Search revolution gives marketers $350bn headache

mobile.newSearch marketing is on the verge of one of its most significant shake-ups since Google first introduced its sponsored keyword search auction over 20 years ago, with the rise of retail media, social and AI set to drive the sector past $350bn in 2023 but also bring increasing complexity for advertisers.

So says WARC Media’s latest Global Advertising Trends report, Search 3.0, which explores the impact of retail media on advertisers’ paid search investments, the growing role of social platforms on search journeys, and the rise of generative AI search.

Having benefited from the use of data and algorithms to provide greater personalisation in search results, a new era of search beckons; one defined as much by image or video as text, and by AI and natural language processing, in which marketers shift from targeting keywords to targeting intent and context.

Amid an ongoing digital ad market slowdown, traditional search spend (excluding retail media) is proving to be resilient. While global advertising spend 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.

Some 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.

In APAC, where social commerce is far more established, paid search’s share of advertising budgets falls to 17%. Japan, the APAC market outside of China with the biggest search spend, is forecast to see search investment expand to $7.4bn in 2023. In China search spend is expected to grow to ¥131bn ($19bn).

The rise of retail media has transformed the search advertising market over the past few years. 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 are likely to be forced to make trade offs 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.

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.

According to WARC Media, while Google remains the dominant force in search and is forecast to earn $176.4bn in advertising revenue in 2023, its share of total search, which includes retail media, is set to drop from 51.0% in 2021 to 50.4% in 2023.

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, down from 59% the previous year.

The race is also on 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. Even so, Google has subsequently rushed to launch Bard, its conversation technology.

The arrival of generative AI will also cause major considerations for brands, such as how paid ads will fit into the conversational nature of the content, the partiality of chatbot responses, risk of content misinformation and misalignment with brand guidelines.

WARC Media head of content Alex Brownsell, who is author of the report, said: “The search market is on the cusp of an era of innovation. Google’s long-standing market dominance is set to come under unprecedented pressure as consumers pivot away from text-based search towards discovery on social, generative AI reinvents the search experience, and the explosive growth of retail media, the majority of which is search-orientated, continues.”

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