Google's search revenue Ferrari hits an AI-powered speed bump

Google's search revenue growth has slowed to 12 percent in Q3 from 17 percent in Q2, despite Alphabet's $51.4 billion in Q3 capital expenditures. This slowdown has contributed to investor concerns and a $500 billion loss in market value for Alphabet. Douglas Anmuth from JPMorgan Chase & Co questioned whether Google is showing fewer ads in AI Overviews and AI Mode than in traditional search results.

Chief Business Officer Philipp Schindler attributed the lower monetization in AI Mode to foreign exchange rates, Europe's elimination of customs-duty exemption, and lower monetization in AI Mode itself. Google plans to expand AI Overview ad distribution and add multiturn ads for AI Mode queries in the US. However, some Google Ads customers are concerned that Google is prioritizing short-sighted, highly extractive tactics, such as charging advertisers more for lower-quality clicks.

Analyst Eric Seufert dismissed concerns about a decline in search usage, noting that the year-over-year Search query growth rate was the highest in the last five years in Q3. However, Google's efforts to monetize AI may face challenges if users find better alternatives for information discovery.