Search advertising heads into a new era

Search advertising, forecast to be worth $350.4bn in 2023, is set for unprecedented disruption from retail media, social media and AI, according to WARC Media’s latest report. 

Why it matters

Global Advertising Trends: Search 3.0 outlines how search marketing is on the cusp of its most consequential transformation since Google first introduced its sponsored keyword search auction over 20 years ago, and the more recent introduction of the use of data and algorithms to provide greater personalisation in search results.

Now a third era of search beckons – one defined as much by image or video as text, and by artificial intelligence and natural language processing, in which marketers shift from targeting keywords to targeting intent and context.

“As consumers pivot away from text-based search towards discovery on social, generative AI reinvents the search experience, and with the explosive growth of retail media, the majority of which is search-orientated, Google’s long-standing market dominance is set to come under unprecedented pressure,” explains Alex Brownsell, Head of Content, WARC Media, and author of the report.

Takeaways 

• Traditional search spend is proving to be resilient. While global advertising investment is forecast to grow just 2.9% to $907.2bn this year, paid search, the largest media channel by ad spend globally, is set to increase 6.2% according to WARC Media.
  Within that, however, there are significant regional differences: 40% of the global search market is in the US, where WARC Media forecasts a robust 12% growth rate this year, taking its value to nearly $100bn. But in APAC, where social commerce is far more established, paid search’s share of advertising budgets falls to 17%.
• Retail media is transforming the search advertising market. According to WARC Media and GroupM forecasts, total search advertising spend is set to be worth $350.4bn this year, of which just over a quarter (26.8%) will come from retail media, valued at $93.8bn.
  As brands commit more budget towards retail media, and the number of platforms increases, marketers may be forced to make trade offs as to where their ad spend goes. Advertisers will also need to rethink their approach to paid search and SEO, and particularly how their brands show up towards the bottom of the purchase funnel.

• Search experiences are fragmenting across platforms. Younger audiences increasingly favour searching for information and inspiration on visual platforms such as TikTok, Instagram, Pinterest and YouTube or RED, Douyin and Zhihu in China. According to data from GWI, in 2020, 19.2% of internet users turned to TikTok to search, rising to 27.5% last year.
  As search evolves into a “system for exploration” and search strategies diverge depending on category and demographic, Google’s dominance of the global search advertising market is being challenged: its share of total search is set to drop from 51.0% in 2021 to 50.4% in 2023; and while over half (53%) of global advertisers surveyed by WARC for The Marketer’s Toolkit 2023 report said they plan to increase ad investment with Google this year, that was down from 59% the previous year. 

• Generative AI threatens to disrupt search behaviour. A race has begun to develop the most compelling AI chatbot search product. Microsoft plans to incorporate OpenAI’s ChatGPT – estimated to have become the fastest-growing app in history, reaching 100 million monthly active users in only two months – into Bing. However, as it stands, Bing is only forecast to earn a 5.2% share of the global search market in 2023, per WARC Media. Yet the news was deemed a “code red” situation for Google, which has subsequently rushed to launch LaMDA, its conversation technology.
  The arrival of generative AI will cause major considerations for brands, such as how paid ads will fit into the conversational nature of the content, the partiality of chatbot responses, the risk of content misinformation and misalignment with brand guidelines.

Download a complimentary sample report of WARC Global Ad Trends: Search 3.0 here.