Why Your Google Ads Cost More in 2026 — And What AI Search Has to Do With It

If your Google Ads budget is buying fewer leads than it did a year ago, you’re not imagining it and you haven’t done anything wrong. Cost per click across most industries is up roughly 12% year over year, and AI search is one of the main reasons. When Google answers a question directly at the top of the page, fewer people click through to the results below, so more businesses bid for the paid spots instead, and the price of those spots goes up.

That’s the short version. Here’s what’s actually going on, and what we think local businesses in the Lower Mainland should do about it.

Why Your Google Ads Cost More in 2026

Why is AI search making ads more expensive?

The mechanism is simpler than it sounds.

Google now shows an AI-generated answer at the top of a large share of search results. Pew Research found that when one of those summaries appears, clicks on the regular results below drop by roughly half.

For businesses that used to get steady traffic from ranking well, that’s a real loss. And the fastest way to replace lost traffic is to buy it. So businesses that were previously getting by on organic visibility enter the ad auction, competition increases, and everyone’s cost per click rises, including yours, even though your campaigns haven’t changed.

Google has also started placing ads inside those AI answers rather than only above and below them. Ads now appear in roughly a quarter of AI Mode results, showing up as inline citations, sidebar recommendations, and product listings after the answer. Early data suggests these placements get noticeably higher engagement than standard search ads, around 18% higher, but also cost around 35% more per click.

Do I need to set up new campaigns for AI ads?

No, and this catches people out. Eligibility for those placements runs through Performance Max and AI Max for Search campaigns. If you’re already running those, you’re likely appearing in AI results without having changed anything, and without any separate line in your reporting telling you so.

That’s worth knowing for a practical reason: your costs can shift because your ads moved into different inventory, not because a competitor outbid you. Before assuming the market is to blame, it’s worth checking where your ads are actually being served.

The part most businesses miss: paid and organic now share the same foundation

This is the shift that matters most, and it’s the one we spend the most time explaining to clients.

Whether your ad qualifies for the good placements inside AI answers now depends heavily on things that used to be considered “SEO stuff”: the quality and structure of your landing pages, the accuracy of your product or service information, whether your business details are consistent everywhere they appear online.

Google’s own guidance for these placements leans on asset quality, structured data, and clean feeds. The same underlying factors, how well-structured, crawlable, and trustworthy your information is and determine both whether an AI answer mentions you organically and whether your ads are eligible to appear in that answer.

In other words, the work that gets you mentioned by ChatGPT, Gemini and Google’s AI is the same work that makes your ad budget go further. They stopped being separate projects.

The most common version of this problem we see is boring: a business with three different phone numbers floating around the internet across old directory listings, an outdated chamber of commerce page, and a Google profile. That inconsistency is enough to keep AI tools from confidently naming the business at all. It’s also exactly the kind of signal quality that Google’s ad systems are increasingly sensitive to.

What about ads inside ChatGPT?

They exist, and Canada is one of the live markets.

OpenAI began running ads in ChatGPT in February 2026 and opened a self-serve ads platform in May, with no minimum spend. Pricing has come down considerably since launch, and cost-per-click bidding is available alongside the original CPM model.

Our honest position: it’s worth watching, and we’re testing it ourselves before we recommend it with client money. The reporting is aggregated by design and gives you far less detail than you’re used to from Google Ads, which makes it hard to prove what worked. That may improve. Right now it means the channel is easier to spend on than to evaluate.

So should I cut my ad budget and focus on AI visibility instead?

No – and you’re going to see a lot of content this year telling you otherwise.

The pitch goes: AI referrals are free, the playing field favours small well-optimized businesses, so stop paying Google. It’s an appealing story, it contains some truth, and it’s usually being told by someone selling AI visibility services.

Here’s the more honest version. Ads produce leads this week. AI visibility work is an asset that takes a quarter or more to build and then keeps paying. Those are different tools for different jobs, and businesses that get the best results are running both, using paid to keep the phone ringing while they build the organic and AI presence that eventually reduces how much paid they need.

Cutting ads to fund AI visibility work is how you end up with a quiet month two.

A note on Google’s AI campaign tools

Google is pushing hard on AI Max, its most automated campaign type, and the marketing around it is confident. The independent evidence is more mixed, one round of testing found the majority of advertisers saw neutral or negative results when measured at the account level, even where individual campaigns looked good.

We’re not saying avoid it. We’re saying test it on a budget you can afford to have underperform, and measure at the account level rather than trusting the campaign-level view. That’s true of most new automation, and it’s especially true when the company selling the automation also runs the auction.

What to actually do about it

If you take four things from this:

1. Check where your ad spend is going, not just what it costs. Placement has shifted even in accounts nobody has touched.
2. Fix your business information everywhere it appears. Same name, address, and phone across Google, Yelp, Apple Maps, the BBB, your chamber listing, and any industry directories. This is unglamorous and it underpins everything else.
3. Find out what AI tools currently say about you. Ask ChatGPT and Google’s AI Mode about your business. It takes ten minutes and the answer is often surprising.
4. Don’t treat paid and organic as separate budgets anymore. They now draw on the same foundation.

Where we come in

We’ve built two services around exactly this. The AI Search Visibility Audit is a one-time snapshot of how ChatGPT, Google AI Mode, Perplexity, Gemini and Copilot currently see your business and what they say, what they get wrong, who they recommend instead of you, and what’s fixable. The AI Search Visibility Care Package is the ongoing work to fix those signals and keep them fixed.

Both improve the foundation your Google Ads sit on, which is why we increasingly recommend the audit to clients who came to us purely for paid search.

If you’d like to talk it through, book twenty minutes: https://calendly.com/99digital_geoff/intro

Geoff Lee is the founder of 99 Digital Inc., a Vancouver digital marketing agency working with small and medium businesses across the Lower Mainland.

Conclusion

Call 604-359-2239 or book at 99digital.ca to get started.

Geoff Lee is the CEO of 99 Digital Inc. in North Vancouver, BC. He has been helping local businesses get found online for more than 25 years.