Growing Ecommerce – The Retail Growth Podcast

Google & OpenAI are FORCING You to Pay: The AI Ad Overhaul

• Smarter Ecommerce • Season 4 • Episode 14

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It's here! Ads are officially landing inside your AI search results, and Google’s not asking for permission. 

In this episode, Mike Ryan and Chris break down the massive global rollout of AI Overviews (AIO) and AI Mode (AIM). They reveal the experimental phase where ads will soon appear inside the AI content itself, and expose the most critical issue: advertisers currently have neither an opt-in nor an opt-out for these new properties. This means your existing ad budget is being automatically pushed into this new environment—a fundamental shift in search since the smartphone.

But the real disruption isn't just Google—it's OpenAI. They've launched an aggressive e-commerce shopping assistant model, complete with in-chat checkout and integrated with giants like Walmart and Target.Our hosts explain why this completely changes the game, essentially turning the AI into a marketplace. They discuss the only way retailers can survive this new reality: providing maximum information density (feeds, structured data, landing pages) to be visible to the AI, even as you are forced to compete in its new commission-based ecosystem.



About smec (Smarter Ecommerce):

At smec - Smarter Ecommerce, we specialize in transforming business goals into optimized ad campaigns. With over 16 years of experience in Google & Microsoft Ads, our intelligent software and expert services help retailers achieve superior results.

We're committed to giving you the tools and insights needed to stay ahead in the ever-evolving world of digital advertising.

Make sure to follow smec - Smarter Ecommerce for more performance marketing insights:

SPEAKER_01:

Welcome to another episode of Growing E-Commerce. I'm your host, Mike Ryan, and with me today is Chris. Just Chris.

SPEAKER_00:

That's our rolling thing now, huh? Yes. Man, it's it's I always say it's a pleasure being with you. Actually, it's it's more than that. I feel honored. I feel honored, man. Just the other day, I'm not kidding, man. Uh, you know, I'm talking with a lot of clients of us and it's fascinating. How many of our clients? No, look, give me, give me that now. Don't just know you, they are in awe. You know, when when when the name Mike Ryan drops, it's like, yeah, yeah, I know him. Is he here? Can can I talk to him? It's fun, man. It's really fun. It's an honor. Like completely ridiculous, but I'll allow it. Wait, give me give me that. But and it comes comes from the bottom of my heart. I I know. And it's true, man. You do a fantastic job. Really? I appreciate it. We're super glad having you.

SPEAKER_01:

I I appreciate it. I'm just I'm just sharing the knowledge that I get here and that from the conversations that we have in here. So that's all it is. Nice great. Let's let's have a good episode. Now that I'm blushing, let's kick it off with You want to do another intro? No, I'm good. Let's kick it off with I can't survive another one of those. Let's kick it off with the topic that is gonna be coming up more and more in the in the year ahead. Yes. And that is ads in AI overviews and ads in AI mode. Mode. AIO and AIM aim. I don't know.

SPEAKER_00:

AI has to be in there in order to be a good product.

SPEAKER_01:

Yeah. So this is I mean, here in Europe, AI mode debuted a couple of weeks ago at the time of airing. Have you? I mean, you you you found it now, right?

SPEAKER_00:

It was was life in okay.

SPEAKER_01:

It took you know, they announced it and it took me probably another week before it rolled out on my account.

SPEAKER_00:

Uh have you seen it? I've seen it, but it was on and off. Uh it's it's it's it's interesting. I think a couple of weeks ago they they launched it in what was it, fifty countries, fifty languages? I don't know. Yeah, it was a huge rollout.

SPEAKER_01:

Yeah, exactly. And you know, I think both of them are now in over 200 more. Sure, okay. And and basically every language you could wish for more or less is supported. So yeah, it's it's getting pretty big. And now comes monetizing that. Sorry, what do you want to say?

SPEAKER_00:

No, because it it it's becoming big, and you know, you you have been covering this a lot, I have been covering this a lot. The big question is okay, they have these great products now. When and and and and how does the the money train and you know, you know, come and what's the monetization strategy? We both talked about it rather sooner than later. There will be ads embedded in some way, shape, or form. And we can talk about that right now, right? It it it has happened.

