Key points
- Alphabet reported Q3 Search & other revenue up 12% to $63.35 billion, slower than earlier quarters, even as query growth hit a five-year high.
- Chief Business Officer Philipp Schindler tied part of the slowdown to AI Mode, citing its lower monetization; currency was named the biggest factor.
- Google expanded AI Mode ads to 10 more countries and is launching multiturn ads in the U.S., per Search Engine Journal.
- Alphabet shares fell about 12.6% on Oct. 29, per Digiday, erasing close to $500 billion in market value.
Why it matters for marketers: Google's AI search is drawing more queries but earning less per query so far, so marketers should expect new ad formats and keep watching results they cannot yet isolate.
Alphabet's third-quarter report showed Google Search & other revenue rising 12% to $63.35 billion, a slower pace than the prior quarter, even though search queries grew at their fastest annual rate in five years. On the earnings call, Philipp Schindler said currency was the largest factor in the slowdown, followed by retail and media trends, but also said strong AI Mode query growth had an effect because those queries monetize less.
Investors reacted sharply. Digiday reported Alphabet shares fell about 12.6% on Oct. 29, wiping out close to $500 billion in market value. The Verge noted that paid click growth also cooled, from 13% to 8%, while Google plans heavy infrastructure spending on AI.
For marketers, the key point is that AI search is still working out its ad model. Google is widening ads in AI Mode to 10 more countries and adding multiturn ads in the U.S., which means commercial placements can appear across a longer conversation. Tinuiti, an agency, told The Verge its advertisers raised Google paid search spend 14% year over year in Q3 while holding return targets. But advertisers cannot break out AI ad inventory, so steady returns may simply mean that traffic is still small.
Schindler did not give a comparison point or size for the monetization gap, and no click figure for traffic sent to websites was provided this quarter. Watch for AI Mode ad reporting, any move of these formats into the Gemini app, and your own paid search returns as the new placements spread. Treat your own data as the check.
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
