How AI Search Engines Will Monetise

Like it or not, and I am very much in the not camp, LLM-powered results are coming to a search engine near you. What started out as their own little silo front end with ChatGPT and Gemini has started to spew over into every website on the planet.

Sites everywhere are trying to force chatbots or some LLM on us; why? I have no idea, but let them cook!

None more so than the big boys.

After Bing added ChatGPT-powered answers to its search engine, Google thought it couldn't be left out and added Gemini to its SERPS.

Did we get a choice? No, you will receive AI slop on your SERP and will like it.

While Google and Bing determine whether these features will improve their user experience and translate into additional ad dollars from SERPs, niche search engines like You and Perplexity are also building LLM-powered search engines from scratch and don't have solid ad businesses to pay for them yet.

LLM niche search engines

The rise of large language models (LLM) powered search engines like Perplexity and Search GPT offers us another way to discover and interact with information online. Instead of forcing an above-the-fold chatbox based on our search queries, it's established itself as more of a content discovery tool and really doesn't feel as jarring to use as LLM-enabled Bing or Google.

As these new platforms gain traction due to the hype and curiosity about how AI can improve current products, the question of monetisation becomes increasingly critical. Unlike traditional search engines, AI-powered search platforms are poised to create a more intelligent, contextually relevant advertising ecosystem.

But they come at a cost; even Google has stated that a Gemini query costs x10 to 100x more than returning a traditional query, so either you need to eat into your profit margins or increase CPMs and CPCs to compensate.

That's if you can't subsidise your operations with a profitable Cloud business, ad business or enterprise tool business like Google and Microsoft do.

The Limitations of Traditional Search Advertising

Traditional search advertising has relied on keyword-based targeting and simple display mechanisms. Google and Bing have long dominated this space with their pay-per-click models. However, LLM-powered search engines are set to disrupt this approach by offering:

1. Hyper-Personalised Ad Experiences: AI can understand user intent far beyond simple keyword matching, enabling more nuanced and relevant ad placements that feel like genuine recommendations rather than intrusive interruptions.
2. Contextual Intelligence: Unlike traditional search ads, LLM platforms can generate ads that are deeply integrated into the search response, providing value-added information that feels organic to the user's query.

This type of conversational search also makes the user more sticky and increases the time on the page and amount of page views, thus driving up impressions and making clicks less likely but more valuable.

It can also help unearth deeper insights into the user's level of intent in the buying cycle, which would be oh-so valuable to advertisers.

Potential Monetisation Strategies for AI Search Platforms

The obvious strategy for generating cash flow for LLMs would be to offer a paid tier, something Perplexity and You have started to play around with, like the bigger LLMs such as ChatGPT and Gemini.

Perplexity Pro is their other monetisation strategy, offering the following perks for $20 monthly.

• Unlimited Quick searches
• 300+ Pro searches per day
• Select your preferred AI Model. Choose from GPT-4o, Claude-3, Sonar Large (LLama 3.1), and more
• Upload and analyse unlimited files
• Visualise answers using Playground AI, DALL-E, SDXL, and more
• Get $5/month in API credits

While You.com offers a pro plan for $10 per month

• Access to all AI models - Including GPT-4o and Claude 3.5 Sonnet
• File uploads - Up to 25MB per query
• Up to 64k context window
• Access to Research and Custom Agents

The problem with subscriptions is that if a user has a ChatGPT subscription, they're less likely to want another, so you're competing in a winner-takes-all market. In addition, ChatGPT hasn't reached a point where the number of paid subscribers annually covers their annual expenses.

Currently, OpenAI has a $5 billion shortfall, so if the big boys can't make it work, what hope do niche services have with the subscription model?

Making advertisers pay for the service

While SearchGPT has yet to roll out to the public fully and has no real monetisation strategy, AI-powered search engine Perplexity says it'll begin experimenting with ads on its platform starting this week.

Perplexity will show ads in the U.S., formatted as "sponsored follow-up questions." These ads will be positioned to the side of answers and labelled as "sponsored." Brands and agency partners participating in Perplexity's ad program include Indeed, Whole Foods, Universal McCann, and PMG.

How can LLMs advertise?

Imagine searching for "best running shoes for marathon training" and receiving an AI-generated response that seamlessly includes sponsored recommendations.

These ads would be:

• Contextually relevant
• Presented as part of the conversational flow
• Providing genuine value to the user's specific query

Sponsored Knowledge Modules

AI search engines could offer sponsored knowledge modules where brands can provide in-depth, expertly crafted information related to user searches. These aren't traditional ads but rather additional, curated information sources.

Intelligent Affiliate Recommendations

By leveraging a deep understanding of user intent, AI search platforms could generate far more sophisticated affiliate recommendations than current affiliate marketing approaches. The recommendations would feel like personalised advice from a knowledgeable friend.

Enterprise Search Monetisation

For business-focused searches, AI platforms could offer premium sponsored insights from industry experts, consultants, and thought leaders—creating a new marketplace for specialised knowledge.

Ethical Considerations and User Trust

The key to successfully monetising AI search will be maintaining transparency and user trust.

Successful platforms will:

• Clearly distinguish sponsored content
• Ensure high-quality, relevant recommendations
• Give users control over their ad preferences
• Prioritise user experience over aggressive monetisation

The drag on revenue

Now, slapping ads in your SERP can generate more income, but it's not without its own issues, as Perplexity has discovered, as it ramps up the program and starts to broaden its publisher program.

While traditional search engines send traffic to third-party sites, which they can monetise with ads or subscriptions, LLM-Search engines keep users within their platform but use 3rd party content.

A practice that some critics argue competes unfairly with publishers by pulling in their stories — sometimes behind paywalls — and paraphrasing them inaccurately.

So, how do you keep the cry babies quiet? You bribe them, of course,

Perplexity has recently added outlets like the Los Angeles Times, Adweek, and The Independent. Participating publishers will share ad revenue and access performance metrics, with notable absences, including The New York Times and Dow Jones, which are in legal battles with the startup.

How it works:

• Revenue sharing: Publishers earn a cut from ads shown on Perplexity's platform.
• Data access: Outlets get performance insights, fostering transparency and optimisation.
• No public terms: Perplexity keeps financial details private, possibly to maintain negotiation leverage.

Perplexity has to find a way to split those ad dollars with program members, which means less revenue for the LLM. In addition, as larger publishers get paid and smaller publishers get ignored, you have to deal with the reality that you're marginalising the little guy.

Challenges and Opportunities

While the potential is immense, AI search advertising isn't without challenges:

• Maintaining user privacy
• Preventing algorithmic bias
• Creating truly valuable sponsored content
• Developing robust monetisation infrastructure

LLMs need to start paying for their server costs

As AI search engines like Perplexity continue to evolve, could we be witnessing the dawn of a new advertising paradigm, or will LLM-powered SERPs never break even, never mind generate healthy profits?

While the future of digital advertising isn't about more ads, it's about the right ad at the right time and how to use data and customer touchpoints best; we will have to wait and see if LLM-powered search engines can deliver on those promises. and

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Recommended reading

If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on SEO and search updates.

• Google Launches Neural Matching Algorithm
• Is Pushing Live Too Many Pages Risky For SEO
• Why Ranking #1 Does Not Always Equal Improved Leads or Sales
• 10 Reasons Why Your Site Doesn't Rank For *Insert Keyword*
• Google Trial More Related Searches On Mobile
• Google Launches Expandable Featured Snippets

Tags: LLM, AI, SEO