SPEAKER_01:

Yeah, exactly. I mean, there there are some details that we can share here. It's uh actually a lot of a lot of things are are not known yet or not and and can't be known. But I mean, sort of to kick it off, there are these two surfaces, AI overviews, which of course are the auto-generated summaries, the blah, blah, that appear in a lot of disclaimers. It's funny because like Google has this uh Venn diagram and they they have a disclaimer that it's not proportionate, but they basically show like, you know, there's all their search queries. And then there are these this subset of search queries where there's no one right answer or where they're very long, detailed queries. And this is what will trigger an AI overview to appear on. And in my experience, it appears on 99%. Yes. For the easiest questions. Yeah. Anything. Anything. Also, what pisses me off, by the way, is that I've gotten very lazy with my typing on my smartphone because I when I especially um when I'm Googling, because I don't need to be like they they figure out my worst typos. They know you and I can type the words in any which order, it doesn't matter, and they'll sort it out. Um that was the magic of the Google search engine result page, which I think that experience peaked a couple years ago. And now sometimes instead of straightening out my typos for me, they'll serve me an AI overview that's trying to make sense of the nonsense I typed in. It's hurting. It's hurting.

SPEAKER_00:

By the way, they have to work on that. It's not good.

SPEAKER_01:

It's not good. This is this is a tangent, but I find it they're to me, they're really over-delivering the AI overviews. Yes. I do I do come to Google search for Google search results still. So the other surface, of course, is AI mode, which is much more like their version of ChatGPT.

SPEAKER_00:

By the way, going strong, right? Over over 100 million active users. Yeah. Already it's probably more.

SPEAKER_01:

Yeah, and they'll be they'll be pushing it. You know, they're pushing it really on their domain homepage and everywhere.

SPEAKER_00:

They're pushing it hard. All right. So these are the two flagship cheminy powered products. I would say directly embedded now in the search resource page. Exactly. And what's going on with with ads now?

SPEAKER_01:

Well, ads can serve adjacent to these, to the AI contents. So for example, it it'll spit out an AI overview, and it can ads can appear above or below, and that's already happening in every market and every language that's done. And then ads can also appear adjacent to AI mode, to the AI content of AI mode. And then what's really the next step of this is that ads will start to appear inside of the AI content. Yes. And that's that's gonna be the the big thing. So, you know, right now the ads in AI mode and within these and within the AI content, this is limited to the US, to English, and there's also it's limited to mobile and desktop. I mean, that's most of the traffic. Anyway, yeah. But so it's in an experimental phase through Q4 2025. Yeah. We'll have ads inside of AI overviews by the end of the year in other markets, maybe even by the time this episode airs, who knows? And we'll see how long it takes with the AI mode stuff. But uh yeah, in the next six months, let's say.

SPEAKER_00:

And man, it's so it's so disrupt disruptive and dynamic times. And by the way, I love it because I think there although there are so many untackled questions, for instance, how I mean down the line, how can I make sure that if there's this new shopping assistant, which open I mean, uh when we talk about AI mode, it it will become a shopping assistant at some point of time. For sure. How can I make sure that I get get get get shown? What what can I do to to be favored by the shopping assistant? What about the ad rack, right? I mean, there are so many questions, and I love these dynamic times because I feel like that we are really on this topic all over the place. Again, spearheaded by you. We will talk about that for a long time now and and great, great insights will will pop up here. And I think it's it's it's might it might be a threat because it's unknown. Yeah. I think there are a lot of chances for for retailers who who know their stuff. I I think it's a big, big thing.

SPEAKER_01:

I I think so too. I mean, we talked about in a previous episode about this intermediate phase and and this curve that will happen with maybe traffic to websites declining and AI facilitated purchases increasing. And we don't know how sharp those curves will be. But I mean, in the in the first place, I think what we talked about in the past too is that like Google has chosen not to expose AI overviews on e-commerce queries that much. Um and that's something that's totally in their control and that they can pace. But AI mode is not in their control because it depends on how the user will use it. And they face pressure from other platforms who are going aggressively on this e-commerce shopping assistant thing. So they're gonna be forced to do this.

