Google is set to roll out advertisements in its AI-driven Search experiences across international markets. The tech giant is banking on the potential of generative AI to create new revenue streams amid a slowdown in its traditional search advertising business.
This announcement was made during Alphabet‘s third-quarter earnings call, where the company reported a revenue of $127.6 billion, reflecting a 25% increase year-over-year. However, concerns arose as growth in search advertising waned, leading to an 8% dip in Alphabet’s share price following the earnings release.
Google noted that revenue from search grew by 12% year-over-year in Q3, a decline from 17% in Q2 and 19% in Q1. This slowdown intensifies the pressure for Google to translate its expanding AI capabilities into a significant source of advertising revenue.
“We are now scaling high-quality ads within AI overviews in AI mode to more users and queries,” stated Philipp Schindler, Google’s chief business officer, during the investor call. “This includes taking our monetization footprint global for the first time. Today, we are announcing the expansion of ads in AI mode into international markets alongside multi-turn ads and AI mode in the U.S.”
Early metrics suggest that these new ad formats are proving effective. According to Schindler, click-through rates for sponsored product listings in AI mode are now comparable to those of organic listings. Additionally, user research indicates a positive reception of the ads’ relevance.
This initiative builds upon Google’s earlier announcement in May regarding new Gemini-powered ad formats. These formats include conversational discovery ads that engage with user inquiries and sponsored recommendations embedded within AI-generated responses.
Sundar Pichai, Google’s CEO, reported that search queries achieved their highest year-over-year growth rate in five years. However, he refrained from disclosing specific figures. Pichai credited the AI features for transforming how users engage with Search, including encouraging more intricate and longer queries.
On average, queries in AI mode are three times longer than traditional searches, Pichai noted, with one in five global AI mode searches incorporating voice, images, or documents. Furthermore, Google has exceeded 50 billion visual searches monthly.
“Search is bringing the benefits of AI to more people than any other product in the world,” Pichai remarked. “Users are increasingly leveraging our AI features, leading to longer, more personalized, and multimodal queries.”
Alphabet’s Google Services division, which encompasses Search, reported a revenue of $96.3 billion, up 11% year-over-year. Meanwhile, Google Cloud experienced impressive growth, with revenue soaring by 103% to reach $30.7 billion.
The quarter was notably eventful for Google, featuring the launch of Gemini 4 Argon, an increase in the Gemini app user base to 1 billion monthly users, and the introduction of the Pixel 11 lineup.
Editor’s Take
The expansion of ad capabilities in AI mode marks a significant shift for Google as it seeks to revitalize its advertising revenue amidst slowing growth in traditional search. This initiative not only highlights the company’s commitment to leveraging AI for enhanced user experiences but also poses opportunities and challenges for businesses and developers looking to navigate the evolving digital advertising landscape.
Source: techcrunch.com
