Google is putting ads into AI Mode in ten more countries, and the move comes with an unusual admission: its AI-powered search earns less money than the search it is replacing. The announcement came alongside Alphabet’s third-quarter earnings on Wednesday, October 29, and Engadget and Ars Technica both covered the change.
Where ads are going. Ads in AI Mode are going live in Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore, according to Engadget. Brazil, Mexico and the United Kingdom are set to get them later this year. Reports by Search Engine Journal and other outlets add that the ads are limited to English, and that only text ads will be available in Pakistan.
New ads for US users. In the US, Google is adding what it calls multiturn ads, which appear in follow-up questions during an AI Mode conversation and not only in the first answer. That matters because AI Mode is built around back-and-forth questions, so the follow-ups are where much of the activity happens.
The admission. On the earnings call, Google’s chief business officer, Philipp Schindler, said lower monetization within AI Mode was one of three reasons for slower growth in search, according to a report by Search Engine Journal. Google Search and other revenue rose 12% from a year earlier to $63.35 billion, the same report says. Engadget says executives told analysts that AI Mode was generating less revenue than Google was spending on it, and that early ad results look promising.
How investors reacted. Reports disagree on the size of the share price drop after the results. One report says Alphabet’s shares fell more than 12%, wiping out about $511 billion in value, while another puts the decline at 8%. The difference is worth noting, and readers should check the closing prices from a market data source for the exact figure.
Why this matters. For years, Google made most of its money from ads next to a list of links. AI Mode answers questions directly, so there are fewer natural places for ads and fewer clicks, and the ad formats have to be reinvented. This week’s announcements show Google trying to do that quickly, while telling the market that the new approach is not yet as profitable as the old one.
What it means for advertisers and publishers. Advertisers get another place to buy attention, with more countries and follow-up questions in the US. Publishers face a familiar worry, which Reddit voiced separately this week when it blamed AI search for a drop of more than a million weekly referrals. If AI answers keep people on Google, the traffic that websites depend on shrinks.
What to watch. Look for the UK launch date, which Google has only placed in the fourth quarter, the first data on how much AI Mode ads earn compared with classic search ads, and whether Google’s search growth recovers.
Sources: Engadget, Ars Technica and Search Engine Journal. Figures are as reported by those outlets from Alphabet’s earnings.
Google street sign in Mountain View, California (file image), Wikimedia Commons, CC BY-SA 3.0
