For the past two decades, we have seen companies spend billions buying their way to the top of search engine results. Now, AI-powered search is changing how consumers discover information, potentially altering the value of that investment.
Following Alphabet's October earnings announcement, Google's parent company saw its stock fall more than 12 percent on October 29. One concern was the economics of AI-powered search, a change that Google implemented on its own search algorithm. Google acknowledged that queries through its AI mode generate less advertising revenue than its traditional searches, even as the company’s overall search advertising business continues to grow.
These changes are driving corporate leaders to reconsider decisions that made financial sense at one time. Organizational leaders are now asking what happens when online discovery is less dependent on buying placement and more on becoming a source that AI systems recognize as credible and referenceable?
The rise of digital advertising transformed corporate communications budgets during the past twenty years. Search advertising, paid social media, and sophisticated digital targeting offered executives measurable visibility and a direct connection to their customers.
These paid advertising tools shaped companies’ investment decisions. Gartner's 2024 research found that companies were prioritizing paid media budgets while reducing their spending on agencies. By the following year, 39 percent of surveyed marketing leaders planned further agency cuts. Across many organizations, communications departments often saw activities such as media training, outside public relations counsel, and travel to industry conferences face similar scrutiny. These expenditures were easy to question when their returns could not be measured as immediately as digital clicks and online conversions.
But now the economics of discovery are shifting.
Just last year, a Pew Research Center study found that Google users clicked traditional search results in only 8 percent of their visits when an AI-generated summary appeared, compared with 15 percent when search results did not display an AI-generated summary.
The shift we are witnessing has implications for how companies are choosing to establish their marketplace presence.
Gartner has predicted that the growing adoption of AI-powered search will drive public relations and earned media budgets to double by the end of 2026. Additional research examining more than 158,000 AI-generated answers suggests that retrieval relevance and an AI model's brand familiarity helps determine which sources receive citations.
While recent studies and expert forecasts like these do not guarantee that investing in public relations will earn a placement in an AI-generated answer, they suggest that a company's broader public record deserves renewed look by organizational leaders.
Companies build their public perception in many ways, from securing earned media coverage and producing original research to sharing their expertise at major industry conferences. When executives become thought leaders by contributing to important industry conversations, publish original ideas, or collaborate with universities and professional associations, they create new opportunities for their companies to become recognized sources.
These tried-and-true public relations activities have always helped companies generate awareness and credibility. But now, they may also be shaping how organizations are being perceived when customers, clients, investors, partners, and other stakeholders increasingly turn to AI to answer their questions.
Paid advertising is not going away. But companies that spent years optimizing their paid media strategies may need to reconsider the communications activities they previously reduced, eliminated, or considered expendable.
The next competitive advantage may belong to the organizations that are first to recognize the difference between buying attention and earning a place in the conversation.
This CEO commentary was written by Robert Krueger, executive director at The Communications Board ®.
