Google Search enters new phase as AI tools reshape user behavior, undermine legacy metrics

Google’s search business is entering a new phase driven by artificial intelligence which is shaping how users interact with search and how that activity is monetized, analysts at Bank of America believe.

As AI tools become more integrated into the search experience, the analysts expect a shift away from traditional cost-per-click advertising toward a broader monetization model that includes subscriptions and cost-per-action transactions.

“A multi-tiered product monetization structure is evolving that includes subscriptions,” the analysts wrote, noting that this is driven by what they describe as a “step-function increase” in the utility of search.

They highlighted a fundamental change in user behavior and monetization mechanics, noting that growing adoption of Google's AI Overviews and AI Mode could result in a lower number of clicks but will enable Google to better interpret queries with targeted ads.

As these AI-driven interfaces become more central, standard metrics like paid clicks may become obsolete, they believe.

“Search metrics such as paid clicks could become less relevant and monetization KPIs (like average revenue per user) may offer better reflection of Search performance,” they write.

The analysts noted Google parent Alphabet Inc (NASDAQ:GOOG)’s scale, infrastructure, and product reach as key advantages in adapting to the changing landscape.

“Google is well-positioned with tech talent, extensive data to build AI models and multi-product distribution to drive AI usage and monetization,” they wrote.

The analysts project Gemini-driven subscription revenue could grow to $12 billion by 2027 and Workspace will see $1 billion plus in annualized benefit from price increases this year.

“Beyond Search, Google will capture growth through Google One subscriptions, Workspace price increases & system-level integrations across Android & ChromeOS,” they added.

However, they noted structural risks as user behavior and distribution dynamics shift.

“The starting point for access to information and transactions will shift from browser based to mobile O/S & app based, with at least 5 tech titans (Amazon, Apple, Google, Meta, OpenAI) targeting the opportunity,” they wrote.

The analysts caution that this change will erode Google's long-standing competitive moats and reduce usage share. “OpenAI is well funded & scaling rapidly, and likely to introduce ads, while Meta could launch Agentic AI capabilities to its 1bn assistant users,” they wrote. 

Bank of America has a $200 price target on ‘Buy’-rated Alphabet, which traded hands at about $164 on Monday afternoon.