Posted on 15th Jan 2025
By E4M
If you search for ‘How much does it cost to study MBA in Delhi?’ or a more specific query like ‘What is the MBA fee at Narsee Monjee?’, chances are the top response will be an AI-generated overview. As consumer behaviour evolves, AI-powered tools like Google Gemini are reshaping search delivery. This shift is driving up Google’s cost per lead (CPL) by up to 100%, according to digital experts. This surge is severely impacting ROI for digital campaigns, particularly in sectors like education, pushing marketers to explore alternatives like social media, SEO, and programmatic ads to stay competitive as rising costs strain campaign sustainability.
As a result of this evolving search landscape, Gartner predicts search engine volume will drop 25% by 2026, due to AI chatbots and other virtual agents.
How is this trend pushing costs for marketers?
With Gemini taking centre stage in search, brands are facing a challenge in maintaining visibility and engagement, prompting a shift toward AI-optimized strategies, diversified marketing platforms, and a greater focus on organic audience-building to navigate this rapidly changing digital ecosystem. Increasing costs have become a major pain point in this scenario.
Simply put, AI-driven searches are pushing down Google Ads, reducing their visibility and effectiveness and increasing costs overall.
“The rising CPL on Google is creating significant challenges for marketers. As CPL increases by 30%-100%, businesses face reduced efficiency in customer acquisition, forcing higher ad spend to achieve similar results. This strain on budgets lowers profit margins and challenges the sustainability of campaigns,” said Yasin Hamidani, Director, Media Care Brand Solutions
According to Hamidani, marketers must recalibrate their strategies, emphasizing alternative channels like social media, SEO, or programmatic ads to balance costs. Data-driven optimization, retargeting, and personalization become essential to maximize returns. Without adaptation, the spiraling costs on Google could erode ROI, pushing brands toward less competitive, innovative platforms.
Recent data indicates that Indian brands are experiencing significant cost escalations in digital marketing. For instance, the average cost per click (CPC) for Google Display Ads in India is approximately Rs 5, with a cost per thousand impressions (CPM) being around Rs 50. Additionally, as per IPSOS estimates, digital marketing expenditures in India have surged, with spending reaching Rs 31,500 crore for FY 2023-24, reflecting a 30% year-over-year growth. This rapid increase in digital ad spend has intensified competition, leading to higher costs for brands aiming to maintain visibility and engagement online. Consequently, businesses are compelled to allocate larger budgets to achieve comparable results, impacting overall marketing ROI.
Which sectors are most affected?
In education, search traffic for niche queries seems to have declined by 20% due to AI-driven direct answers. Likewise, travel agencies are also reporting a growing reliance on remarketing campaigns to compensate for fewer first-touch conversions.
Ambika Sharma, founder and chief strategist at full stack agency Pulp Strategy, highlights similar trends across other sectors. “There has been a huge escalation in marketing costs across categories. For instance, e-commerce brands are reporting a 40% increase in CPLs as AI-driven results dominate top search spots, leaving ads with reduced visibility. In SaaS, companies are facing a 35%-50% hike in lead generation costs, prompting them to rework keyword strategies and explore alternative platforms. These cost surges make it clear that the days of relatively inexpensive Google Ads campaigns are behind us.”
Are brands rethinking their dependency on Google?
According to digital marketing experts, this spike in CPL is directly impacting ROI by increasing the cost of acquiring customers without necessarily improving conversion rates.
“It’s forcing businesses to reevaluate their strategies, moving from a purely performance-based ROI model to a more holistic approach that considers customer lifetime value (LTV) and retention. For example, instead of relying solely on Google ads, some brands are shifting budgets to nurture existing customers through email marketing or loyalty programs, creating more sustainable growth,” said Sharma.
Kirtan Mankad, Co-Founder and CEO of Blackcoffee.media, a full stack agency specialising in performance marketing believes that the rise and especially the placement of Gemini and Gemini results, will force the marketers to rethink their brand presence, both organic and inorganic, on Google.
“This means SEO alone won’t suffice, or at least the importance could somewhat reduce unless the content is hyper personalised and contextual. Same goes for ads. Precision in audience segments, dynamic ad formats like Performance Max, and leveraging first-party data for hyper-personalized messaging will be critical. Moreover, bidding strategies must align with high-intent queries that complement AI-driven results. Gemini’s ability to synthesize content creates opportunities for brands that invest in contextually relevant content and ads,” Mankad explained.
Could these trends permanently alter the balance between paid and organic marketing efforts?
Prady, CEO and Co-Founder at digital marketing agency NP Digital India, suggests that marketers should work on producing quality content that fits well with Google Gemini's AI algorithm to boost visibility.
“Although paid advertising will still be important, the rise of AI-focused organic search underlines the need for a mix of both paid and organic methods. This change will likely affect how companies assign their marketing budgets in the future,” he said.
Unlocking the opportunity
According to some domain experts, the rise of Google Gemini and AI-powered search tools marks a defining moment for content strategies, unlocking opportunities for marketers to boost engagement and visibility.
By prioritising user-focused, intent-driven content that leverages semantic understanding, brands can craft deeper, more resonant material tailored for AI-driven platforms. Advanced schema markup and optimised user experiences further elevate content performance. As AI refines search precision and audience targeting, the fusion of traditional and AI-enabled strategies enables marketers to deliver personalised, authoritative content that drives meaningful impact across channels.
“Rising lead costs on Google demand a shift in focus—from chasing numbers to delivering impact. AI’s precision targeting helps marketers connect with the right audience at the right time, making every lead count. Simultaneously, diversification across platforms like Microsoft Advertising, Amazon, and Quora is unlocking fresh opportunities,” said Tejas Maha, Group Head - Media, White Rivers Media.
According to Maha, these channels offer unique advantages—professional audience targeting, seamless e-commerce integration, and intent-driven engagement—boosting campaign impact and delivering measurable results.
“AI-driven tools are transforming audience engagement by combining advanced analytics with creative precision to forge meaningful, authentic connections. This evolution equips marketers to tailor content and anticipate audience needs, elevating engagement across digital platforms,” he added.
As the marketing landscape continues to evolve, platforms such as LinkedIn and TikTok are proving essential for discovery and lead generation, complementing industry mainstays like Google.
Tejas also believes that the rise of social commerce, video-first strategies, and AI-enhanced search technologies is driving unprecedented growth across sectors.
These innovations emphasise the importance of a well-rounded, multi-channel strategy, empowering brands to cultivate deeper audience relationships while achieving sustainable success through strategic content delivery.
“In a shifting landscape, adaptability isn’t just an advantage; it’s everything,” he said.
The way forward
As digital marketing costs rise, many businesses overlook key factors like website efficiency, branding, and customer segmentation. Experts suggest that addressing these basics first can help reduce customer acquisition costs (CAC). As Amit Verma, CEO & Founder, Digitup, puts it, “The internet penetration has increased in the last 2-3 years. There are more users, who could potentially be consumers, and ideally, CAC (Customer acquisition cost) shouldn’t increase just because of the sheer number of potential users, who can be turned into customers.”
“However, brands are spending significantly more into digital marketing than the basics like customer segmentation, branding and efficient websites, leading to a supposed increase in CAC. You need to get the website right - quick loading, filled with contextual information and the right keywords - before you spend on digital marketing,” Verma said.
Failing to do so, he added, can negatively impact the ROI of digital campaigns, as users may land on a page with poor user experience. A well-performing website, he concluded, can significantly reduce marketing costs.