Key points
- Alphabet reported Q3 Search and other revenue up 12% to $63.35 billion, slower than roughly 17% in Q2, even as queries grew at their fastest pace in five years.
- Chief Business Officer Philipp Schindler said AI Mode queries monetize at a lower rate than traditional searches, though currency was the biggest factor in the slowdown.
- Google expanded ads in AI Mode to 10 more countries and is launching multiturn ads in the U.S.
- Tinuiti said its advertisers raised Google paid search spend 14% year over year in Q3 while holding return targets, but cannot isolate AI placements.
Why it matters for marketers: Advertisers are being moved into AI Mode inventory they cannot separately target or measure, so budget decisions rest on blended results until Google shares more data.
Alphabet's third-quarter report showed a split between usage and revenue. Search queries grew at their fastest rate in five years, but Search and other revenue rose 12% year over year to $63.35 billion, down from roughly 17% in Q2. Growth in paid clicks slowed from 13% to 8%, according to The Verge.
Asked about the slowdown, Philipp Schindler named currency as the largest factor, followed by retail and media. He also said strong AI Mode query growth had an impact because of lower monetization there, while adding that Google feels good about its trajectory. He did not say what AI Mode was lower than, or by how much. Alphabet shares fell about 12.6% on Oct. 29, according to Digiday.
For marketers, the practical issue is visibility. Tinuiti's Andy Taylor said its same-store advertisers grew Google paid search spend 14% in Q3 and kept return-on-ad-spend targets, but Google does not let advertisers target or report on AI inventory separately. Steady returns may simply mean AI traffic is still small, he suspects. An October working paper found ChatGPT ad visits produced less retailer revenue per session than Google Search ad visits, though it does not measure Google's AI ads and intent differences may explain the gap.
Google is pushing ahead. On the same day as earnings it expanded AI Mode ads to 10 more countries and said multiturn ads are coming to the U.S. It has also floated ads in the Gemini app without a date. Watch for any Google reporting on AI placements, and compare your own branded and upper-funnel campaign results over the coming quarters.
Sources
This brief is our own summary. Read the full reporting at the source.
- The Verge: Google hasn’t figured out how to make AI pay like its search engine
- Latent Space: [AINews] Google admits AI Mode hurts Search revenue; -15% $500B drop worst since 2004 IPO. AI Bear Market coming?
- Search Engine Journal: Spam Guide Update, Restaurant Controls & AI Mode Revenue – SEO Pulse via @sejournal, @MattGSouthern
- Digiday: Ad Tech Briefing: Google’s AI-reckoning
- Social Media Today: Google says AI chatbots are hurting its bottom line