For the first time in over a decade, Google is losing its dominance in the U.S. search ad market. Google's share of the search advertising market is expected to fall below 50% next year, according to eMarketer reports.

For years, Google has been the go-to platform for search advertising. However, competitors are rising to challenge Google’s dominance. 

Why Google is losing its grip

AI-powered competition

One of the key reasons for Google’s shrinking market share is the rise of AI-powered search engines. These platforms are changing how users search for information. They provide direct, conversational responses instead of traditional search results.

Frederick Vallaeys, CEO of Optmyzr, cited several reasons for the decline in a LinkedIn post. He noted that AI search engines, like Bing, and ChatGPT, are gaining ground. ChatGPT, which had the fastest-growing user base at launch in 2022, has become a big player. Bing now holds about 8-10% of the market. 

Despite facing backlash for allegedly using copyrighted content without proper attribution, Perplexity AI has still managed to attract advertisers and users. The company says it processed 340 million queries in September alone and handles about 15 million queries daily.

The platform, valued at over $1 billion, is looking to raise $500 million in new funding as it prepares to introduce ads later this year. It is also planning to allow advertisers to sponsor follow-up questions that come after an initial search query. This could give it an even stronger foothold in the search ad market.

Changing consumer search habits

Another reason Google’s share is dropping is how people search for products. As consumer behavior changes, platforms like Amazon and TikTok are entering the search ad space. 

Amazon is expected to capture 22.3% of the U.S. search ad market this year, as more shoppers start their product searches on its platform. TikTok’s appeal to young people has made advertisers attracted to the platform. The platform now lets brands target ads based on user search queries with the launch of ‘Search Ads Campaign.’ This is creating new opportunities for advertisers to reach consumers through non-traditional search platforms.

Google legal issues

In recent times, Google has faced antitrust cases and regulatory scrutiny. These legal challenges are forcing the company to change its operations. These regulatory pressures could hurt its market share as the company is pushed to allow more competition in its ecosystem.

The DOJ is proposing that Google allow more competition in its Android Play Store, among other remedies. This could reduce Google’s control.

Google's dominance in the search market 

Despite these challenges, Google remains top in the search market. A recent study by BrightEdge found that Google still controls about 92% of global search traffic. However, competitors like Perplexity, SearchGPT, and Claude are growing fast. For instance, SearchGPT's growth rate has hit 150% month-over-month. In the same period, Perplexity and Claude grew by 22%.