Google Admits AI Mode Ads Earn Less Than Search

Google has said out loud what many advertisers suspected: an ad shown inside an AI answer is, for now, worth less than an ad on a list of blue links. On Alphabet's third-quarter earnings call on 28 October, chief business officer Philipp Schindler pointed to "the lower monetization we were seeing in AI Mode" as one reason ad revenue grew more slowly, even as the number of AI Mode searches grew strongly, according to Search Engine Roundtable.

Investors did not like the wider picture. Alphabet shares fell 12% on 29 October, erasing about $460 billion of market value, Techweez reported, citing the Financial Times. If the fall held to the close, it would be the second-largest one-day loss of value in Wall Street history, after Nvidia's $593 billion drop in January 2025.

What Google said about AI Mode ads

Google has previously said ads in AI Overviews, the summaries at the top of normal results, earn about the same as ads without them. That claim never covered AI Mode, the separate chat-style search tab, Search Engine Roundtable notes. Schindler said AI Mode queries currently earn less each than a traditional search, and that many of them are early research, before a person is ready to buy.

Google is not pulling back. Schindler announced "the expansion of ads in AI Mode into international markets alongside multi-turn ads in AI Mode in the U.S.", according to a quote shared by search analyst Glenn Gabe and reported by Search Engine Roundtable. Multi-turn ads can appear across the follow-up questions a person asks in one conversation. Google did not name the new countries. Schindler said ad experiments showed "promising results" and that Google is scaling ads in both AI Overviews and AI Mode.

He also gave other reasons for the slowdown: currency moves were the largest single drag compared with the second quarter, some Asian retail advertisers were hit by the EU ending its low-value import exemption, and media spending normalised after a World Cup-boosted second quarter.

The numbers that rattled investors

• Revenue rose 25% to $127.6 billion, slightly below forecasts.
• Capital spending was $51.3 billion in the quarter, up from $44.9 billion; finance chief Anat Ashkenazi said it could reach $205 billion this year.
• Cash flow was negative $9.1 billion, only the second negative quarter since the 2004 listing.
• Net income fell 25% to $26.2 billion, against $37.3 billion expected, partly because of investment losses.
• Google Cloud revenue doubled to $30.7 billion.

Those figures come from Techweez's report on the results. The contrast with Microsoft, which reported the day before, was sharp: Microsoft's Azure grew 48% and its shares rose more than 5% on Wednesday, according to TechXplore, while its capital spending of $45.2 billion was lower than Google's.

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Who it affects

For Google, the problem is mix. Every search that moves from classic results to AI Mode currently earns less, so growth in AI Mode can slow search revenue even when usage is rising. For advertisers, it means the cheapest attention may soon be inside AI answers, sold on new formats, with less history to judge performance by.

Search is also no longer the only AI ad market. ChatGPT began selling ads in Nigeria and South Africa on 21 October, as part of OpenAI's expansion to 89 markets, which TheStak reported last week.

What is still unknown

• Which countries get AI Mode ads next, and whether any African market is among them.
• How AI Mode ads will be priced and reported in Google Ads, and whether advertisers can opt in or out.
• How much less an AI Mode search earns; Google has not given a figure.