The rise of artificial intelligence is transforming the lucrative search business, but concerns about its impact on web traffic and companies relying on search results may be overblown. A study by the Pew Research Center found that users encountering an AI summary when searching are about half as likely to click on a traditional search result. Another survey from Bain found that 80% of consumers rely on these “zero-click” results in at least 40% of searches, reducing organic web traffic by approximately 15%-25%.
However, investors may be overestimating the impact on these companies. Wedbush Securities analyst Dan Ives said “The death of search is greatly exaggerated.” He pointed to Google-parent Alphabet’s latest quarterly figures as a sign that search remains strong. The company’s second-quarter earnings and revenue beat analyst expectations.
Its search engine business raked in $54.2 billion in sales, while advertising revenue expanded by 10% to $71.3 billion. Ives believes that Google and rivals such as Meta Platforms will learn how to monetize AI search. Bank of America analyst Justin Post wrote, “Google’s key KPIs (traffic, search share, & mobile DAUs) were relatively stable in July, despite rapidly growing AI adoption.
Data suggests AI-driven usage appears incremental, with growing adoption complementing, rather than significantly altering existing search activity.”
Not all companies will remain unaffected by the rise of AI search. Barclays anticipates that the impairments will become clearer over time.
AI’s impact on search traffic
The bank noted in a July report that as search referral traffic declines, companies can either maintain profit margins while their top line decelerates or supplement the loss of traffic by increasing spending on customer acquisition, compressing margins but keeping growth rates consistent. Barclays found that companies relying more on web traffic from search results versus direct traffic are likely to face larger disruptions. For example, TripAdvisor, with just 29% direct traffic, might be disadvantaged compared to Airbnb.
Companies with higher direct traffic are more insulated from the threat of AI to searches. Robert Pavlik of Dakota Wealth Management highlighted stocks that could be negatively impacted by AI search, such as eBay, NerdWallet, Wayfair, Booking Holdings, Airbnb, and Chegg. Wedbush’s Ives believes Expedia Group faces more headwinds compared to Booking Holdings due to weakened demand trends and higher exposure to advertising trends.
Still, both Pavlik and Ives believe the impact from AI on search will not be as negative as expected. Pavlik pointed out that while AI can help summarize search results, users will still need to click through to sites for products. “General searches may upset companies, but AI will still have to direct users somewhere,” he added.
Ives is bullish on Pinterest amid these shifts, citing the platform’s new initiatives on modernization and engagement. “I think the Street is underestimating what that’s going to look like,” he said.
