Google is introducing advertising into its AI-driven Search experiences across international markets. The company is gambling that generative artificial intelligence will create fresh revenue streams, even though expansion in its traditional core search advertising sector is decelerating.
The announcement was made on Wednesday during Alphabet's third-quarter earnings call, where the company reported $127.6 billion in revenue, representing a 25% increase year over year. However, Search advertising growth continued to slow, leading to an 8% drop in Alphabet stock after the results were released.
In the third quarter, Google Search revenue increased by 12% year over year. This figure marked a decline from the 17% growth seen in the second quarter and the 19% seen in the first quarter. This deceleration adds further pressure on the company to monetize its expanding suite of AI features effectively.
Philipp Schindler, Google's chief business officer, stated during the investor call, "We are now scaling high-quality ads within AI overviews in AI mode to more users and queries." He added, "This includes taking our monetization footprint global for the first time. Today, we’re announcing the expansion of ads in AI mode into international markets alongside multi-turn ads and AI mode in the U.S."
Google reports that early results indicate these formats are proving effective. According to Schindler, click-through rates for sponsored product listings in AI Mode are already comparable to organic listings. Additionally, user research suggests that consumers perceive the advertisements as relevant.
This initiative follows Google's May announcement regarding new ad formats powered by Gemini. These include conversational discovery ads that answer user inquiries and sponsored recommendations embedded within AI-generated responses.
Google CEO Sundar Pichai noted that Search queries increased at their fastest year-over-year rate in five years, although he did not provide specific figures. He attributed this surge to AI features, which have altered how users interact with Search by prompting longer and more complex inquiries.
Pichai revealed that queries in AI Mode are, on average, three times longer than traditional searches. Furthermore, one in five AI Mode searches globally utilizes voice, images, or documents. Google has also recorded over 50 billion visual searches per month.
"[Search] is bringing the benefits of AI to more people than any other product in the world," Pichai told investors. "People are using our AI features more, searching in entirely new ways. Their queries are longer, personalized, and multimodal."
Alphabet's Google Services division, which encompasses Search, generated $96.3 billion in revenue, an 11% increase year over year. Concurrently, Google Cloud revenue skyrocketed by 103% to reach $30.7 billion.
These results followed a productive quarter for Google, which included the release of Gemini 4 Argon, the expansion of the Gemini app to one billion monthly users, and the launch of the Pixel 11 smartphone lineup.
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