Google in ‘tough position’ as it balances AI advances and advertising revenue
20 May 2025, 22:04
The tech giant used its annual developer conference to announce new AI tools, but one expert said this could affect traditional revenue streams.
Google is facing a “tough” balancing act of showing it can innovate in AI while maintaining its vital advertising revenue from its search engine, an expert has said.
On Tuesday, the tech giant announced that it was rolling out a new, optional version of its search engine entirely powered by artificial intelligence, which it said would enable users to ask longer, more complex queries.
It was part of a string of announcements around new AI tools coming to Google’s various services.
But Leo Gebbie, industry expert and principal analyst at CCS Insight, said the company would need to strike a delicate balance between showing it was a leader in AI, while also protecting the money it raises from its search engine, which makes up the “vast majority” of its revenue.
“As expected, Google is wrapping AI more tightly into its products and services than ever before. This includes Search, which will now get a dedicated AI mode,” he said.
“Any moves that Google makes to amend its Search product are of critical importance given that this contributes the vast majority of Google’s revenues on a quarter-by-quarter basis.
“The new interface appears to try and cut down on the number of web pages that users will need to navigate to, allowing Google to handle more complex inquiries within its own platform.
“For the end user, this should mean less time spent browsing the web itself, and more time spent talking with Google’s AI tools.
“What’s far from clear is how Google will include advertising here, how third-party websites will respond to a lack of traffic to their content, and – as always – whether AI can be trusted to provide trustworthy responses to users.
“These are major and existential questions for Google given how central Search is to its entire business model.
“Google is in a tough position. The pressure is on for the company to show the value of its AI investments and to integrate it into its biggest products, like Search, but with that comes the risk that it jeopardises these critical revenue streams.
“But as competitors ramp up their offerings and shareholders look for returns, it must continue to seek innovation.”
The rise of OpenAI’s ChatGPT following its launch in late 2022 sparked an AI arms race which has seen many of Silicon Valley’s most established names rush to introduce their own take on generative AI chatbots and integrate the emerging technology into their existing offerings, but with mixed results.
Both Google and Apple have had issues with their generative tools creating misleading or inaccurate content, and AI tools also remain the subject of concerns around their potential impact on the jobs market, as well as issues around data privacy and copyright, with the creative industries warning the technology could be huge damage to their sector.
