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Retail media – encompassing Amazon, Walmart, Alibaba and others – is set to draw over a quarter ($93.8bn) of all search advertising spend this year

Search marketing is on the cusp of its most consequential transformation since Google first introduced its sponsored keyword search auction over 20 years ago, and the more recent introduction of the use of data and algorithms to provide greater personalisation in search results.

Now a third era of search beckons – one defined as much by image or video as text, and by artificial intelligence and natural language processing, in which marketers shift from targeting keywords to targeting intent and context.

WARC Media’s latest Global Advertising Trends report, Search 3.0, explores the impact of retail media on advertisers’ paid search investments, the growing role of social platforms on search journeys, and the rise of generative AI search.

Author of the report, Alex Brownsell, Head of Content, WARC Media, says: “The search market is on the cusp of an era of innovation. Google’s long-standing market dominance is set to come under unprecedented pressure as consumers pivot away from text-based search towards discovery on social, generative AI reinvents the search experience, and the explosive growth of retail media, the majority of which is search-orientated, continues.”

Steady growth for search, even in tough times

Amidst an ongoing digital ad market slowdown, traditional search spend (excluding retail media) is proving to be resilient. While global advertising investment is forecast to grow just 2.9% to $907.2bn this year, paid search, the largest media channel by ad spend globally, is set to increase 6.2% according to WARC Media. 

40% of the global search market is in the US, where WARC Media forecasts a robust 12% growth rate this year, taking its value to nearly $100bn. 

In APAC, where social commerce is far more established, paid search’s share of advertising budgets falls to 17%. Japan, the APAC market outside of China with the biggest search spend, is forecast to see search investment expand to $7.4bn in 2023. In China search spend is expected to grow to ¥131bn ($19bn).

The search market, including retail media, is forecast to reach $350.4bn in 2023

Retail media has transformed the search advertising market over the last few years. According to WARC Media and GroupM forecasts, total search advertising spend, is set to be worth $350.4bn this year, of which just over a quarter (26.8%) will come from retail media, valued at $93.8bn.

As brands commit more budget towards retail media, and the number of platforms increase, marketers may be forced to make trade offs where their ad spend goes. Advertisers will also need to rethink their approach to paid search and SEO, and particularly how their brands show up towards the bottom of the purchase funnel.

Search experiences are fragmenting across platforms

Younger audiences increasingly favour searching for information and inspiration on visual platforms such as TikTok, Instagram, Pinterest and YouTube or RED, Douyin and Zhihu in China. According to data from GWI, in 2020, 19.2% of internet users turned to TikTok to search, rising to 27.5% last year. 

As search evolves into a “system for exploration” and search strategies diverge depending on category and demographic, Google’s dominance of the global search advertising market is being challenged.

According to WARC Media, whilst Google remains the dominant force in search and is forecast to earn $176.4bn in advertising revenue in 2023, its share of total search, which includes retail media, is set to drop from 51.0% in 2021 to 50.4% in 2023. 

Over half (53%) of global advertisers surveyed by WARC for The Marketer’s Toolkit 2023 report said they plan to increase ad investment with Google this year, down from 59% the previous year. 

Generative AI threatens to disrupt search behaviour

A race has begun to develop the most compelling AI chatbot search product. Microsoft plans to incorporate OpenAI’s ChatGPT – estimated to have become the fastest-growing app in history, reaching 100 million monthly active users in only two months – into Bing. 

However, as it stands, Bing is only forecast to earn a 5.2% share of the global search market in 2023, per WARC Media. Yet the news was deemed a “code red” situation for Google, which has subsequently rushed to launch Bard, its conversation technology.

The arrival of generative AI will cause major considerations for brands, such as how paid ads will fit into the conversational nature of the content, the partiality of chatbot responses, risk of content misinformation and misalignment with brand guidelines.