It's the End of Search Advertising as We Know It (And I Still Don't Know if I Feel Fine...)
As we move further into generative AI experiences in Search, it's becoming increasingly clear that the traditional advertising models used by search engines need some rethinking.
Perplexity's decision to introduce advertising in its app, opting for a cost-per-mille (CPM) model rather than the more traditional CPC approach, caught my attention the other day. This shift may be indicative of broader trends in the industry: is this the beginning of the end for click-based advertising models, at least for search engines?
Is this the beginning of the end for click-based advertising models, at least for search engines?
Quite possibly, if you want my two cents.
The CPC model has long been the cornerstone of search engine advertising. It operates on a simple premise: advertisers pay when users click on their ad, driving traffic to their website. This model has thrived in a landscape where search results were primarily a collection of links. However, the rise of generative AI in search is fundamentally changing the nature of search engines and how users interact with them.
Generative/hybrid search engines provide direct answers within the SERPs. This reduces the need for users to click through to external sites to almost zero, as anyone who regularly uses Perplexity (here I am!) knows.
You can get the information you need without ever leaving the SERP. As a result, click-through rates on ads and source links are likely to decline, and the effectiveness of the CPC model, which relies on these clicks, is at serious risk.
For those unfamiliar with the lingo, the CPM model charges advertisers based on the number of impressions an ad receives, regardless of whether it is clicked. This makes it a more suitable approach in an environment where direct engagement with external links drops. It also allows advertisers to capitalize on brand visibility, even when users do not click on ads.
In my view, Perplexity's move is a hint of what's to come in the broader search engine ecosystem. The CPC model will likely become obsolete as search engines evolve. Generative AI is changing how we search: from browsing through links to getting the answer we need, loud and clear, in the SERP—and advertising models must adapt accordingly.
The CPC model is likely to become obsolete as search engines continue to evolve. Generative AI is changing the way we search: from browsing through links to getting the answer we need, loud and clear, in the SERP—and advertising models must adapt accordingly.
This shift from a click-based economy to an impressions-based one will likely accelerate as search engines seek to monetize the growing amount of time users spend interacting with AI-driven content.
The key will be finding ways to monetize the attention economy in a landscape where clicks are no longer, after half a century of search engine advertising, the primary (if not the only) success metric.
And I’m still figuring out where I stand on this...
