and continually improve.
Search engine providers find themselves faced with a new “innovator's dilemma” with AI, as first described by Clayton Christensen in 1997. Even if major innovators are motivated to pioneer new technologies and products, what happens when their new creations make the old obsolete? Should that stop them from innovating? The short answer is, of course not.
It becomes a numbers game over time, cost, and expected revenue. If they get their numbers right, the Big 5 can not only stay in the game, but also win big.
In other words, they will inevitably find ways to migrate, grow, and monetize the latest technology. That being said, there are really only two viable business models for digital services. It's either paid or ad-supported. People don't pay enough to offset the benefits advertising brings, so marketers should expect advertising to become a monetization driver.
Related article: Google, generative search, and the uncertain future of the web
Potential lag effects: user adoption and advertising inventory
In the case of search engine marketing (SEM) and Gartner's report, AI in marketing will mean fewer search ads in the short term. What will happen in the long run? Advertising will eventually catch up.
Disruption can reduce search volume for advertisers as people use non-mainstream search options like Google and Bing. This would be the worst case scenario.
What's the best-case scenario? Google and Bing overcome the innovator's dilemma, pivot, and figure out how to implement AI in their search engines to replace older technology. This avoids revenue loss when repositioning to support AI. AI is a technology that isn't going away any time soon (or ever).
How successful they are likely to be determined by paying attention to the lag effect between user adoption of AI in marketing and the ad inventory available to attract those users.
Related article: Unintended consequences of relying on AI in marketing strategy
What can marketers do?
Even in the face of this lag effect, marketers can avoid risk and invest in things that are likely to pay off in the long run. Invest in the top funnel. Drive user experience. Make lemonade.
Rather than resisting what will soon become the “new normal,” the first step is to diversify your reliance on search engine marketing. This is a win-win situation. SEM has become incredibly expensive. So anything you can do to reduce costs in this area is a win.
Additionally, the move away from traditional search engine marketing should encourage targeting potential new customers early in the funnel, before users even start searching. This has an overall positive impact on your brand positioning and should be evaluated regularly anyway.
In other words, there's no need to get too excited about Gartner's report. As search volume decreases, costs increase further. Think about your product. Is it perfect for building your brand? How can we improve? How can we provide a better customer experience than our competitors? Or are we creating advertising programs purely based on intent? To disrupt business, we need to disrupt normal thinking.
Related article: AI in Marketing: 10 Skills Essential for Success
Essentials of AI in Marketing: Moving with the Times
What we're seeing with a lot of advertisers who focus on direct response is that once you move up the funnel and start driving brand metrics, all your conversions go up.
Allocate about 20% of your budget to high-reach channels that you believe are reaching your target audience. Engage them with more impactful creative that evokes your brand's value proposition. You should see an overall increase. At that point, double down until you find the point of diminishing returns. You will be in a great place.
Bonus tip: Invest in media mix modeling. This will help you understand how your upper-funnel campaigns drive your lower-funnel campaigns.
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