Goodbye funnel, hello prompt: Why AI is forcing brands to rethink ad strategy
If outcomes matter more than impressions, then platforms that control conversations become the new gatekeepers. Each has its own advantage and its own risks, according to experts.
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For decades, digital advertising has been shaped by search queries, social feeds, and programmatic auctions. Impressions, clicks, and conversions defined the funnel. But the rise of AI-driven conversations through chatbots, generative search, and voice assistants is compressing that funnel and forcing brands to rethink what it means to be visible, relevant, and persuasive.
Industry leaders agree: in a prompt-driven world, discovery, consideration, and even conversion are no longer discrete stages. They are becoming a single conversational flow. This raises fundamental questions for advertisers: How do you show up in a recommendation set? What happens to inventory models like CPM and CPC? Which platforms are best placed to win, and is there still room for niche players?
The Funnel Collapses
Akshay Mathur, Founder & CEO, Unpromptd, frames the shift in stark terms. “Prompt-driven interactions compress the funnel dramatically,” he says. Traditionally, discovery, consideration, and conversion were distinct stages, each influenced by different ad formats and touchpoints. “With prompts, discovery and consideration often happen within a single interaction. Instead of browsing multiple links or feeds, a consumer may rely on a conversational AI to provide an answer, product, or even a purchase option.”
That compression, he argues, changes the job of advertising itself. “For advertisers, this shifts the emphasis from pure visibility to being part of the AI’s ‘recommendation set.’ Conversion paths may become shorter but more contextually driven, requiring brands to optimize content and partnerships that feed into AI ecosystems.”
Rajiv Dingra, Founder and CEO of ReBid, echoes the point. “Prompt-driven interactions collapse the traditional funnel. Discovery, consideration, and even conversion will increasingly happen inside a single conversational interface. Instead of a consumer moving across search, social, and e-commerce platforms, the AI layer itself becomes the new ‘operating system of intent.’”
Sarada Prasad, Co-founder & Chief Growth Officer at ThinkROI adds, “Prompt-driven interactions are transforming the advertising funnel from linear to conversational. Discovery is no longer about mass impressions but delivering precise answers when users ask, for example, ‘Best budget smartphone under ₹15,000.’ Conversational AI reduces friction in consideration and conversion by enabling instant recommendations or purchases within the interaction. The strategy blends traditional funnel-driven campaigns with AI-led, intent-first approaches to make every touchpoint purposeful and outcome-focused. The fundamental funnel of advertising followed the AIDA model, while the transformation shows intent-led journeys picking up drastically.”
“AI-powered prompts are narrowing the funnel. Discovery, consideration, and even purchase decisions are happening through limited interactions. Instead of multiple touchpoints across search, social, and display, prompts deliver contextual, intent-rich answers in real time. For brands, the challenge today is ensuring visibility at the exact moment the prompt is made — being present not just in search results, but in the AI’s recommended answer," according to Rubeena Singh, MD, NP Digital India
Vivek Kumar, Chief Strategy Officer at DViO Digital, notes the trend is already visible in data. “Across the 100+ brands our team has already optimised for LLM and AI discovery, the data is telling. AI search already contributes around 6% of desktop traffic, and that number has doubled in a year. Users coming through prompts stay 2 to 3 times longer, explore more, and convert better than normal search behaviour.” Among younger audiences, he adds, the shift is even sharper: “Nearly half of 18–24 year olds we track rely only on LLMs and skip traditional search completely. If your audience is younger, having your share of voice here is not a debatable topic.”
Rethinking Ad Economics
If the funnel changes, so must the economics. For decades, CPM and CPC were the foundation of digital ad spend. But in a conversational environment, impressions and clicks lose meaning.
Mathur argues: “In a prompt-driven environment, the unit of value is not an impression but an outcome within the conversation. For example, being the chosen recommendation or the product link surfaced. We might see hybrid models emerge, such as ‘cost per inclusion’ (paying to be part of an AI’s shortlisted answers) or ‘cost per validated recommendation’ (when a consumer engages with an AI-suggested option). Over time, these models will converge toward outcome-based pricing tied to trust and relevance rather than sheer volume.”
Dingra puts it more bluntly. “The classic models don’t vanish, but they get abstracted. Prompts drive outcomes, and outcomes will need new pricing logic — ‘cost per answer,’ ‘cost per recommendation,’ or ‘cost per transaction.’ We may see bundled models where AI agents charge advertisers for influence at the point of decision rather than just impressions or clicks.”
Traditional models focused on impressions, clicks, and views are losing relevance. AI-driven interactions prioritise intent and outcomes. In India, voice search has grown 270% in three years, and 60%+ of urban users prefer conversational discovery. The shift is toward performance models like cost per solution delivered or conversation-led conversion. Traditional inventory still fuels awareness, but efficiency now comes from intent-driven, frictionless engagement, adds Prasad.
The Platforms in Play
If outcomes matter more than impressions, then platforms that control conversations become the new gatekeepers. Each has its own advantage and its own risks.
