The AI Ad Paradox: Search gets pricier, programmatic gets smarter

AI was supposed to make advertising more efficient, scalable, and precise. And in many channels, it has. But in search? It’s a bit complicated.

As AI Overviews dominate our Google results, we’re seeing a fundamental shift in how people interact with search. Users are getting the information they need straight from AI summaries without ever clicking on a link. For performance marketers who rely on high-intent traffic and measurable outcomes, this shift is introducing new and unexpected challenges.

This is the paradox: while AI is reducing the effectiveness of paid search, it is unlocking smarter performance in programmatic channels.

The paid search paradox

Search is under pressure. There’s more queries than ever, but clicks are dwindling. Google’s AI Overviews now answer many questions directly in the search results, eliminating the need to click through to organic or paid links.

A recent Pew Research study found that only 8% of users who encounter an AI summary click on a traditional result link. In contrast, those who did not see an AI summary clicked on a search result nearly twice as often (15% of visits). And if you’re thinking that advertising within the AI summary itself is the answer, keep this in mind: Only 1% of users click on links embedded in AI Overviews.

The irony here is striking. AI is often seen as advertising’s optimization savior. But in paid search, it is actually making media buying less efficient. As a result, search ad spending is forecast to take a nosedive in the coming years.

Consider this: as AI reduces organic visibility, brands are forced to compete harder for the remaining paid placements. This increases CPC while reducing overall campaign efficiency. Forecasts already predict that search ad spending growth will slow significantly over the next few years.

The implication for media buyers? Higher spend and lower return, especially in competitive search categories such as finance, insurance, and retail.

Why programmatic thrives in the AI era

While AI is squeezing value out of search, it’s creating new opportunities in programmatic channels. Mobile in-app, CTV, and DOOH are all harnessing the power of AI to drive results. For example, AI is being used to:

• Optimize bids in real time
• Improve audience segmentation and targeting
• Streamline cross-channel delivery
• Unify fragmented inventory across apps and platforms

Programmatic is where AI delivers on its promise: smarter automation, better performance, and less waste.

Let’s look at the numbers. Last year, paid search CPCs in the competitive financial sector rose from $1.44 in Q1 to $1.73 by Q4 (a 20% increase). Meanwhile, programmatic CPCs dropped from $56.99 in Q1 to just $13.77 in Q4 (a 75% decrease). That’s a massive shift in ROI.

Programmatic advertising also benefits from changing consumer behavior. Our recent survey of 4,000 consumers found that their openness to watch ads for free in-app content is increasing. In fact, 67% of users are more willing to watch ads for free content than two years prior. This means higher engagement, longer sessions, and more monetizable impressions.

These programmatic channels are also inherently more flexible than search. With AI-enabled tools, advertisers can dynamically reallocate budgets, test creative variations, and fine-tune targeting based on real-time results.

Get AI-driven results

Where AI creates cost in search, it creates value in programmatic. Verve’s platform is built to help advertisers and media buyers take full advantage of AI for performance marketing. AI agents automate time-consuming ad ops tasks. Predictive models analyze behavioral signals to deliver smarter targeting across formats and devices. And real-time optimization ensures your campaigns are always aligned to performance KPIs.

Verve’s AI-powered traffic curation helped Smadex manage traffic surges while maintaining campaign performance. By analyzing bidding patterns, this machine learning technology optimizes settings to reach more relevant audiences, reduce overhead costs, and, ultimately, improve ROI.

Rethink where your next ad dollar goes.

Search is still important, but it’s not the performance driver that it used to be. For brands seeking real performance and scale, AI-enabled programmatic offers a smarter path. Whether you’re buying mobile, CTV, or DOOH, Verve can ensure your spend is optimized, automated, and accountable.

Want to see how AI can work for your campaigns (not against them)? Get in touch.