Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has been in charge of the $300 billion search advertising market for years, but new competitors like AI and social video are becoming more dangerous.
ByteDance’s (BDNCE) short-form video app TikTok says it has 170 million users in the US. The Wall Street Journal reported Sunday that TikTok recently added a way for brands to target customers based on their search queries, which directly competes with Google’s main source of income.
Perplexity AI is a search company backed by Jeff Bezos, the father of Amazon (NASDAQ:AMZN), which is another threat. This month, the site will show ads next to AI-generated answers. Before, Perplexity’s more powerful AI features were paid for through subscriptions.
After getting money this summer from SoftBank and other investors, Perplexity AI was worth about $3B. CrunchBase says that OpenAI has raised almost $160B and Elon Musk’s xAI has raised $24B.
For years, Amazon has been making its way into the search-ad market. Studies have shown that a lot of product searches begin on Amazon’s e-commerce site, skipping Google altogether.
A study by eMarketer says that Google’s share of the U.S. search ad market will drop below 50% next year, which will be the first time in more than ten years that it does so.
The Journal said that Microsoft (NASDAQ:MSFT), which is a big supporter of Open AI, has put ads in some AI-generated comments and added sponsored links and comparison-shopping ads for a Bing chatbot. Meta’s (NASDAQ:META) Meta AI in the Facebook search bar and in its WhatsApp and Instagram apps could be good for the company. Another thing Apple (NASDAQ:AAPL) could do is use ads in Apple Intelligence, which is a feature of the iPhone 16 line.
The market for search ads is still growing because companies want to reach people whose search questions give them hints about what they want to buy. eMarketer predicts that Amazon will grow faster than Google next year, by 17.6% compared to 7.6%.
Of course, the race to get ad bucks will make even more people want AI processing power, which is good for chip companies like Nvidia (NVDA), Broadcom (AVGO), Taiwan Semi (TSM), and ASML (ASML).