Bharatesh Salian, President, Digital at WondrLab, is emphatic about Google’s position. “Google has been doing this for 25 years, so come on. No one does ‘person asks question, gets answer, sees relevant suggestion’ better than they do. Google already has every advertiser's credit card on file, and they have more search intent data than anyone knows what to do with.”
With Search Generative Experience (SGE), he says, Google can simply reframe ads. “They only need to change ‘sponsored results’ to ‘expert recommendations’ in SGE responses. When someone asks about ethnic wedding clothes, Google can naturally include suggestions from brands that have a good track record.”
Amazon, he adds, plays a different but equally powerful role. “Conversation without business is just costly customer service. When you say, ‘Alexa, I need bathroom paint that won’t peel in humidity,’ it doesn’t just give you options. It knows what you’ve bought in the past, what kind of house you have, and it can even add the paint to your cart while you’re still talking. No other platform can go from ‘I have a problem’ to ‘problem solved, product ordered’ as easily as this one.”
OpenAI, meanwhile, is the dark horse. “ChatGPT has done something crazy: people like talking to it. Like, really love it,” Salian says. “If they can figure out how to make money off of it, it’s gold for advertisers. Think about how much fun it would be to talk for 30 minutes about your plans for your wedding clothes or your ideas for fixing up your house. Luxury and lifestyle brands would pay a lot of money to be a part of that kind of deep engagement.”
OTT platforms and Perplexity add variety to the mix. Smart TVs and streaming services may enable prompt-driven product discovery linked to visual context, while Perplexity is experimenting with citation-based advertising where brands pay to be credible sources. Still, as Salian concludes: “Google is winning this race because they already have the data, the infrastructure, and the relationships with advertisers. Amazon owns the ‘buy stuff’ category because they can actually do business. OpenAI is the biggest question mark.”
Consolidation or Fragmentation?
Will all this consolidate power in the hands of a few, or open the door for vertical specialists?
“Prompts do run the risk of concentrating power in a handful of big AI platforms. When most people start with a single question, the system that answers it first becomes the gatekeeper, and right now the scale sits with names like Google, OpenAI, or Amazon. That kind of control can easily tilt budgets and attention their way,” says Tabrez Alam, Chief, Business Strategy & Data Alliances, Segumento.
“But it’s not the whole picture. Prompts also make space for specialists. A travel-focused engine, or one built just for healthcare, can go much deeper than a generalist platform. In areas where trust and expertise matter more than breadth, consumers are often more comfortable with a vertical player that really understands the space,” adds Alam.
“So yes, consolidation is real, but there’s also a countertrend. We’re likely heading toward a split model — a few giants covering the mass market, and a set of sharp, vertical platforms owning specific niches. For advertisers, the smart move will be to engage with both,” Alam explains.
Mathur believes both forces are at play. “Prompts inherently favor platforms with the most comprehensive data and AI models, which points toward consolidation around a few dominant ecosystems. On the other hand, vertical AI platforms will emerge where depth matters more than breadth. For example, healthcare, finance, travel, or education may each see specialist AI agents that outperform generalists on trust and accuracy.”
Dingra describes it as a “barbell effect.” “Large AI platforms will capture majority budgets because of reach and infrastructure, but niche vertical prompt systems (finance, travel, healthcare) will emerge where trust, compliance, and contextual expertise matter more than scale. Advertisers will need a dual strategy: partner with the giants for reach, while experimenting with vertical AI ecosystems for depth and precision.”
Salian offers a vivid analogy: “It’s like DMart and your local kirana store. DMart has the most products and the best prices, but when you need something that really understands your family’s needs, remembers your preferences, and gives you personalized service, you’ll have to pay extra for that.”
Kumar agrees: “The mainstream players will create the behavioural changes and then the vertical players will create an exceptional experience creating meaningful interaction, experience and solutions.”
Becoming Prompt-Aware
If there is one practical takeaway for advertisers, it is that creativity must now anticipate prompts.
Vishal Raj Sharma, Business Head at PerformAce, explains: “Advertisers will need to reconsider ad strategies for prompt-driven user journeys because a single response can determine visibility. Success will now focus on creating prompt-aware content using multiple approaches — anticipating what users’ prompts may be, creating ad assets optimized for generative models, and working with partners to ensure the brand is included in prompt-generated responses.”
Instead of bidding for impressions, Sharma suggests mapping customer intents and building creative around solution-based, comparison-based, or recommendation-based prompts. The challenge is no longer just being seen — it is being selected in the exact moment when the AI decides what to surface.
The Prompt Imperative
Advertising has always followed attention. Today, attention is shifting to prompts — the new gateway of intent, trust, and purchase. For advertisers, the implications are profound. Funnels collapse, pricing models evolve, and platform power reshapes.
The winners will be brands that understand conversations as outcomes, not just channels; those who secure presence in both the mega-platforms and the specialist niches; and those who learn to speak the language of prompts before consumers stop asking questions anywhere else.
