Google's AI future is imminent

Ad revenues took a hit across the board at Alphabet last year and the tech firm is laying off thousands of staff, but it is also promising significant advancements in AI in coming months. 

Headline ad figures

• Advertising revenue at Alphabet was down 3.6% in 2022, knocking $2.2bn off the previous year’s total. 
• Google Search was down 1.6% to $42.6bn 
• YouTube advertising was down 7.7% to $8.0bn
• Google Network was down 8.9% to $8.5bn

The AI future of ads

The challenging macroeconomic environment filtered through in Q4, especially when there was “ a broadening of pullbacks in advertiser spend”, chief business officer Philipp Schindler, told an earnings call. But he is optimistic about the future, seeing opportunities in applying Google AI to the ad business. 

• Already, smart bidding uses AI to predict future ad conversions and their value, he noted, “helping businesses stay agile and responsive to rapid shifts in demand”.
• Specifically, an understanding of intent in language, combined with advances in bidding prediction, “are why businesses can see an average of 35% more conversions when they upgrade exact-match keywords to broad match in campaigns that use a target CPA”. 
• “Google AI also underlies our creative products like tech suggestions in Google ads and creative optimization and responsive search ads,” Schindler added.

The AI future of shopping 

Google continues to explore how it can become a more central part of shopping journeys and a valuable place for merchants to connect with users. 

• An improved consumer experience will include more visual, immersive, browsable search; at the same time more merchants will be able to take advantage of free listings and ad experiences.
• AI-powered campaigns like PMax are helping retailers better hit goals and connect with customers: “advertisers on average see a 12% uplift from SSE to PMax,” Schindler reported.

Key quote

“Very soon, people will be able to interact directly with our newest, most powerful language models as a companion to Search in experimental and innovative ways. Stay tuned” – Sundar Pichai, CEO, Alphabet. 

Sourced from Alphabet, Motley Fool