Alphabet (NASDAQ:GOOGL) continues to reshape its Google Search experience, following the launches of AI Overviews and AI Mode. On Monday, the company announced updates to how text ads will appear on both desktop and mobile search results. Instead of individual “Sponsored” tags for each ad, text ads will now be grouped under a single “Sponsored Results” banner that remains visible as users scroll through the results. This header will appear either above or below the AI Overviews section.
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Building on these interface changes, J.P. Morgan’s Doug Anmuth, an analyst ranked among the top 1% of Street stock experts, drew attention to another significant addition: a new “Hide sponsored results” option. This feature allows users to collapse the ad section with a single click and view only organic results. However, the control is located at the bottom of the Sponsored Results group, meaning users must still scroll past the ads first, and the setting resets with each new query.
At first glance, Anmuth notes, giving users the ability to hide ads might seem risky for search monetization. Yet, he argues that these changes are part of a broader effort to modernize Google Search and could ultimately strengthen monetization in several ways.
For one, they enhance the user experience and boost engagement. Early tests indicated that the new layout improved both top-of-page navigation and overall usability. By giving users greater control and personalization, Google can increase satisfaction and query volume – critical advantages as competition from ChatGPT and other AI chatbots intensifies.
Moreover, Anmuth points to the potential for a “higher Search ad load.” While Google confirmed that users will continue to see no more than four text ads per Sponsored Results group, the streamlined design may enable a more consistent ad load across a broader range of queries without compromising experience.
“Allowing users to tailor their experience should help balance search monetization with users’ evolving expectations for high-quality results and greater control,” the 5-star analyst explained.
Finally, there’s the possibility of higher click-through rates (CTRs) and improved “click quality.” Because users might not distinguish as sharply between paid and organic results under the single banner, ads could receive more attention and higher CTRs. Conversely, those who choose to hide ads will generate fewer low-value clicks, yielding cleaner data and more precise targeting for advertisers.
All told, Anmuth assigns GOOGL shares an Overweight (i.e., Buy) rating and a $260 price target, implying about 6% upside from current levels. (To watch Anmuth’s track record, click here)
That bullish stance reflects the broader Street view as well. GOOGL holds a Strong Buy consensus rating, backed by 29 Buys against 8 Holds. Still, for all the optimistic calls, the expected gain is hardly impressive – the average price target of $257.03 points to just about 2% upside over the next year. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.