SPEAKER_00:

Forced at some point of time. And I think the big thing we talked the other day about it, as of now, you you don't have any clue if let's say the AI mode serves, I don't know, uh at inventory of let's say PMAX. You don't know if the PMAX ad triggered by AI mode works any differently compared to So I think Google is just to finish off one. I think they're they don't they are they just don't know Google how this will play out, how this works. But there's certain pressure on them, so they they have to try it out. And I think they do it by doing it smartly most of the time. But it it it will be so interesting, right? Is is the different type of search behavior which certainly will occur for the end user of Google using AI mode, there will be different types of search queries, and how will the the ads perform there? For me, it's the biggest question, right?

SPEAKER_01:

Yeah.

SPEAKER_00:

Yeah, I'm I'm curious on that. And we have you, you will find this up, man, together with our teams. Uh absolutely.

SPEAKER_01:

And I mean, we we have to be permitted by Google to find this up. That's a step like to talk about the status quo here. I mean, Google Google's statements about how the performance is and stuff like that, it is very Wall Street oriented, to be honest. Like you can jump into the FAQ and it feels like it's not written for an advertiser. It feels like it's written for See the CFO had had his hands on it. Yeah. Like so someone someone who's looking for any sci-like there are questions in there like the tick rate stuff? Exactly. Will will this will this decline? Will this have a negative impact on the amount of ads being shown? Will this have a negative impact on the click-through rate of ads? And so on. Like these are because people want it because that's Google's revenue stream. Superlegric question. Yeah. It's a very legitimate question, both for shareholders to ask, is it what's going to happen to your main revenue stream, and also for advertisers who have a business dependency on this channel, they want to know these things too. And the answers are very fluffy, not a lot of substance in them.

SPEAKER_00:

Fluffy is a very you're you're very kind. You're very kind. How would you characterize it, Chris? Not the right time to talk something. But they're fluffy. Yeah. And by the way, it's not about the shareholders only. I mean, I understand, but it's about the online retailers, right? I want to know what's going on there. Yeah. And as far as I know, the online retailer can't even control if I'm shown now in iMode, right? With that.

SPEAKER_01:

No, neither nor. Like you cannot target these properties and say, I want to appear here. And you also can't opt out if you don't want to appear here. So if you are running and another thing about this, you know, I talked about PowerPack on a recent monologue. We've talked about it. I think we've covered PowerPack, but Google has sales slides where it says the key to winning AI search is the PowerPoint. PowerPack. And it's completely misleading, actually. Because you can appear in these and you will appear in these properties with standard shopping campaigns and standard search campaigns with broad match. Um and another part of the PowerPack, DemandGen, does not serve on these properties at all. Which so which will change, I assume. I probably somehow. But it's it's right now very misleading to say actually maybe yeah, that's another topic. But it's very I don't know if Demand Gen will because it doesn't tackle search network. But but at any rate, it's extremely misleading some of these sales slides. The sales slides are also very confident. They're saying like the ability to match intent has never been higher. And I actually think it's a very challenging moment for Google. Of course. These queries are new, these behaviors are new. It will become paragraphs. Yeah, exactly. Like it's not just hard for a retailer to keyword bid on something like that. It's hard for their for their algorithms for sure. They don't have historical performance data for this. No doubt about it. It's all long tail.

SPEAKER_00:

And it's all new. Yeah. Because it the the the search behavior will change. Because one thing is for sure. I think Google implicitly or explicitly educated the user, right? I know how to search for a product. Yeah. And it's certainly not a natural language-based search query. For instance, I'm an ambitious tennis player and I want, I don't know, a tennis shoe for indoor between 100 and 200 euros. If you put that in Google, you you get shitty results. This will change now, I assume. Yeah. But these search queries will be new to Google as well.

SPEAKER_01:

Yeah, I mean, long term it's a demographic dream because people will volunteer maybe more about themselves and what they're in market for in an explicit way. It's an online beratungsgespräch, help me out on your uh Yeah, like uh a consultant. Consultant, yeah, like it's a good idea.

