Market analysis

· 12 min

PPC in October 2026: the keyword gives way, the answer takes ads

Google's search ad revenue grew 17% while its share of US search ad spend is forecast to fall below half. Automation arrived before the controls did, ChatGPT built a billion-dollar ad business in under 200 days, and the courts rewrote Google's ad exchange instead of breaking it up.

PPC
AI23%GOOGLE & SEARCH20%PPC42%ANALYTICS8%BRANDS7%
Topic radarSelect a topic to filter the archive. The radar shows how this issue's words divide across the topics.

Signal readout

Topic mix

  • AI: 23%
  • Google & Search: 20%
  • PPC: 42%
  • Analytics: 8%
  • Brands: 7%
  • AI23%
  • Google & Search20%
  • PPC42%
  • Analytics8%
  • Brands7%

Share of the issue's words about each topic, counted section by section.

Why it matters

Check every automated default Google switched on this year — AI Max upgrades, target-obeying bidding from 17 August, automated promotions from 12 October — and test incrementality before trusting the platform's own uplift figures. The controls to steer these changes are arriving after them, some still without a date.

The short answer

What
A reading of paid search and performance advertising in mid-October 2026: Google's results and automation changes, ads in AI Mode, AI Overviews and ChatGPT, Microsoft, Amazon and Meta, cost benchmarks, and the ad tech and DMA rulings.
Why
Because the unit of buying is moving from the keyword to the answer, and the order of Google's changes — automation first, controls later — decides what an account manager can still steer.
Who
PPC managers, performance marketers, agencies and anyone setting search and AI ad budgets.
Where
Mostly the US, where the benchmarks and earnings are reported, with the European Union where the DMA applies and ChatGPT ads where they have launched.
When
Q2 2026 results and the changes from July to 16 October 2026; Q3 results are due from late October.
How we know
From earnings releases and filings (Alphabet, Microsoft, Amazon, Meta), Google Ads and Microsoft Advertising announcements, OpenAI's statements, benchmark reports (Tinuiti, Skai, WordStream), studies (Graphite, SE Ranking, Smarter Ecommerce), court and Commission documents, and the trade press. Every source is listed at the end.

In plain words

Search ads used to be simple: you picked words, people searched those words, your ad showed. Now Google's AI decides more of where an ad goes and what it says, and ads are appearing inside AI answers in Google and ChatGPT. Advertisers are spending more and getting more automation, but they get the tools to control and check that automation only after it has been switched on.

Paid search is growing and changing shape at the same time. Google's search ad revenue rose 17% in the second quarter, yet eMarketer forecasts its share of US search ad spending will fall to 48.5% this year, the first time below half in more than two decades. The market is widening — Amazon, retail media, AI assistants — rather than Google shrinking.

Inside Google, the keyword is giving way to automation, and the automation arrived before the controls. Outside Google, ads have moved into AI answers faster than any new search channel before them. This analysis covers the money, Google's changes in the order they happened, ads in AI answers, the other platforms, costs, and the rulings. It ends with our reading.

The money

Alphabet reported Search and other revenue of $63.27 billion for Q2 2026, up from $54.19 billion a year earlier. YouTube ads grew 13% to $11.06 billion; the Google Network declined slightly to $7.30 billion. The release reported no paid clicks or cost per click and did not mention ads in AI Mode or AI Overviews; Sundar Pichai said AI features are driving query growth. Q3 results are expected at the end of October.

Company, Q2 2026Ad lineRevenueGrowth
AlphabetSearch & other$63.27B+17%
AlphabetYouTube ads$11.06B+13%
AmazonAdvertising services$19.8B+26% ex-FX
MetaTotal revenue$60.80B+28%
Microsoft (FY26 Q4)Search advertising ex-TAC—+10%

Google: automation first, controls later

The order of this year's Google Ads changes matters as much as their content.

From September Google began automatically upgrading Search campaigns that use automatically created assets or campaign-level broad match to AI Max, its AI-driven search campaign layer; the sunset of Dynamic Search Ads was pushed to February 2027. Google says the full AI Max feature set gives an average of 7% more conversions or conversion value at a similar CPA or ROAS, a comparison with search-term matching alone on its own non-retail data. An independent study by Smarter Ecommerce of more than 250 accounts found a median 13% revenue uplift and a median 16% higher CPA, with ROAS ranging from +42% to −35%.

