Key points
- Alphabet's Q3 Search and other revenue rose 12% year over year to $63.35 billion, slower than 17% in Q2, even as query growth hit a five-year high.
- Growth in paid clicks eased from 13% to 8%, according to The Verge's reading of the results.
- Google expanded AI Mode ads to 10 more countries and is introducing multiturn ads in the U.S.
- Alphabet shares fell roughly 12.6% on Oct. 29, wiping out close to $500 billion in market value, per Digiday.
Why it matters for marketers: Advertisers are paying for AI search placements Google can't yet report separately, so budgets in AI Mode are a bet made without clear performance data.
Alphabet's third-quarter report showed search queries growing at their fastest pace in five years, yet Search revenue growth cooled to 12 percent. Chief Business Officer Philipp Schindler said currency was the largest drag, but he also tied part of the slowdown to AI Mode, which is attracting heavy usage while earning less per query than classic search. Investors reacted sharply, and Digiday put the one-day share drop at about 12.6 percent.
Google's position is that AI Mode adds searches rather than replacing them, and that many of those searches happen early in a buying journey. It is now widening the ad inventory, with AI Mode ads reaching 10 more countries and multiturn ads arriving in the U.S. It has also floated ads in the Gemini app but has not given a date.
For marketers, the practical issue is visibility. Tinuiti's Andy Taylor said its advertisers raised Google paid search spend 14 percent in the quarter while holding return targets, but Google does not let buyers isolate or report on AI placements. Steady results may simply mean AI traffic is still small. Schindler also did not say how much lower AI Mode monetization is, or compared with what.
An analyst quoted by The Verge noted that ad formats in new media can take years to settle. An October working paper found that ChatGPT ad visits produced less retailer revenue per session than Google Search ad visits, though it said little about Google's own AI ads, and intent differences may explain the gap.
Watch how Google reports AI Mode going forward, and whether advertisers gain separate controls or reporting. Until then, compare branded and non-branded search results on your own accounts, and treat any AI Mode spend as a test.
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