Spending on AI-driven search advertising in the US is projected to reach nearly $26bn by 2029, Reuters reported citing data from the research firm Emarketer. This marks a substantial rise from the projected expenditure of just over $1bn this year. The surge is attributed to the swift adoption of AI technology and improved user-targeting capabilities.
In contrast, companies depending on traditional keyword-based search ads may see a decline in revenue as AI-powered search advertising gains traction. Advocates for the latter argue that these products offer users greater convenience and engagement, but pose challenges for companies reliant on older models.
Search engine giants deploy AI to compete with chatbots
Major search engines such as Google’s Alphabet and Microsoft’s Bing are integrating AI capabilities to compete with AI chatbots such as OpenAI’s ChatGPT and Perplexity AI. These chatbots provide users with direct information, reducing the need to navigate through multiple search results. The report also said that Apple is looking into incorporating AI-driven search features into its Safari browser, which may signal a shift from its long-standing partnership with Google.
Google has also recently expanded its AI-powered search capabilities into the consumer-packaged goods sector by enhancing Google Shopping.
The report emerges amid growing concerns that users are increasingly turning to chatbots for conversational search. This trend could disrupt the business models of some companies. Last month, online education firm Chegg announced that it would lay off about 248 employees as students opt for AI-powered tools like ChatGPT over traditional educational technology platforms.
“Publishers and other sites are feeling the pain from AI search. As they lose out on traffic, we’re seeing publishers lean into subscriptions and paid AI licensing deals to bolster revenue,” said Emarketer analyst Minda Smiley.
According to the report, current AI search ad spending constitutes approximately 0.7% of total search ad spending in the US. This figure is expected to grow significantly, reaching 1.3% by 2026, 2.8% by 2027, 7% by 2028, and 13.6% by 2029. Industries such as financial services, technology, telecom, and healthcare are actively adopting AI to enhance their advertising strategies, while the retail sector shows slower adoption, the report mentions.
Earlier this year, Adobe reported noting a substantial increase in Generative AI (GenAI) traffic to US retail sites from 1 November to 31 December 2024, with traffic rising by 1,300% compared to the previous year. This trend continued beyond the holiday season, with a 1,200% increase in February 2025 compared to July 2024 figures. Despite its modest share compared to other channels such as paid search or email, GenAI traffic has doubled every two months since September 2024.
Read more: 88% of US firms to increase AI budgets amid agentic AI adoption, finds survey