From 17 August, budget-limited campaigns on Target CPA or Target ROAS began optimising toward the stated target instead of trying to beat it, across Search, Shopping, Performance Max, Demand Gen and Travel. PPC Land and Optmyzr reported accounts whose effective CPA roughly doubled afterwards. From 12 October Google Ads began finding promotions on advertisers' websites and applying them to Search and Performance Max ads, on by default for some accounts.

The controls followed. Performance Max reporting by channel arrived in the API on 21 September. Self-serve Conversion Lift, now covering Search and Performance Max, arrived on 8 October, with a minimum of 1,000 observed conversions and a $5,000 study budget. Channel prioritisation and budget allocation by channel were announced on 14 October, rolling out "over the coming months". The unified report from search term to asset to landing page for AI Max was promised for "later this year" with no date.

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Ads in AI answers

Google is opening AI Mode to advertisers step by step. Ads in AI Overviews run in English in 12 countries, an expansion dating from December 2025; ads above and below AI Overviews are eligible in every market where AI Overviews appear. Google Marketing Live in May introduced Conversational Discovery ads, ads inside AI Mode's recommendation lists and Shopping ads with Gemini-written explanations labelled Sponsored. On 4 September Google confirmed a small experiment in which exact and phrase match keywords in standard Search campaigns can serve text ads in AI Mode where there is explicit and direct intent; a small US test of healthcare ads in AI Mode and AI Overviews began in June. Google has published no country list and no separate reporting for AI Mode ads.

ChatGPT built its ad business at unusual speed. The US pilot began on 9 February with a $60 CPM and a $200,000 minimum commitment; self-serve buying with CPC bidding opened to all US businesses on 5 May; 31 European markets followed on 24 August with conversion-optimised bidding, and seven Asian markets on 23 September, taking ads to more than 60 countries. On 31 August OpenAI said ChatGPT Ads had reached a $1 billion annualised run rate in under 200 days. In October it announced a US test of visual ads shown during image generation, brand-suitability checks with DoubleVerify and IAS, incrementality partners Haus, Measured and WorkMagic, and human account managers for advertisers.

Performance is still modest. Graphite, using Similarweb panel data, measured click-through per ad-bearing exchange of 0.73% in the US, 0.74% in the UK and 1.91% in Brazil; B2B SaaS took 19.9% of US impressions. SE Ranking found ads in 25.94% of ChatGPT commercial answers and 29.45% of ad-eligible AI Mode queries, and only 3.63% of advertisers also cited as an organic source. eMarketer estimates all standalone chatbot ads in the US will bring in under $1 billion in 2026. Perplexity went the other way, winding down its native ad formats over user trust.

In less than 200 days after launch, ChatGPT Ads has reached $1 billion in annualized revenue run rate.

Microsoft, Amazon, Meta

Microsoft's search advertising revenue excluding traffic acquisition costs grew 10% in the quarter to 30 June, down from 12%, and Amy Hood guided to mid-single-digit growth for the current quarter. The line, renamed Search advertising, now covers Bing, Copilot, Edge and partners. In April Microsoft launched Offer Highlights, ads that show product differentiators inside Copilot conversations, and an open pilot of AI Max for Search from May; its September update added a HubSpot integration and general availability of optimisation experiments, with no new Copilot ad format.

Amazon's advertising revenue rose 26% excluding currency effects to $19.8 billion in Q2, faster than the 22% of the previous four quarters, and Andy Jassy said shoppers who click sponsored prompts in its assistant convert 48% more often. Meta's revenue rose 28% to $60.80 billion, with ad impressions up 14% and average price per ad up 12%; its prepared remarks put the Advantage+ automated suite above a $75 billion annual run rate.

Costs

Second-quarter benchmarks agree that cost inflation sat mostly outside Google Search. Tinuiti's US data shows Google Search spend up 14% on clicks up 13%, so cost per click rose just 1%; non-brand text CPC rose 4% and brand CPC fell 1%. Microsoft Ads CPC rose 19%. Meta CPM rose 10%, its biggest increase since early 2022. Performance Max fell to 60% of combined Shopping and Performance Max spend from 67% in Q1. Skai measured paid search spend up 17% with clicks roughly flat and CPC rising, paid social clicks up 53% with CPC down 18%, and a record-low Prime Day blended CPC of $1.63 on Amazon. WordStream and LocaliQ's annual benchmark, covering April 2025 to March 2026, puts the average search CPC across industries at $5.42.

