Could Chatbots Kill the Search Advertising Star?

I can’t say I was surprised by findings from research firm L2 Marketing that Amazon’s virtual assistant Alexa is more likely to push Amazon Prime products on users seeking a variety of wares. There’s nothing scandalous in that—if I had an Alexa, I’d probably want it to look for Prime sellers first because… that’s what I do on Amazon’s website. I don’t want to pay extra for shipping.

But the news reminded me of something that had been spinning ‘round my brain since I attended the giant startup celebration known as Collision in New Orleans back in May. While I did run into some old ad tech comrades, I actually was in NOLA to escape my narrow world of header bidding, server-to-server, private marketplaces and other programmatic jargon. This may be blasphemy to some folks, but one can only talk about that stuff for so long without going crazy.

I had two goals at this conference: first, to hear from some of those elusive brand marketers and CMOs that hold the digital media’s fate in their hands via purse strings. And in the many panels and presentations I witnessed, I do not remember the term “programmatic” coming up once. I don’t remember any real talk of digital media—the brand people were much more interested in platforms that enabled conversations directly with consumers. (I have some thoughts on this preoccupation I hope to get to later.)

My second goal was to hear more about technology where digital advertising is merely scraping the surface. The virtual and augmented reality chats caught a lot of my attention, but despite some high-profile case studies, the advertising was pretty basic sponsorship models.  I was able to ask Niantic—creators of Pokemon Go—about monetization, and was almost a little disappointed that they’re sticking with a sponsorship model. But hey, if that’s bringing in revenue, who am I to judge? Even if location-based programmatic advertising could be really cool…

The topic that really grabbed me was complete a surprise: chatbots.

My Bot-Servants Will See to That…

For a while I’ve been receiving press releases about how chatbots will revolutionize digital media and advertising. But as someone who tends to stay deep in the weeds with ad tech, I’m having trouble wrapping my head around how chatbots could affect digital advertising and media monetization. Fortunately this was illuminated during a panel with Facebook about group messaging in Asia.

Services like WeChat in China don’t just enable conversations between friends; they allow for in-app shopping and search much in the same way most Americans hit up Google. In addition, some apply artificial intelligence to make suggestions on activities and products (occasionally sponsored); users don’t consider these interruptive because the value is easy to see.

Which brings us back to Alexa—if I’ve got a handy AI based in my connected device or within my favorite social network, why would I bother heading over to a search engine? Especially if said AI is keeping track of preferences and probably can serve up extremely relevant results (including advertising)?

Google has so dominated the search market that unconsciously most Americans refer to the act of online searching as “Googling.” (I did that once years ago in an interview with a Yahoo top dog, and he just laughed: “That’s exactly why we’re getting out of the search business.”) But its virtual assistant is bumping shoulders with the likes of Apple and Amazon—and the latter has a serious advantage with its gargantuan e-commerce (and growing brick and mortar commerce) business. On the messenger front, Google is far behind Facebook, and other parties (e.g., Snapchat, WeChat) are threatening to break in. Google will not own the “AI servant” market like it has search.

Advertisers follow consumers, so it seems highly likely if not inevitable that virtual assistants and chatbots will steal chunks of Google’s search advertising revenue. Transfering search marking budget to chatbots/virtual assistants makes perfect sense considering search traffic will decline with the dispersion of new technology.

When will those budgets shift and search marketing take a tumble? I don’t know—in the past week I’ve had multiple people in my Facebook feed asking what’s the point of a virtual assistant like Alexia. Personally, I have no need or desire for one. (And that speaker? PLEASE. I go for vintage audio equipment, which I don’t mind plugging into.)

However, I found out the other day I’m a “Xennial” (though I preferred the term “Cusper”). Basically I’m old—I remember the stone ages before the Internet (or even widespread use of personal computers… I REMEMBER WHEN WE GOT CABLE TV!) and came into adulthood as the web was a fussy toddler. (I don’t know if we’ve actually hit adolescence…) I’m set in my ways—Googling is almost hard-coded to my system, though I find I go directly to Amazon these days when I know I’m in-market for a product.

Adoption of virtual assistants and chatbots is going to start with the young’ens, as suggested by many of those cute commercials with toddlers getting information from virtual assistants. So the drain on search marketing will be slow, but I bet we start seeing it trickle down in the next few years—a step behind a drop in “traditional” search engine use.

How Fareth Digital Media?

My question, which I’m sure I share with many readers, is what does this mean for digital media monetization? Google still makes the majority of its revenue off of search advertising. That’s helped prop up its display and video biz, where the margins have been less favorable—a chief reason many have suggested to me that the company doesn’t invest enough money or labor into the Doubleclick for Publishers business, although it’s definitely king of publisher-side ad servers.

I would think Google would try to muscle up its display and video business, especially since Facebook is eating its lunch on the mobile side (for now). Exchange Bidding through Dynamic Allocation (EBDA) seems like a weak response to header integrations.

My guess is that Google will go on an acquisition spree to clear up the programmatic markets and consolidate unique demand sources—I’d think sooner to be safer. It will be interesting to see who turns down Google’s advances, because I imagine plenty of provider clients (i.e., buyers and bidders) will be eager to avoid the monolith for a variety of reasons.

But Google also may wait to see who survives consolidation among header tech companies before assessing the pickings. Hesitating might prove futile, though, as some of these have laid for are laying foundations to remain strong and independent.

A great person to ask about all this speculation is industry veteran Anthony Katsur, now the SVP of Platforms for quiet telecommunications giant Nexstar. Oh, and look—his keynote at the Publisher Forum in Montreal, Aug. 13-16, is on “The Path to Sustainability in Digital.” How convenient!