Key points
- Alphabet's Q3 Search & other revenue rose 12% to $63.35 billion, slower than the prior quarter, even as queries grew at their fastest pace in five years.
- Chief Business Officer Philipp Schindler said AI Mode queries earn less than traditional searches, though currency was the biggest factor in the slowdown.
- Google is expanding AI Mode ads to 10 more countries and launching multiturn ads in the U.S.
- Advertisers cannot target or measure Google's AI ad inventory separately, according to Tinuiti's Andy Taylor.
Why it matters for marketers: Search spend still performs, but AI ad inventory cannot be isolated, so marketers have to watch blended returns and prepare for new conversational ad formats.
Alphabet reported that search queries grew at their fastest annual rate in five years in the third quarter. Search & other revenue still rose 12% to $63.35 billion, but that was slower than the previous quarter. The Verge reported that paid click growth also cooled, from 13% to 8%.
Philipp Schindler, Google's chief business officer, put currency first among the reasons, followed by shifts in retail and media spending. He also said strong AI Mode query growth weighed on results because of lower monetization. Search Engine Journal noted he did not say what AI Mode was being compared with or by how much. Investors reacted sharply, with Digiday reporting a one-day share drop of roughly 12.6%.
For marketers, the key point is that results are holding up for now. Tinuiti's Andy Taylor told The Verge that its advertisers raised Google paid search spend 14% year over year while keeping return targets. But Google does not let advertisers separate AI inventory, so steady returns may only mean AI ad traffic is still small.
Google is widening ads in AI Mode to 10 more countries and adding multiturn ads in the U.S., where ads can appear across a longer conversation. It has also floated ads in the Gemini app without a date. eMarketer's Nate Elliott cautioned that effective formats can take years to emerge.
Watch your blended search returns and any new reporting Google offers for AI placements. Treat comparisons with ChatGPT ads carefully: a cited working paper measured retailer sales, not platform revenue, and intent differs between searches.
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
