• by Joe Mandese  @mp_joemandese, June 14, 2024

Days after WPP's GroupM unit released estimates that more than two-thirds of advertising buys are now "AI-enabled," a Wall Street equities researcher following the sector has updated calculations for AI-related ad spending to include Google's "AI Overview" search ads, which leverage Google's Gemini chatbot technology to enhance search queries and results.

"We expect AI Overview advertising to generate $17 billion by 2027," New Street Research analyst Dan Salmon writes in an update sent to investors this morning.

Characterizing his estimates as conservative, Salmon projects AI Overview ads will generate $1.7 billion for Google next year, accounting for less than 1% of Google's total ad revenue, but will rise to $6.7 billion in 2026 (2.8% of Google's total), and $16.9 billion in 2027 (6.5% of Google's total).

It wasn't immediately clear from Salmon's analysis if the AI Overview contribution is entirely incremental to Google's ad sales, but it appears to be at least somewhat incremental as Salmon notes, "AIOs can drive multiple queries per placement as users will often re-generate answers."

Noting that Google has already disclosed that consumers have used AI Overviews "billions of times" through its search generative experience tests, which were launched May 10, 2023, Salmon projects it will generate 58 billion queries this year.

While it's been difficult to assess totals for pure-play AI-related media buys due to rapidly changing business models, earlier this year, Salmon released estimates that two companies alone -- Meta and Snap -- will generate $6.7 billion and $686 million, respectively, next year from ads sold on their AI chatbot agents.

Following a query by MediaPost, Salmon said New Street Research is in the process of revising the AI chatbot advertising estimates downward based on guidance from both Meta and Snap, and will issue revised figures soon.

In today's analysis Salmon groups Google's AI Overviews ads in a group of AI media developers including Meta, Snap, Microsoft and Perplexity that already have advertising as at least part of their business models (see below).