Key points
- Alphabet reported Q3 Search & other revenue up 12% to $63.35 billion, slower than the prior quarter, while queries grew at their fastest pace in five years.
- Chief Business Officer Philipp Schindler said AI Mode queries monetized at a lower rate, 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 US, the same day as the earnings report.
- Tinuiti says its advertisers raised Google paid search spend 14% in Q3 with steady return targets, but cannot isolate AI ad performance.
Why it matters for marketers: AI search ads are expanding faster than the data to judge them, so marketers must plan for new placements they cannot target or measure separately yet.
Alphabet said search queries grew at their fastest annual rate in five years in the third quarter, yet Search & other revenue rose 12% to $63.35 billion, slower than the prior quarter. Paid click growth also slowed, according to The Verge. Alphabet shares fell sharply after the report, which Digiday put at about 12.6% on Oct. 29.
On the earnings call, Philipp Schindler named currency as the biggest factor in the slowdown, followed by changes in retail and media spending. He also said strong growth in AI Mode queries had an impact because those queries monetized at a lower rate. He did not say what the comparison point was or by how much. Google maintains that most AI Mode queries are additional rather than replacements, and says it feels good about its trajectory.
For marketers, the practical issue is measurement. Tinuiti's Andy Taylor says its same-store advertisers increased Google paid search spending 14% year over year in Q3 while holding return-on-ad-spend targets. But Google does not let advertisers target or break out AI inventory, so steady results may simply mean AI ad traffic is still small. An October working paper found ChatGPT ad visits generated less retailer revenue per session than Google Search ad visits, though it does not show how Google's own AI ads perform, and purchase intent may explain the gap.
Google expanded ads in AI Mode to 10 more countries and is rolling out multiturn ads in the US. It has also floated ads in the Gemini app, with no date. Watch whether Google adds reporting for AI placements, and compare your own paid search results by query type, since upper-funnel research queries may behave differently from shopping 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