The Digital Revolution: AI's Impact on Search and Advertising
The internet has long been a two-way messaging system, where users query search engines to find web pages, products, and services, while producers send paid ads to reach users. This system has been a cornerstone of online business models, with data trails left by consumers powering targeted advertising that generates revenue. Google Search, the dominant general search engine, epitomizes this strong link between search and advertising.
However, artificial intelligence services are transforming this web navigation landscape. AI can answer complex queries derived from original content, consulting webpages and saving users time and effort. While this is beneficial for users, it poses a challenge for online service providers, as it redirects user attention away from original content and revenue-generating advertising.
AI 'answer engines' also complement general search engines, excelling at answering complex questions that search engines cannot. Search engine providers are now switching between search and answer on the same page, depending on the query. Search engines thrive on data-driven network effects, resulting in monopolistic markets like Google Search. AI models, however, do not exhibit network effects, although harvesting user data and leveraging search engine data in AI could open that possibility.
The competition in search supported by AI aligns with policymakers' efforts to weaken Google Search's monopolistic position, notably by obliging Google to share data with competitors. Yet, these remedies have not yielded tangible results. As AI pressure mounts, competition policymakers may need to reconsider their approaches to Google's dominant position in search and advertising markets.
About the Authors
Bertin Martens, a Senior Fellow at Bruegel, specializes in the digital economy, covering economic and regulatory issues in digital data markets and online platforms. He explores the impact of digital technology on institutions in society and the long-term evolution of knowledge accumulation and transmission systems in human societies. Martens also focuses on online services trade, e-commerce, geo-blocking, and copyright in digital media. He is fluent in English, French, and Dutch and is a Non-resident Research Fellow at the Tilburg Law & Economics Centre (TILEC). Previously, he worked as a Senior Economist and team leader for the Digital Economy research programme at the Joint Research Centre (Seville) of the European Commission, and as deputy Chief Economist for Trade in the European Commission. He holds a PhD in Economics from the Vrije Universiteit Brussel.
