Woe is Google. After it starved out publishers with its AI features, it’s now getting a taste of its own medicine.
Shares of its parent company Alphabet took an over 11 percent nosedive on Wednesday, after it disclosed that its AI search features are raking in less money than its traditional search ad model. The steep correction wiped out more than $500 billion in market value.
In its Q3 report, Google reported a quarterly revenue of $127.6 billion, a 25 percent year over year increase. But it’s also spending more, with capital expenditures more than doubling from last year to $51.4 billion, largely thanks to its massive AI investments.
Meanwhile, the growth of its revenue from search seems to be tapering off. It reported a 12 percent year-over-year increase to $63.3 billion, which is less than the 14.5 percent growth it reported in the same period last year.
That’s despite Google Search fielding more queries than ever. Google chief business officer Philipp Schindler admitted in an earnings call, per Search Engine Land, that this was because of “lower monetization we’re seeing in AI Mode,” its AI-powered search experience that works more like a chatbot instead of showing the traditional ten blue links.
It’s an ironic, but perhaps not unforeseen, downturn for Google. When ChatGPT became global phenomenon in late 2022, questions were soon asked regarding if a shift to using chatbots to obtain information over a traditional search engine would topple Google’s ludicrous 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 Overviews, and prominently integrating them into its search engine. This came at the expense of the websites and publishers that its AI models were pilfering from: users were happy to read error-plagued summaries instead of visiting the websites that contained the original information, depriving these sites of clicks and ad revenues. Despite Google’s repeated claims to the contrary, multiple studies have demonstrated that AI Overviews have destroyed click-through rates.
This has had a disastrous effect on the media landscape, with data compiled by Axios showing that the number of visits to top news sites plummeted from over 70 million visitors a month in July of 2024 — the year that Google launched AI Overviews — to just over 47 million in July of 2026. Media leaders who responded to a Reuters Institute survey are grim about the future, predicting traffic to their websites to fall by nearly half over the next three years amidst this AI-dominated paradigm.
Now, Google is getting a taste of this too, earning less advertising dollars from its AI Mode than from the traditional search that it is so eager to abandon. It seemingly hasn’t considered what comes next after the websites it earns money off of all go out of business.
Chief business officer Schindler, though, was adamant that Google will soon start squeeze more money out of AI Mode.
“On AI Mode, many of these queries are upper funnel queries, allowing us to capture new, high-value commercial intent,” he argued. “In addition, the majority of AI Mode queries are incremental, creating more monetization opportunities over time.”
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