AI & SEM – Navigating the New Search Frontier

Here’s What

For Australian marketers, the ground is definitively shifting. Paid search, the reliable workhorse of digital budgets, is in the midst of its most significant transformation since its inception. This isn’t a future problem; whilst the full impact is still being measured, the changes have already begun.

The primary catalyst for change is Google’s AI Overviews, now actively rolling out across Australia. This feature fundamentally changes the search experience from a list of links to a direct answer. This is an evolution of search, designed to handle more complex, multi-faceted queries that elicit a single or zero-click response. 

But Google is not the only player and the long-held search monopoly is facing its first credible challenge in a long time. AI platforms like Perplexity are gaining traction globally and have begun live testing of advertising solutions (not available in AU, yet). Meanwhile, after initially refuting the idea of advertising, OpenAI is reportedly considering showing ads to users based on ChatGPT’s memory and has already begun testing its “Instant Checkout,” an Agentic Commerce Protocol that allows users to purchase products directly from results. For advertisers, this signals a future of fragmented intent and new, non-traditional ad formats.

User behaviour is changing. AI Overviews are designed to create “zero-click” or, more accurately, “one-answer” searches. AI provides direct answers, which reduces the need for users to click on traditional paid or organic search results. The user’s goal is shifting from “finding a link to click” to “getting a complete answer,” pushing traditional paid and organic links further down the page and further down the users priority list. 

While comprehensive, public Australian data on Paid Search since the full AI Overview rollout is still emerging, the latest Google data shows that Search requests have remained steady, for now. 

After analysing hundreds of thousands of client keywords, over 13 million recent impressions and hundreds of millions of search requests, we have seen some CPC inflation but confirm that search requests have, generally, held steady. Keep in mind this data is prior to the recent Google AI Overview update, which could change this. 

Here is the most critical fact for Australian advertisers today: Ads are now actively appearing above and below AI Overviews in Australia. 

Contrary to early assumptions, this is no longer a “tomorrow” problem. As part of Google’s APAC rollout, Search, Shopping and Performance Max ads are all “eligible to show” above or below AI Overviews as of October 2025. Pivotus has our clients ads appearing in these new slots, particularly for queries with commercial intent. 

The primary impact on Australian campaigns right now is this new, dynamic placement. Your ads are now competing where the AI Overview block occupies the most valuable real estate. Google’s “AI-Mode” resources for Australia reinforce this, focusing on leveraging Performance Max and Broad Match as the current way for brands to “participate” in these new, complex search journeys. They are telling us the “what” (AI is here) and the “how” (use our automated products) to adapt today. 

Google has not announced a launch date for Ads within AI Overviews in Australia but are currently testing this in the USA.

So What?

This new landscape demands a new analysis. The old equations (Keyword + Bid = Click), whilst still effective today, are likely to become quickly and dangerously oversimplified but for now, the existing SEM strategies prevail after Google confirmed several critical strategic realities for the newly launched AI Overview Ads. 

The most significant implication for advertisers is the total lack of direct control regarding AI Ads in Australia. Google has confirmed that you cannot target ads only to AI Overviews, and more importantly, you cannot opt out of serving ads in this new layout but the good news is, the ads currently appear based on your existing Search Term and Query strategy.

Currently, AI Ads within Google are not a new channel to test; it’s a fundamental, forced change to the core search and user experience. 

Ads today are served based on “existing signals and systems”. Meaning AI Ads are not separate auctions, but a new, high-stakes outcome of the same auction. This makes Google’s “AI-Mode” (Performance Max, Broad Match, AI Max) no longer optional. These are the key mechanisms Google provides to interpret a user’s complex AI query and match it to your ad’s “existing signals” of relevance and quality. Your ability to influence placement is now entirely dependent on the quality of your data feeds, your bidding strategy and your audience signals. 

With Google confirming that specific reporting for AI Overview placements is still in “early stages,” advertisers are, for now, flying blind. We cannot segment performance for ads in vs. out of the AI Overview. 

This forces a strategic shift away from granular analysis. The “So What?” is that high-level metrics like ROAS, CPL and CPA, if they aren’t already, should become everything. It may not feel right but the fact is we must trust that the automation is working to find the most “helpful” (as Google puts it) and high-intent placements and judge its success only by the final conversion outcome, not by a granular metric like CTR or Impression Share. 

As AI Overviews and AI Search improve and become ingrained in daily life, we believe AI’s ability to answer informational queries will likely decimate CTR for those terms. Conversely, Google’s data suggests users find ads near AI Overviews “helpful” for taking the next step. This implies these are high-intent, qualified users. This will likely lead to higher CPCs for fewer, but far more valuable, clicks. 

The top of the funnel activity (awareness, research) is already being absorbed by the AI Overviews. In the future, an advertiser will no longer “win” a query like “best hiking boots for the Blue Mountains” with a simple ad. The new goal should be to have your product cited in the AI’s answer. This compresses the funnel, merging the “consideration” and “purchase” stages into a single interaction.

The potential rise of competitors like Perplexity and OpenAI and others means Marketing, in particular search budgets, will need to be more fluid and dynamic and encompass a full funnel and multi-channel approach. The future ad model may not be CPC at all as in an agentic system, like Open AI’s Instant Checkout, brands may bid on a Cost Per Action (CPA) or a revenue share for a transaction completed. 

This future will likely destroy the silo between SEM and SEO and we believe that the future will likely become about a unified search strategy. Regardless, the one thing that most experts, including Pivotus, agree on is that the Organic search traffic of today is at high risk and will likely drop significantly. 

The new, shared goal of both SEO and SEM would then become Search Experience Optimization (SXO). The goal is to become the authoritative source that the AI model trusts and cites. Your paid strategy then amplifies this authority. Your content and data feeds are no longer just “SEO assets” or “PMax inputs”; they are the fuel for your entire search presence. 

Now What?

This is a moment of strategic transformation and whilst the final roadmap is still to be determined by Google, OpenAI and others, advertisers can focus on what you can do today and how to prepare for tomorrow.

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Here’s what we’re planning for your next chapter. 

• Budget for New Formats: The next evolution will be ads inside AI Overviews (e.g., sponsored citations). When Google fully launches these in Australia, you should have a test budget ready. Be first, learn fast, and understand the new auction dynamics. Our Account Managers will communicate with you when this is available. 
• Diversify and Test: Allocate 5-10% of your search budget for experimentation. Start running small, data-gathering campaigns on alternative platforms as AI advertising solutions become available. Be ready to test new formats the moment they appear. 
• Re-skill Your Team: The future SEM professional is not a “bid manager.” They are a “search strategist” who understands data feeds, audience segmentation, content strategy (SXO), and can manage a diverse portfolio of search experiences. Invest in this training now if you have this role anywhere other than with Pivotus. 
• Audit Your Placements: Start segmenting your performance data to see how placements above/below AI Overviews are performing, when data becomes available. Understand that an ad below an AI Overview may have a lower CTR but a much higher conversion rate. 
• Operationalise SXO: Start breaking down the silos now. Create a “Unified Search” task force with your SEO, Content, and SEM teams. The shared goal is “to be the answer”. This means your content strategy must be re-tooled to answer questions authoritatively, which feeds both organic ranking and AI citations. 

Conclusion

For the Australian market, this is a “cautiously optimistic” moment. The search market remains robust. We are simply moving from a “dumb” list of links to an “intelligent” assistant. This will prune low-quality, research-phase traffic and force brands to compete on true authority and relevance. The click is becoming less important. The answer is everything.