Paid search advertising is changing significantly, per EMarketer. The platform highlights four key trends. The report focused on shifting dynamics in ad spend, user engagement, and market competition. 

Ad spend is rising, but impressions are dropping

According to Emarketer, advertisers are spending more on search ads, despite a significant decline in the number of times ads are displayed. 

The platform reports that while paid search ad spending increased by 4.0% year-over-year (YoY) in Q4 2023, search ad impressions fell by 15.0% in the same period. It also noted that in the US alone, search ad spending is expected to grow by 11.1% this year, reaching $124.59 billion.

Users are clicking less on ads

The report shows an 8.0% YoY decline in paid search ad clicks during Q4 2023, with the retail sector hit hardest at a 12.0% drop. Analysts suggest this could be linked to the rise of generative AI in search engines. 

AI-driven tools are increasingly providing direct answers to user queries, reducing the need for users to click on paid search ads. This shift changes user behavior and may reduce the effectiveness of traditional search ads.

EMarketer also explained that spam content on Google may also be a factor for a drop in click growth. 

Google dominates the search market but faces competition

According to Emarketer, Google continues to dominate the search market. The platform leads the global search market with a 91.02% share as of July 2024, according to StatCounter. Its nearest competitor, Bing, holds just 3.88%.

However, Google faces rising competition from platforms like Amazon and TikTok. These platforms are changing how users search for information by providing direct, conversational responses instead of traditional search results.

Amazon’s growing focus on search ads aligns with its strong shopping intent audience, while TikTok’s recent launch of search ads would attract younger users.

Google's share of the search advertising market is expected to fall below 50% next year. Th platform will lose its dominance in the U.S. search ad market for the first time in over a decade. Google is also facing regulatory challenges that could force it to sell its Chrome web browser.

Retail media costs more than traditional search advertising

Retail media search ads have higher costs per click (CPC) than traditional search ads. Retail media averaged $1.32 compared to $1.10 overall in Q3 2024. On Amazon, CPCs are even higher at $1.50, compared to Google’s $1.16.

Per Emarketer, The higher costs on Amazon are attributed to its audience’s strong purchase intent, which makes these ads more valuable to advertisers. Reflecting this trend, Amazon’s U.S. search ad revenues are forecasted to grow by 17.6% this year, outpacing Google’s 7.6% growth. Amazon’s share of U.S. search ad spending is expected to rise to 22.3%, while Google’s drops to 50.5%.

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