Google searches are growing fastest in five years, but AI answers aren’t paying like ads yet

Alphabet reported search queries growing at their fastest rate in five years. Search revenue growth slowed to 12% year over year in the third quarter, from roughly 17% earlier, and paid-click growth fell from 13% to 8%; shares dropped about 14% after the report. Business chief Philipp Schindler blamed currency effects and advertiser spending shifts for most of the slowdown but acknowledged AI Mode queries monetize at a lower rate than traditional searches (Google’s admission). All this as Google plans about $200 billion in infrastructure spending this year, much of it for AI. People clearly find AI Overviews and AI Mode useful; the business model was built on clicks, and a conversation that answers your question doesn’t need many.

Google argues most AI Mode queries are incremental, extra questions rather than replacements, and that research-stage searches are future ad opportunities. Plausible. But as The Verge notes, saying most queries are additional doesn’t reveal how much revenue is lost from the searches AI Mode does replace, and Google isn’t giving that number. Advertisers aren’t panicking: Tinuiti says clients raised Google search spending 14% while hitting return targets. They can’t isolate AI ad performance, though, because Google doesn’t let them target or measure that inventory separately, so steady returns may only mean AI ads are still small. Opacity just as the format changes is a problem for buyers.

An October working paper found ChatGPT ad visits generated far less retailer revenue per session than Google Search ads, though it doesn’t measure Google’s own AI ads and purchase intent may explain much of the gap (chatbot ads). Google is expanding ads in AI Overviews and AI Mode internationally and across multiple turns of US conversations (global AI ads), and has floated ads in the Gemini app without a timeline. Analysts note past shifts like mobile took years before ad formats caught up.

If AI answers keep growing while clicks shrink, pressure to stuff conversations with ads grows, risking the usefulness that drove adoption, and publishers lose traffic too. The same tension shapes Google’s stance on classroom AI (schools). Google has time and a huge cushion; it also has a $200 billion bill. More in our Google coverage and business coverage.