Woe to Google. After starving publishers with its AI features, it is now getting a taste of its own medicine.
Shares of its parent company Alphabet plunged more than 11% on Wednesday, after it revealed that its AI search features made less money than its traditional search ad model. This sharp correction wiped out more than $500 billion in market value.
In its third quarter report, Google announced quarterly revenue of $127.6 billion, an increase of 25% year-over-year. But it’s also spending more, with capital spending more than doubling from last year to $51.4 billion, largely thanks to its massive investments in AI.
Meanwhile, its research revenue growth appears to be faltering. It recorded a 12 percent year-on-year increase to $63.3 billion, lower than the 14.5 percent growth recorded during the same period last year.
This is despite the fact that Google Search is answering more queries than ever. Philipp Schindler, Google’s chief commercial officer, admitted as much during an earnings call, according to Land of search enginesthat this was due to “lower monetization we’re seeing in AI mode”, its AI-powered search experience that functions more like a chatbot instead of displaying the traditional ten blue links.
This is an ironic, but perhaps not unforeseen, slowdown for Google. When ChatGPT became a global phenomenon in late 2022, questions were quickly asked about whether the shift to using chatbots to get information through a traditional search engine would topple Google’s ridiculous advertising empire, which earns the company hundreds of billions of dollars each year.
Google responded by developing its own AI features, including its notoriously unreliable AI previews, and integrating them prominently into its search engine. This came at the expense of the websites and publishers its AI models flew on: users were happy to read error-riddled summaries instead of visiting the websites containing the original information, depriving those sites of clicks and ad revenue. Despite Google’s repeated claims to the contrary, several studies have shown that AI insights have destroyed click-through rates.
This has had a disastrous effect on the media landscape, data compiled by Axios showing that the number of visits to major news sites fell from more than 70 million monthly visitors in July 2024 – the year Google launched AI previews – to just over 47 million in July 2026. Media executives who responded to a survey Reuters Institute The survey is gloomy about the future, predicting that traffic to their websites will drop by almost half over the next three years, amid AI dominance.
Now Google is getting a taste of it too, making less ad money from its AI mode than from the traditional search it is so eager to abandon. It seems he hasn’t thought through what will happen after the websites he makes money from go bankrupt.
Chief commercial officer Schindler, however, insisted that Google would soon start getting more money out of AI mode.
“In AI mode, many of these queries are upper-funnel queries, allowing us to capture new, high-value sales intent,” he explained. “Additionally, the majority of AI queries are incremental, creating more monetization opportunities over time. »
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