SPEAKER_00:

I think uh it down the line it will be good for us. For for for the Google end user, it will be good. Yeah. The question is what about the online retailer? How how to deal with that? And how can I make sure that these because the the the the the the the matching of intent versus product, this is in Google's hands more or less. But the question is okay, how can I make sure that I I can push that? Yeah. As an online retailer, what what can and should I do? I mean one of the biggest questions.

SPEAKER_01:

We talked about it last episode, we're talking about first party data and we'll never tire of it. But this is, I mean, what you need to think of here is that if someone is creating imagine that someone is creating one of these very detailed queries that Google likes to showcase with a lot of very specific context, very specific features and stuff. Basically they're doing all the work. Normally someone might land on your on your website, still really in browsing mode, and they'd use your product filters and your site taxonomy categories to find their way around. And by the way, they might upsell and buy some other things along their way. But now they'll theoretically do all of this qualification through the prompt and either arrive on a website pre-qualified or potentially in future do a checkout in the chat, whatever. But what I want to say is in order for you to appear, because you need to be relevant to the query and to the AI content in these ads and also organically, so you need as much information density as possible. Yes, yes, yes. Because if like, you know, if they're asking about, I don't know, vegan alternative, this specification, that, et cetera, if Google doesn't know that from your feed, if they can't learn about that from your landing. You're cooked. You're cooked. You're not visible. You're cooked. The person who makes this information available. So you need to have really excellent landing pages. You need to have excellent structured data that probably lives with your organic team. The landing pages probably live with your e-commerce team. You need to have a really detailed feed with as many attributes as possible that leaves with you with your paid team. Yes. So all these teams need to work together to tackle.

SPEAKER_00:

And it's a hell of a challenge. Yeah. I mean, don't get me wrong. And I think it's more important than ever to, when you create content, to walk in the shoe of the client. Because the type of search behavior, it will change. Like I said, it will be this online consultancy type of search query. And I I know for a fact that a lot of unreal retailers don't have that type of content ready in a structured way, first and foremost.

SPEAKER_01:

The crazy thing, Chris, is that this is what we should have been doing all along. All along the good customer. I know. But now the funny thing is because we just relied that consumers would do this labor for the yeah. They'd land on your website, they would do this labor forward. Exactly. But when people offboard that labor to AI, either if you haven't done it, because the AI is either you're going to be dealing with it. Exactly. Or not. And the question is, yeah, like it's sad, but we need to wait for machine brains to start optimizing towards human brains.

SPEAKER_00:

A and B, of course, we we need to wait to to get more and more details from Google directly.

SPEAKER_01:

Yeah, and just yeah, to bring maybe we've gone off topic here a bit, but I mean just to recap that, like there's no opt-in or opt-out. There's no segmented reporting.

SPEAKER_00:

You don't know actually. And it's happening. The ads are either adjacent or directly embedded in AOs and it's already happening.

SPEAKER_01:

And Google will not tell us what the impact is on really advertising volume. I actually think it's neutral positive or click-through rate. I think it's probably negative. But you might, yeah, we'll see how it goes. But the the short answer is that right now we don't know anything about it.

SPEAKER_00:

We don't know anything. We know it's happening. We know what potential leverages the online retailer has, and we will be all all over the place and then on this thing with with with all the force we have. Because this is the future of search, right? It's it's happening now. The future is now. I love it, but there are challenges ahead of us. Yes. Talking about we we partially talked about this, uh, the the the pressure. By the way, our our CEO was invited to to Mountain View uh and had had some great, great conversations with with Hallab and Google reps. And what what we feel is like, yes, I mean Google is the dominating force. We talked about that. 90% of global search queries goes through Google. Yeah, yeah. But I think they are very, very aware uh about what OpenAI and then Perplexity are doing. That that's that that's a feeling we have, and rightfully so. OpenAI, talking about that, right? There has been now from my perspective, a massive move. For sure. Which will dictate somehow what the next move on Google's side will be. Mike, shed some light on it, please.

