Why AI is boosting Meta's ad business while hurting Google search (www.cnbc.com)

Meta has reported a remarkable 26% increase in its advertising revenue, significantly outperforming Google's 12% growth in their search division. This shift reflects a broader trend in the digital advertising landscape as AI technologies, like ChatGPT and Claude, are reshaping consumer behavior and taking market share from traditional search engines. Analysts suggest this changing dynamic poses a serious threat to Google's advertising business, as chatbots offer more engaging and efficient information retrieval methods, thereby reducing click-through rates on traditional search results. For Meta, investments in AI have enhanced its ad targeting capabilities, allowing brands to connect more effectively with users on platforms like Facebook and Instagram. Tools such as the Meta AI business assistant have demonstrated tangible benefits for advertisers, with reported increases in conversion rates and significant returns on ad spend. Conversely, Google's growth has stagnated despite advancements in integrating AI into its ad products, as its search model faces competitive pressures from new AI-driven alternatives. Both companies are heavily investing in AI infrastructure, signaling an industry-wide pivot. However, while Google appears to have more diversified revenue streams, Meta remains heavily reliant on advertising, underscoring the urgency for both to adapt to these evolving technological trends.