Google hasn’t figured out how to make AI pay like its search engine

Google’s search queries are growing at their fastest rate in five years, but its advertising revenue growth slowed in the third quarter as the company expands AI features. The figures have raised questions about whether AI can strengthen Google’s core business enough to justify the roughly $200 billion it plans to spend this year, largely on infrastructure.

Search revenue grew 12 per cent year on year, down from about 17 per cent in the previous quarter, while paid-click growth fell from 13 to 8 per cent. Alphabet said currency effects and changes in some advertisers’ spending contributed to the slowdown, and that AI Mode queries currently earn less than traditional searches. Advertisers surveyed by Tinuiti increased Google search spending by 14 per cent while maintaining return targets, but they cannot separately measure AI ad performance, leaving its contribution and potential to displace existing revenue unclear.