Google's AI search boom isn't yet boosting its ad revenue

Chief Business Officer Philipp Schindler pointed to currency effects as the main cause of the weaker growth, along with shifts in what advertisers in certain industries were spending. But the AI makeover contributed too: AI Mode queries are growing strongly while monetising at a lower rate than traditional searches, he said. Google argues most AI Mode queries are incremental, additional questions rather than replacements, and often "upper-funnel" research ahead of a purchase. It is rolling out more ads in AI Overviews and AI Mode, both internationally and across multiple turns of US AI Mode conversations, and has suggested ads could reach the standalone Gemini app using formats built for AI Mode, without giving a timeline.

Advertisers are still seeing returns. Tinuiti's same-store advertisers lifted their Google paid search budgets 14 percent year over year in the third quarter and kept hitting their return-on-ad-spend targets, and the agency's vice president of research Andy Taylor said performance had not taken a hit. But Google does not let advertisers separately target AI ad inventory or break out its performance, so steady overall returns could simply mean AI ad traffic is still too small to matter. "This is the first major disruption that Google is facing to its core business in decades," said Nate Elliott, an eMarketer principal analyst covering AI and advertising. "If people are clicking through less often," he added, "that is a challenge that they need to figure out."