SPEAKER_01:

Yeah, I mean, OpenAI has done a couple things. They've they've rolled out their their in-chat checkout and Shopify is integrated. Etsy is integrated. These were the first partners, kind of the flagship partners. I think we can I think Shopify makes a lot of sense to be in there. I think Etsy, I'm not so sure. That's usually the kind of things where people maybe wanna I I think people buy really personal, I I don't know, maybe they want to use AI for that, but yeah. And meanwhile, they've also they're launching effectively an app store. And, you know, Walmart has signed on, Target has signed on. I think Target's gonna have an app. It's crazy.

SPEAKER_00:

These are huge players. By the way, before we talk about that move, isn't it interesting that Target and Walmart are jumping on that board, on that boat? Because as far as I see it, this will eat into the marketplace business model, especially of Walmart, right? Yeah. What what what what's the thought process here on Walmart's side?

SPEAKER_01:

It's a great question. I mean, I definitely see it long term as a threat because yeah, all of the these marketplaces they serve as an infinite digital shelf where there's a lot of comparison possibilities, a lot of selection. Um, and now that comparison happens in someone else's place. Exactly, yeah and the checkout happens somewhere else. I mean that transaction data is hugely important. So I think they definitely need to come to an understanding about sharing transaction data. Um they won't want to lose that data. But it's I guess forward thinking of of Walmart, or maybe they just view I don't know how they view it. If they view the volume as insignificant, I don't know where they assess that waterline risk, but they they must see, you know, in this kind of game theory way or something, there must be more advantages of cooperating right now than competing.

SPEAKER_00:

Another way to think about it is if if if it's really seen as as a threat, then I think, I mean, Walmart is by the way, they are doing doing a fantastic job. Hats off, they great company. And I think their marketplace strategy pays off uh tremendously. But what what I think they might also be thinking about okay, this is a big threat. Let's take this this threat by the horns. Let's be part of this threat to really understand what's going on there. Yeah, it's certainly fascinating. I mean, back to Open AI. That means, Mark, if I understood you correctly, you can now buy directly in the app. We have been talking about that, that this movie's coming. It's I think even earlier than expected. Yeah. But you can now buy products directly in the app.

SPEAKER_01:

Exactly. Right now, it's still pretty primitive from an e-commerce standpoint. Like I think what they need personally, I I've said this all along. I think that there needs to be a standalone specialized e-commerce shopping app. Or, you know, they can have their I think it is sort of a tab that they can have a tabbed experience available. But their need, you need e-commerce special, and it's not wrong what people have been doing on their websites. It's not wrong what people have been doing on marketplaces or in places like Google Shopping. I think all of that rich media and stuff like that needs to be integrated. And but if you know, for right now, it's pretty primitive, and you can just buy, as far as I understand, one product. One product. So that's not great from a shopping standpoint. It's also not great as a like you want to have larger basket values in that.

SPEAKER_00:

But a first step. It's the first step. I think most important assign what what's about happening right now. It's it's really again crazy times. Yeah. Honestly, Mike, I mean, we have been in the business now for what is 15 years, let's say. I think, man, probably the the the the most dynamic times I've I've ever been. I mean, I I can remember when the PLAs got launched. This was huge.

SPEAKER_01:

Yeah.

SPEAKER_00:

I can remember when DSAs were launched, yeah. Huge. But this feels now more fundamental. Uh uh I don't know.

SPEAKER_01:

I think it's the biggest thing since smartphones and definitely on par with that and probably be bigger. Big up, yeah.

SPEAKER_00:

All right, man. Great, great insights here. I mean, one one one last thing. Talking about Walmart. Yeah. You have some some interesting data here, right?

SPEAKER_01:

Yeah, one one more thing. If we talk about Walmart and OpenAI, saw some pretty big figures from the last complete month, September, that OpenAI, OpenAI accounted for 32% of Walmart's referral. Holy shit. So that means, you know, any website sending traffic to Amazon, it's coming in with that little UTM parameter equals chat GPT. And this is, I think it was probably estimated using similar web or however, but 32% of referral traffic. It sounds very impressive. And it's up from 21% in August. This is this is a messy. That's big rough.

