Direct Offers in Google AI Mode: Will They Reshape Advertising?

Google is currently trying a new ad format called Direct Offers in AI Mode.

With Direct Offers, advertisers can present exclusive incentives directly within the AI search experience. It enables advertisers to reach high-intent shoppers right in the moments they’re ready to convert.

So, what does this mean for the future of advertising on Google?

We sat down with our PPC expert, Colton Wilkinson, to get his thoughts.

If AI can predict exactly when a user is about to “abandon cart” and intervenes with a personalized offer, does this redefine the way we approach advertising?

Colton: Not necessarily — this really isn’t all that much functionally different then a promotion extension that you would run on a regular search ad, for instance. It’s just more interactive (and actually does a pretty good job of competing with ChatGPT ads without crossing the same lines).

I think functionally, the way you’re thinking about these types of promotions is essentially the same. This is just a cross between a promo extension, an abandoned cart email, and an interactive AI ad.

I do think though that this underscores the importance of incrementality measurement in the new age of search. Being able to measure how much a certain tactic recovered/added sales that you would’ve lost otherwise is the biggest way advertising measurement approach should change.

At what point does “personalized incentive” cross the line into “predatory pricing”?

Colton: I’m not sure that it necessarily can cross a line into predatory pricing in this instance.

My reasoning for that is to follow the money.

Google stands to make a lot more money if it can scale this feature to as many advertisers as possible than just Amazon for instance. As a result, it sort of prevents widescale predatory pricing — not to say that it doesn’t and won’t happen from time to time.

I just think it’s really only possible for it to be predatory pricing if the feature was only available to the biggest retailers in the world (which it’s not). But it then underscores the importance for SMBs to make sure they are taking advantage of all features to compete with the big guys.

If Google can facilitate the offer, the negotiation, and the transaction (via UCP), does Google become the “Everything Store” without ever holding inventory?

Colton: Short answer: yes.

Google wants to essentially become the “Amazon” of the entire Internet — if all ecommerce flows through them and they become “Fulfillment by Google” of sorts, they make a ton of money.

This is just another step closer to the realization of that strategy.

Is that really going to be realistic though? I think not.

There are too many people that are wary of purchasing through big companies like the Amazons and Googles of the world, so I think it will be improbable that they would become that large of a monopoly in that respect, but they are certainly taking steps toward being as close to that as possible.

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