Google says AI Mode queries earn less than web searches; its fix is more ads in the chat

Alphabet’s third quarter brought almost $128 billion in revenue, up 25%, and more than $26 billion in net income, but net income was nearly $9 billion lower than a year earlier. Earnings per share came in at $2.12 against expectations of $3.02, and the stock fell almost 12% by the time Ars Technica published. Chief Business Officer Philipp Schindler said each AI Mode query earns less than a comparable web search, with fewer ads that cost less. Search volume growth slowed to 12%, from 17% in Q2 and 19% in Q1, and search revenue was flat. Publishers and sites like Reddit have lost traffic to AI answers for months (publishing upended); now the company leading the shift feels it. AI search is better for many questions; it isn’t yet a better business.

Google’s answer is more ads in AI Mode, expanding internationally (global AI ads), plus US multi-turn ads that change as a conversation goes on. Google says its research shows users find them more relevant, and that advertisers may need time to understand AI search ads. But an ad that updates with each turn differs from a sponsored link atop a page: the more answer and ad blend, the harder it is to tell advice from a pitch, especially as Google ties connected Gmail and Photos data to ad targeting (ad targeting). That is where trust could erode at scale.

The bull case is real in cloud, but much of that demand comes from AI startups spending venture money; if funding cools, the cushion thins just as search softens. Google is betting the company that AI search becomes as lucrative as ten blue links. If ad load is the main lever, users pay in attention and clarity; fixing the economics with better products would be preferable to more sponsored turns. More in our Google coverage, Gemini coverage and marketing coverage.