SPEAKER_00:

However, Walmart is so big, right? How how what's the overall share of this traffic?

SPEAKER_01:

Well, you have to understand. It's so funny.

SPEAKER_00:

This is statistics one-on-one, right? How to frame data. So 30, again, one-third of traffic sent from other websites to Walmart is coming through ChatGPD. Exactly.

SPEAKER_01:

And by the before I proceed, I want to break news, yeah. Exactly. I also I want to give a I want to give a shout out to Joe from Marketplace Pulse for writing this up and he's a friend of the podcast. I mentioned Joe a lot. But he's a good guy, yeah. Yeah, he he brought this to my attention actually. But so is it is it a is it breaking news or is it a nothing burger? It's a little bit of both. Okay. Because Walmart, as you said, Walmart is huge. Their brand power is massive. They have a huge amount of direct traffic. That's people typing Walmart.com. They have a huge amount of paid ads. Those are their two biggest sources. So referral traffic is only 4% of their total traffic. Okay. And that means this boils down to like, I don't know, roughly 1% or something of their total volume. Okay. Got it. So just to put it in perspective. I mean, on the other hand, not everyone is Walmart. And for other retailers, other marketplaces, referral traffic might be a lot more. They probably don't have that massive pool of direct traffic that you associate with a mega brand. They probably do have a lot of paid ads. For sure, yeah. But it's it's something. Something to look at, yeah.

SPEAKER_00:

And a massive move. A massive move, I think, because it's a sign to come. And yeah, we will we'll we'll figure it out. I mean, what what what do you think? I mean, they they took the decision now. Next step will probably be that they they enrich this feature, right? Uh I mean they will probably you can buy more than one product pretty soon.

SPEAKER_01:

Oh, for sure. They've they've got to they've got to uh add on a lot. And I could imagine an end state what uh and and by the way, I want to just say Google is not because Google knows these e-commerce basics and they have much more robust features that could potentially step in here. But open AI is learning some kind of basic lessons, but they will learn them. They're gonna invest a lot here. I think there could be an end state where you are buying multiple products from multiple retailers. It's a you a universal cart. I'm not such a believer that this will be fully agentic, that it will be end-to-end automated with, you know, AI actually doing the shopping for you. A lot of energy and investment is being made here, but I'm a skeptic. But I do think that a shopping assistant use case makes a lot. But what I would want is really to have this be a one-stop shop where, you know, if I'm if I'm on Amazon, I'm building a cart of multiple items from multiple sellers. Um, there will be brands, there will be sellers, it's all mixed together, and I click check up. Um, and I think that's where this must head is building up your cart and checking out. And that will be.

SPEAKER_00:

And it will be so interesting when this feature really becomes, you know, I don't know, rolled out in in in a way that it really has an impact on shopping behavior. The big question then will be does this do anything to the market share of Google? Do we see shifts here? I mean, it's yeah, I'm I'm really curious. But yeah, big move by by OpenAI and Chat GPD, and then let's see where this where this ends up. Dynamic, crazy times. Absolutely. Mike, time flies. I think it's time for the outro. All right. No, no, I'm not I'm not I'm not in. There will be a point of time I will I will I will do it. But not today. And man, the level of your outro is just go ahead, Mike. I've been I've been doing the podcast for a few years, so I have a few of these under my belt. You became your second nature, man. And what you know, I I probably can do it, you know, on a semantic basis, maybe almost as charmingly as you, but the voice, man. What can I do about my voice? I can't change it. Yours is just that, Mike.

SPEAKER_01:

All right, so this has been another episode of Growing E-Commerce. Thank you for listening. You this podcast is brought to you now. I'm off my game, man. This podcast is brought to you by Smarter Ecommerce. You can learn more at smarter-ecommerce.com. Please, if you enjoyed the podcast, recommend us to a friend, a coworker, give us a five star review on a podcast platform. And yeah, you really threw me off my game here, Chris. Thanks again. We'll see you next time.

SPEAKER_00:

Bye bye.