Google is getting more search activity as it adds AI features, but more queries have not yet produced faster growth in the advertising business that funds Search. The company is expanding ads in AI Overviews and AI Mode while it works out how those formats can serve advertisers and users.
More searches, slower revenue growth
Alphabet said search queries were growing at their fastest rate in five years. Yet Google Search revenue grew 12 percent year over year in the third quarter, down from roughly 17 percent in the previous quarter. Growth in paid clicks, which are ad clicks that generate revenue for Google, also slowed, from 13 percent to 8 percent.
Chief Business Officer Philipp Schindler said currency effects were the biggest factor in the revenue-growth slowdown, along with changes in advertiser spending in particular industries. He also said AI Mode queries were growing strongly but earning revenue at a lower rate than traditional searches. Schindler said Google felt good about its trajectory and that its “ad experiments have shown promising results.”
The financial picture matters as Alphabet plans to spend about $200 billion this year on infrastructure, largely to support AI. Its shares have fallen about 14 percent since it reported earnings last week, as investors weigh the cost of those plans against their returns. Search revenue is still growing by double digits, but the figures leave open how well AI-powered search can support that growth.
Different searches create different ad opportunities
Google Search now offers different ways to find information. AI Overviews can place generated summaries in results, while AI Mode turns a search into a conversation. But the kind of question a person asks can shape what advertising makes sense.
Someone searching for Nikes may be ready to shop and see familiar product listings and text ads. A person using AI to understand a topic or research a possible purchase may be earlier in the decision process. Google argues that many AI Mode queries are “incremental”—additional questions rather than replacements for existing searches—and that many are “upper-funnel,” or part of early purchase research.
That could create advertising opportunities over time, even if each AI query currently earns less than a traditional search. The unanswered question is whether AI brings enough new activity to offset any searches that it replaces. Google’s description of queries as additional does not, by itself, show how much revenue might be lost if people shift away from searches that are easier to monetize.
Ad performance is hard to see
Google is expanding ads in AI Overviews and AI Mode internationally and across multiple turns of US AI Mode conversations. It has also floated bringing ads to its standalone Gemini app, saying formats developed for AI Mode could carry over, but it has not announced when.
For now, advertisers cannot separately target Google’s AI ad inventory or see its performance broken out, according to Andy Taylor, vice president of research at digital advertising agency Tinuiti. Tinuiti’s same-store advertisers increased Google paid search spending 14 percent year over year in the third quarter while maintaining their return-on-ad-spend targets. Taylor said those advertisers were still seeing good returns and had not seen performance take a hit.
That overall result does not reveal how AI ads are doing. Steady returns could mean AI ad traffic is still too small to change the wider figures, or that it performs similarly to other inventory. Taylor suspects the former. Without separate reporting, advertisers and investors have limited evidence about the contribution of the new formats.
Conversation alone does not guarantee better ads
AI conversations may reveal more about what someone needs than a short search query does. But an advertising system still has to identify which details matter and connect them to a useful ad. More context does not automatically mean more effective advertising.
An October working paper found that US visits from ChatGPT ads generated 64 percent less revenue for retailers per session than visits from Google Search ads: $0.89 versus $2.45. The paper measured retailer sales, not revenue for the advertising platforms, and its findings about ChatGPT do not establish how Google’s AI ads perform.
The comparison also depends on what people are trying to do. A search for Nike shoes may come from someone ready to buy, while a question about which running shoes to choose may reflect earlier research. A difference in sales returns could reflect that purchase intent rather than the quality of the ads themselves.
Google has time to experiment, Taylor said, pointing to its shift to mobile, where early phone traffic was less valuable to advertisers because shopping on a phone was cumbersome. Nate Elliott, an eMarketer principal analyst covering AI and advertising, cautioned that effective formats can take years to emerge. As AI spending raises the stakes, Google still has to show how its new search experiences can generate sustainable advertising value.