CNBC’s MacKenzie Sigalos joins 'Money Movers' to discuss Google's ad tech trial strategy as the company moves into an AI advertising war.

Google is preparing to defend its advertising technology in an upcoming antitrust trial, with new court filings revealing its strategy to argue that the open web is already in decline. Analysts, however, suggest this is a legal tactic rather than a reflection of business realities, as advertising remains crucial to the web's revenue. Google continues to dominate search and YouTube, but faces growing competition in display ads from Amazon and The Trade Desk, as budgets shift to retail media and connected TV.

The emergence of AI-driven platforms like OpenAI and Perplexity is seen as a significant future threat to Google's ad business. These companies are experimenting with alternative revenue models, such as affiliate fees and paying publishers for contributing to answers, rather than relying on traditional ads. The industry is watching closely as the value of advertising may shift from clicks and page views to successful task completion by AI assistants.

Google's ad tech trial strategy as AI advertising war looms

As Google gets ready to fight a second antitrust battle, this time over its advertising technology, a new court filing hints at how the search giant might frame its arguments around ads and the state of the web. Our Mackenzie Sagalos has more on that in today's tech check. Morning, Mack. Hey, good morning, Carl. So in that filing, Google told a federal court that the open web is already in rapid decline, but analysts call that antitrust strategy, not business reality and rivals argue that the real battle ahead is an ad war. Now, Google tells me that it was only talking about ads, not the open web itself. But advertising is still the backbone of the open web's revenue engine. Analysts say that Google's strengths remain in search and YouTube, while open web display ads keep shrinking as budgets shift to retail media and connected TV. And that's where Amazon and the trade desk are really gaining ground. Gil Loria at DA Davidson says that Google has actually navigated the AI shift well precisely because of its monopoly power. He says the bigger threat will come once open AI or perplexity flip on ads. Now at this point, perplexity says that ads make up less than 0.1% of its revenue and they remain purely experimental. The company argues the bigger shift is toward a model that pays publishers for contributing to answers rather than clicks. Now open AI CEO, Sam Altman said earlier this year that he would rather test out affiliate style fees than traditional ads floating a 2% cut when users buy something that they discovered through the tool. He stressed that rankings wouldn't be for sale and while ads aren't ruled out, other models come first. Both companies say the real shift is users handing more tasks to AI assistants where the value and eventually the ad dollars hinge on whether the agent completes the task rather than on clicks or page views. Carl. Mac, I was just thinking about the shares of Alphabet, which are, oh, I think 40 bucks above the 50 day. I mean, the amount of momentum underneath the stock is pretty incredible and it's such a flip of the switch from earlier in the year where we thought they were really under the gun on the regulatory front and on this sort of existential search question. Right. And then we saw a pretty light set of revenues come in, in large part thanks to the rise of gen AI rivals like open AI. And I've been having conversations about what their ad strategy looks like because at this point they haven't flipped the switch. And analysts say that that would be the biggest threat to Google's search ad income. But what they say is, listen, the ad paradigm that exists today doesn't jive with the kind of traffic that they see on these chatbots. So Fiji Simo, they just brought in house. She's only been in that role, uh, ruling over, uh, over product for the past three weeks. So what she did at Facebook and what she did at Instacart, building out their ad strategy, the same rule book doesn't apply here. She's going to have to build out something new. The most obvious use case is around commerce at this point, they say. Yeah. Really interesting. Uh, thanks Mackenzie. Mackenzie Segalos watching Alphabet today.

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Breakdown