Our reading: the 17 August bidding change and the AI Max migration fall after these Q2 figures. Q3 benchmarks, due from late October, are the first that can show their effect on CPC and CPA.

The rulings

In the US ad tech case, Judge Brinkema's remedy decision of 2 September rejected the DOJ's demand that Google sell its AdX exchange and instead rewrote how it operates: Prebid integrations for AdX and DFP, AdX bids into rival publisher ad servers on equal terms, real-time bid data shared with publishers, no direct bidding from Google Ads into DFP, global scope and a six-year technical monitor. The remedy takes effect 60 days after the final judgment is signed; as of mid-October none had been entered.

In Europe the Commission fined Google €890 million under the Digital Markets Act on 23 July, €460 million of it for self-preferencing its own shopping, hotel, transport and sports results; since 8 September Google has served rebuilt commercial units across the EEA. In the search monopoly case, the DOJ and states cross-appealed on 28 July asking for harsher remedies, including the ban on default-placement payments the court had declined. Smaller policy items: from 30 October Google allows personalised alcohol ads on YouTube where local law permits, with Poland, Egypt, India and Indonesia excluded.

What it adds up to

This section is our reading, not a measurement.

  • Google is growing while its share shrinks. Search revenue up 17% and a forecast share below half are compatible: the market is widening to Amazon, retail media and assistants.
  • The keyword is becoming an input, not the unit. AI Max migration, broad match in AI Mode tests and channel controls describe a campaign steered by signals rather than words.
  • Defaults now carry risk. Several of this year's changes were switched on for advertisers. The first job in an account is to find what changed without being asked.
  • AI ad inventory is real but small. ChatGPT's run rate is fast growth from a small base, with sub-1% US click-through, against $63 billion a quarter in Google Search.
  • Paid and earned visibility in answers are independent. Only 3.63% of ChatGPT advertisers are also cited. Buying an ad in an answer does not buy the answer's trust.
  • Incrementality is the new attribution. Self-serve lift tests, OpenAI's incrementality partners and Google's marketing mix model all point to experiments over platform-reported conversions.

What to watch

  • Q3 earnings from Alphabet, Microsoft, Amazon and Meta from late October, for any first disclosure of AI Mode ad revenue or Copilot's ad contribution.
  • Q3 benchmarks from Tinuiti and Skai: the first measure of the 17 August bidding change and the AI Max migration.
  • The ad tech final judgment, its 60-day clock and Google's appeal.
  • A country list and separate reporting for ads in AI Mode; any confirmation of ads in the Gemini app.
  • ChatGPT's visual ads test and whether US click-through improves.

How assistants describe a brand next to the ads they show is the other half of this picture; our brands analysis covers it, and Brandscope reads it for one brand at a time.

Questions people ask

Is Google automatically upgrading Search campaigns to AI Max?

Yes. From September 2026 Google began upgrading Search campaigns that use automatically created assets or campaign-level broad match to AI Max. The Dynamic Search Ads sunset was moved to February 2027. Google claims an average 7% more conversions at similar CPA or ROAS against search-term matching alone.

Where can you buy ads in ChatGPT?

In more than 60 countries as of 23 September 2026, shown to Free and Go users. Self-serve buying with CPC bidding opened in the US on 5 May, Europe followed on 24 August with conversion-optimised bidding, and seven Asian markets on 23 September.

Did Google CPCs rise in 2026?

Barely, in Q2. Tinuiti's US data shows Google Search CPC up 1% year on year, with non-brand text CPC up 4%. The bigger increases were elsewhere: Microsoft Ads CPC up 19% and Meta CPM up 10%.

What did the court order in the Google ad tech case?

On 2 September 2026 Judge Brinkema rejected selling AdX and instead ordered conduct remedies: Prebid integrations, AdX bids into rival ad servers on equal terms, bid data sharing with publishers, no direct Google Ads bidding into DFP, global scope and a six-year monitor. It takes effect 60 days after the final judgment.

Sources

Every claim above is dated and linked. Where a number comes from a measurement rather than an announcement, whoever measured it is named.

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Author

Olexandrauthor

15+ years in marketing and SEO. Dozens of products, mostly the US market. Research and measurement.

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