Key points
- Alphabet's Q3 Search & other revenue rose 12% to $63.35 billion, slower than the roughly 17% growth reported for Q2, per The Verge.
- Chief Business Officer Philipp Schindler tied part of the slowdown to AI Mode, where query growth was strong but monetization was lower.
- Google expanded ads in AI Mode to 10 more countries and is launching multiturn ads in the U.S., Search Engine Journal reported.
- Alphabet shares fell about 12.6% on Oct. 29, per Digiday, which put the lost market value near $500 billion.
Why it matters for marketers: AI search is adding queries but not yet matching the ad revenue of classic search, and advertisers cannot see AI Mode results separately, so budget decisions rest on blended data.
Alphabet reported that search queries are growing at their fastest annual pace in five years, yet Search revenue growth cooled to 12% in the third quarter. On the earnings call, Philipp Schindler said currency was the largest factor, followed by trends in retail and media. He also said AI Mode's strong query growth weighed on results because those queries earned less per search.
Investors reacted sharply. Digiday reported that Alphabet shares fell roughly 12.6% on Oct. 29, wiping out close to $500 billion in market value. Google maintains that most AI Mode queries are additional rather than replacements, and says it feels good about its path. Search Engine Journal noted that Schindler did not explain what AI Mode was earning less than, or how large the gap is.
For marketers, the practical issue is visibility. Tinuiti's Andy Taylor told The Verge that advertisers on his firm's books raised Google paid search spend 14% year over year in Q3 while holding return targets. But Google does not let advertisers target AI inventory separately or break out its results, so steady returns could mean AI ad traffic is still small.
Google is pushing ahead anyway, adding AI Mode ads in 10 more countries and multiturn ads in the U.S. Watch whether Google offers reporting that isolates AI placements, and check your own search accounts for shifts in click volume and conversion value as these formats spread. eMarketer's Nate Elliott cautioned that effective AI ad formats can take years to emerge.
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