A new report from AA/ WARC shows that 2023 is the year of huge disruption in the paid search market with the rise of new entrants from retail media players such as Amazon, social media platforms such as TikTok disrupting user behaviour alongside the rise of generative AI chatbots from both Google and Bing driving innovation in search ad formats.

Paid Search is a $250bn+ global market

According to AA/ WARC, the traditional paid search market is worth $256.5bn globally with Google as the key global player alongside Bing with local players like Yandex in Russia and Baidu in China.

Until 2023, the PPC market was primarily text-based search with search engines figuring out the intent of each query and serving appropriate adverts based on an auction model to determine the Cost per Click (CPC): the price paid every time a searcher clicks on an advert. Advertisers bid different amounts based on the value each new customer was judged to have to their business. This value was a calculation based on the advertiser’s ability to convert a website visitor into a customer, the average level of spend of each customer and the level of competition in the market from other advertisers.

The growth of Retail Media: Players such as Amazon, the big US retailers Walmart and Target, alongside more niche search on platforms such as Wayfair and Home Depot, all offer high-intent search advertising formats for product companies

Group M reported a further $93.9bn in advertiser spend in 2023 on product search on retail media platforms, which on top of the traditional search market, is forecast to take a massive 26.4% of spend. The benefit of these retail media platforms for product advertisers is closeness to point of sale – often one click to purchase. Amazon advertising also enables a closed loop measurement approach for advertisers to understand their Return on Investment (ROI) which is further fuelling their growth at the expense of retail media players unable or unwilling to share transaction level data and ROI figures with their advertisers.

 

Social Platforms: TikTok and Instagram are taking search from some audiences away from the traditional search players in some key areas such as informational searches or key product verticals.

TikTok quietly launched a new search product for selected partners in March 2023 and it is building a reputation amongst younger audiences for being a useful place to find local recommendations and new products. Google even publicised that they were losing informational searches to TikTok back in 2022. Many new users to search appreciate the value of recommendations with the social platform algorithms being particularly good at recommending products and services your social circle use and like.

Advertisers in the TikTok search beta test indicate that using the search ad product enables better insights into SEO and content creation on the platform and the platform enables new target audiences from converted users to be included or excluded from ads.

Instagram offers another alternative to traditional search engines with ranking signals based on text entered into the search bar, previous activity around who you follow and posts you’ve viewed and then overall user engagement on different posts based on shares, clicks and follows to determine what you see as a response to your query.

These are interesting plays from the social platforms and represent a longer-term threat to the big search engines as users start to navigate away from Google as the default place to find all things for the world’s internet population.

Generative AI and ChatBots: new ad formats

The launch of ChatGPT in November 2022 and Microsoft’s subsequent investment of $10bn into the company and integration into Bing created renewed interest in the PPC sector. This new way of conversational search has found strong use cases in question-and-answer queries over lengthy search strings such as holiday planning and help content. It is interesting to see Expedia, the holiday booking website become one of the first e-commerce players to build ChatGPT into their app with users being able to plan their travel arrangements within the chat format exactly like an old-school travel agent discussion. In B2B search, Bing has been sending website traffic and leads over to advertisers since March 2023 based on matching their specific ChatGPT query such as ‘Best companies to optimize Google Ads’ to companies offering the service (with BrightBid receiving our first lead via this new search format!).

May 2023 saw further innovation in PPC with Bing and Google announcements around their new search ads. Google is looking more into a polyphonic approach to the AI-generated search results and not a single answer with chat boxes which is where Bing is headed. This is a safe play as it allows them to cite the source and websites the AI used to help generate the answer.

At this moment, the world is changing so fast it is not entirely clear what new features will be useful to assist the user in their search, but it feels like the era of endless fruitless scrolling could be history soon. This means the quality of content, domain authority and general SEO will be even more difficult for smaller players and this would mean the importance of being visible on paid search becomes even more critical.

It seems that this will be Google’s new approach on personalising the search results, meaning the search engine will better be able to understand what a user is looking for based on the search sequence and provide more accurate results.

In general, seeing how fast Google reacts to catch up with OpenAI and Bing is very interesting and indicates the search will be changing very fast over the next months.

The resilience of search

Despite all the changes in the paid search market: PPC has proven to be a very resilient medium in these times of economic uncertainty as more advertisers shift to short-term results that can be easily measured by channels which paid search delivers in spades.

AA/ WARC report that search has the largest share of AdSpend globally with the 2023 forecast at 28.3% and Google set to earn $176.4bn from search in 2023. They also report that global Ad Spend is forecast to grow 2.6% a year in 2023 but search by 6.2% with some good news coming the way of advertisers with Search CPC’s finally dropping after the pandemic peak of 2021 dropping 12% over 2022.