The advent of artificial intelligence tools like Google Gemini is revolutionizing search engines and redefining the rules of the game in digital marketing. This transformation is leading to a dramatic increase in cost per lead (CPL) on Google, sometimes reaching +100%, according to experts. This evolution poses new challenges for advertisers, particularly in sensitive sectors like education. Faced with this pressure, brands are diversifying their efforts towards social media, search engine optimization (SEO), and programmatic advertising. But how, precisely, is AI impacting the cost of Google ads?

The Mechanisms of AI's Influence

Google Gemini (formerly Bard) uses AI to improve ad targeting and offer even more relevant content to users. However, this increased precision diminishes the visibility of traditional advertisements and increases competition among advertisers, causing advertising costs to explode. According to an analysis by Exchange4media, conducted by Tasmayee Laha Roy and Jarriti Verma, this trend directly impacts the return on investment (ROI) of digital campaigns.

This dynamic is only expected to intensify in the coming years: forecasts from the American management consulting firm Gartner, specializing in technology, anticipate a 25% drop in search volume via traditional search engines by 2026, in favor of AI chatbots and virtual assistants. This shift calls into question the effectiveness of current advertisements and forces advertisers to rethink their strategies to adapt to this new ecosystem.

The Economic and Sectoral Impact

The impact of this transformation is evident in the significant variation in advertising costs across different industries. In 2023, the average cost per click (CPC) on Google Ads stood at 4.22 dollars, according to Wordstream. The fashion industry enjoys significantly lower costs, with an average CPC of just 0.69 dollars—far below that of the tech industry, where it reaches 3.80 dollars, according to Statista. This low CPC makes fashion one of the most accessible sectors for advertising, in contrast to areas such as car repair or legal services, where costs are considerably higher.

However, this apparent advantage hides significant challenges related to campaign performance. With a conversion rate of just 3.33 percent, the fashion industry lags far behind sectors like car repair (12.96 percent) or pet-related businesses (12.03 percent). Additionally, the average cost per lead (CPL) is high, at 83.10 dollars—well above sectors like restaurants (29.67 dollars) or pet care (34.81 dollars).

These figures highlight a paradox: while clicks are affordable, converting them into paying customers remains difficult. The intense competition within the fashion industry, combined with the need to keep up with rapidly changing trends, leads to frequent campaign updates and costly adjustments. This landscape demands targeted strategies to reduce acquisition costs while maximising campaign impact.

Optimising landing pages, leveraging analytics, and refining ad targeting are essential solutions to these challenges. In a market where every dollar spent must yield measurable returns, the fashion industry exemplifies the growing importance of adopting an agile approach in response to technological and economic shifts.

If we take the example of India, the consequences are clear. The average CPC for display ads is around 5 rupees (approximately 0.06 euros), while the cost per thousand impressions (CPM) reaches 50 rupees (approximately 0.59 euros). Digital marketing expenditure surged to 3.15 trillion rupees for the 2023–24 financial year (one crore equals ten million Indian rupees), with an annual growth rate of 30 percent, according to IPSOS.

The education and travel sectors have been among the hardest hit. Ambika Sharma, founder of Pulp Strategy, reports a 40 percent increase in CPL for e-commerce and a 35–50 percent rise for SaaS services. These cost hikes are pushing businesses to rethink their keyword strategies and explore new advertising channels.

Adaptive Strategies for Advertisers

These ongoing changes are pushing brands to rethink their methods. Exchange4media illustrates this transformation by sharing testimonials from leaders of Indian companies.

Integrated Strategies

Kirtan Mankad, CEO of Blackcoffee.media, advocates for a combination of SEO, tailored content, and interactive advertising formats. He emphasizes the importance of leveraging data to optimize campaigns.

Platform Diversification

Tejas Maha, media manager at White Rivers Media, recommends investing in alternative platforms like Microsoft Advertising, Amazon, and Quora.

Quality and Innovation

Prady, CEO of NP Digital India, insists on the importance of creating content compatible with AI algorithms. A fluid and engaging user experience is essential to reduce acquisition costs.

Solid Foundations

Amit Verma, founder of Digitup, reminds us that companies must first consolidate their websites, customer segmentation, and branding before investing heavily in advertising.

A Transformation Fraught with Challenges

While AI is revolutionizing digital marketing by offering unprecedented targeting possibilities, it also poses new competitive challenges. The ultra-precise targeting offered by AI increases advertisers' dependence on digital giants, thus strengthening their hold on the advertising market. This concentration could hinder innovation and marginalize SMEs.

The development of artificial intelligence in digital marketing is emerging as a double-edged sword: it offers immense opportunities while posing significant economic and strategic challenges. To take advantage of this evolution, advertisers must equip themselves with adaptive strategies, invest in quality content, and diversify their channels. The future belongs to those who know how to innovate while maintaining a balanced approach between technology and creativity.

This article originally appeared on FashionUnited.FR, translated and edited to English.

It was translated using AI. .