AI firms are coming for contractors’ ad dollars — but have a long way to go

Two months after ChatGPT launched in November 2022, it reached 100 million users — the second-fastest time in history for an app to hit that milestone.

Since then, it’s evolved from a basic Q&A tool to a full-blown search engine — and has been coined a “Google killer,” raising questions about its long-term impact on search advertising.

Why it matters: Any meaningful hit to Google would trickle down to businesses nationwide. In December 2024, for instance, Google search, including Business Profiles, generated over 90 percent of unique organic lead volume for a sample of contractors.

What’s happening: Capitalizing on ChatGPT’s success, several companies have launched similar products, aiming to chip away at Google’s traffic — and eventually, advertising revenue. 

• Two players include ‘Perplexity,’ founded in 2022, and ‘Claude,’ whose parent company was founded in 2021. 
• Meta, Facebook’s parent, is reportedly developing its own search engine as well, The Information reported in October.  

State of play: ChatGPT has grown tremendously since 2022, currently seeing around five billion global visits a month, according to analytics site Semrush, while Perplexity handles over 400 million monthly searches as of late 2024.

• Almost 60 percent of U.S. consumers used an AI chatbot to “help research or decide on a purchase in the past 30 days,” the Wall Street Journal noted in October.
• Meanwhile, Google’s share of the U.S. search advertising market is projected to dip below 50 percent this year for the first time since 2008, per eMarketer. 

Zoom in: Rolling out advertising is already within these companies’ sights, with Perplexity officially launching ads in November 2024.  

• “Ads will appear in the US to start and will be formatted as sponsored follow-up questions… to the side of an answer,” the company wrote at the time.
• OpenAI, ChatGPT’s parent company, signaled similar plans in December, with CFO Sarah Friar telling the Financial Times, “I don’t preclude [ads].”

The big picture: As consumer attention shifts away from Google, these new AI-powered search engines represent potential advertising channels for contractors evaluating where to allocate their budgets.

• “Google had this seemingly insurmountable position in search, until AI came around, and now AI is to search what e-commerce was to Walmart,” said Melissa Schilling, a professor at NYU’s business school. 

Yes, but: Despite the buzz — and their traction — the upstarts have a long way to go before becoming truly viable advertising platforms for contractors. 

• While a dip is projected, Google still commands roughly 50 percent of U.S. search advertising dollars — and 90 percent of global search traffic. 
• In 2012, it handled 100 billion monthly searches — a number that’s likely much higher today and 20 times more than ChatGPT and Perplexity’s monthly traffic combined. 
• Even Microsoft’s Bing sees several times more visits than ChatGPT, at nearly 20 billion searches a month, according to Microsoft. 

“We know from behavioral economics that people tend to get into certain routines, and in the absence of a spectacularly better product, people tend to stick with that,” noted David Yoffie, a professor at Harvard Business School.

Of note: These platforms are also subpar, locally. Searches for contractors within a city — “HVAC contractors in Tampa” — often return results without call-to-actions to book appointments and sometimes display contractors from entirely different locations. 

The bottom line: Despite the hype, until these new tools can close the gaps in traffic and local search functionality, they don’t warrant meaningful advertising dollars from contractors — and it’s near-certain that Google’s stronghold will remain intact.

• Perplexity didn’t respond to a request for comment, and OpenAI declined to comment on future advertising plans.