The emergence of artificial intelligence (AI) tools like Google Gemini is revolutionizing search engines and redefining the rules of the game in digital marketing. This transformation is leading to a dramatic increase in contact compensation (cost per lead) at Google. This value describes a billing model in online marketing in which advertisers are paid for generating leads. According to experts, this value has increased by up to 100 percent since Gemini was introduced. This development poses new challenges for advertisers, especially in sensitive industries such as education. Given these pressures, brands are diversifying their efforts into social media, search engine optimization (SEO), and programmatic advertising. But how exactly does AI influence the cost of Google ads?
The mechanisms of action of AI
Google Gemini (formerly Bard) uses AI to improve ad targeting and offer users even more relevant content. However, this increased precision reduces the visibility of traditional ads and increases competition among advertisers, causing advertising costs to skyrocket. According to an analysis by Indian news platform Exchange4media conducted by Tasmayee Laha Roy and Jarriti Verma, this trend has a direct impact on the return on investment (ROI) of digital campaigns.
A dynamic that is only likely to increase in the coming years: The US technology consulting firm Gartner predicts a decline in search volume via traditional search engines of 25 percent by 2026 in favor of AI chatbots and virtual assistants. This shift calls into question the effectiveness of current ads and forces advertisers to rethink their strategies to adapt to this new ecosystem.
The economic and sectoral impact
The effects are clearly noticeable in India. The average cost per click (CPC) for display ads is around 5 rupees (around 0.06 euros), while the cost per thousand impressions (CPM) reaches 50 rupees (around 0.59 euros). Digital marketing spending rose to Rs 31,500 crore (one crore is ten million Indian rupees) in the financial year 2023-24, registering an annual growth of 30 percent, according to data from IPSOS.
The education and travel industries are particularly hard hit. Ambika Sharma, founder of Pulp Strategy, reports a 40 percent increase in e-commerce cost per lead (CPL) and a 35 to 50 percent increase in software-as-a-service CPL. These developments are forcing companies to rethink their keyword strategies and open up new advertising channels.
A change with challenges
AI is revolutionizing digital marketing by offering unprecedented targeting possibilities, but it also poses new competitive challenges. The ultra-precise targeting that AI offers increases advertisers’ dependence on the digital giants, thereby strengthening their influence on the advertising market. This concentration could inhibit innovation and marginalize SMEs.
The development of artificial intelligence in digital marketing is proving to be a double-edged sword: it offers immense opportunities and at the same time poses significant economic and strategic challenges. To benefit from this development, advertisers must equip themselves with adaptive strategies, invest in high-quality content and diversify their channels. The future belongs to those who know how to innovate while taking a balanced approach between technology and creativity.
This article previously appeared on Fashionunited.fr and was created using digital tools translated.
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