In a strategic move to strengthen its presence in the South Asian market, Google has unveiled a suite of AI-powered advertising tools in India. This launch follows the Indian government’s recent decision to eliminate the 6% equalization levy, commonly referred to as the Google tax, on digital advertisements—a tax that had previously deterred global tech companies from expanding their operations in the country.
Background on the Equalization Levy
Introduced in 2016, the equalization levy was designed to tax payments made by Indian businesses to foreign companies for digital advertising services. The primary aim was to create a level playing field between domestic enterprises and international tech giants operating without a physical presence in India. However, this levy faced criticism from the United States, which labeled it as discriminatory and unreasonable, arguing that it unfairly targeted American companies like Google, Meta, and Amazon. In response to these concerns and to alleviate potential trade tensions, the Indian government repealed the tax in March 2025, effective from April 1.
Google’s AI-Powered Advertising Tools
Capitalizing on the more favorable business environment, Google hosted its Marketing Live event in India to introduce a range of innovative AI-driven tools tailored for local marketers:
1. Generated for You: Integrated within Product Studio, this tool utilizes AI to identify relevant content opportunities across shopping catalogs. It automatically generates images and videos that merchants can deploy across Google’s platforms, streamlining the content creation process.
2. Smart Bidding Exploration: An opt-in feature for search campaigns, this tool builds upon existing Smart Bidding capabilities. It employs AI to discover new, qualified leads that merchants might not have traditionally targeted, thereby enhancing the efficiency of ad campaigns.
3. Agentic Capabilities in Google Ads and Analytics: These advanced tools learn from various advertising inputs—including datasets, landing pages, assets, and real-time campaign performance—to simplify the process of achieving business objectives. Dan Taylor, Vice President for Global Ads at Google, emphasized that these capabilities take the guesswork out of achieving business goals.
4. AI Max for Search Campaigns: Designed to boost the performance of search ad campaigns, this tool identifies more relevant and high-performing search queries by analyzing brands’ landing pages, existing ads, and keyword lists. Early adopters in India, such as Cashify, reported a 15% increase in conversions and a 12% reduction in customer acquisition costs after implementing AI Max.
Expansion of Advertising Platforms
Beyond these tools, Google announced plans to integrate ads into AI Overviews in India later this year. Additionally, the company has introduced shoppable connected TV ads on YouTube in the country. The YouTube masthead on mobile devices will also begin displaying ads, tapping into the platform’s growing influence on consumer behavior. Roma Datta Chobey, Managing Director of Digital Native Industries at Google India, highlighted that YouTube has emerged as the leading streaming service within Indian households over the past year.
Implications for India’s Digital Advertising Landscape
The repeal of the equalization levy and the introduction of these AI-powered tools are poised to significantly impact India’s digital advertising ecosystem:
– Reduced Advertising Costs: The elimination of the 6% tax is expected to lower advertising expenses for Indian businesses, encouraging increased investment in digital marketing.
– Enhanced Profit Margins for Tech Giants: With the removal of the levy, companies like Google, Meta, and Amazon can anticipate improved profit margins, as they no longer need to account for the additional tax in their pricing structures.
– Increased Digital Ad Spending: Lower costs and advanced tools may lead to a surge in digital ad spending by Indian enterprises, benefiting both advertisers and digital platforms.
– Strengthened Trade Relations: The tax repeal is seen as a diplomatic effort to ease trade tensions with the United States, potentially preventing retaliatory tariffs and fostering a more stable trade environment.
Future Outlook
India’s digital advertising market is on a robust growth trajectory, with projections indicating an annual increase of over 20%, potentially reaching nearly $7 billion by the end of 2025. Google’s proactive approach in introducing these AI-driven tools underscores its commitment to catering to the evolving needs of Indian marketers. As the digital landscape continues to expand, such innovations are expected to play a pivotal role in shaping the future of advertising in India.
