Google points to AI Mode as search revenue growth slows to 12%

Google's search revenue grew 12% in the third quarter, the slowest rate this year, and Google's chief business officer has named AI Mode's lower monetisation as one of the reasons.

Alphabet's earnings release puts Search and other revenue at US$63.35 billion for the quarter. Growth was 19% in the first quarter and 17% in the second, and the third-quarter figure landed roughly US$1.6 billion short of analyst expectations.

On the 28 October earnings call, Philipp Schindler said strong growth in AI Mode queries "had an impact because of the lower monetization we were seeing in AI Mode." Google's revenue line shows search revenue slowing while query growth is at a five-year high, and a Google executive has tied part of that gap to AI Mode on the record.

Google named four reasons search revenue growth slowed

Schindler gave four reasons growth slowed after the second quarter. Currency was the biggest single factor, he said. Some Asia-Pacific retail advertisers were hit by the EU scrapping its de minimis exemption on low-value imports. Media and entertainment advertising eased after a World Cup-boosted second quarter. And AI Mode use grew faster than its ad revenue.

CFO Anat Ashkenazi added that Google is now comparing against the strong search quarters that began in Q3 2025, which she said will keep pressuring year-on-year growth in the fourth quarter.

Currency explains only part of the drop in search growth

Calling currency the largest factor ranks it against the other three. It does not say how big it was. Alphabet's release allows a rough check: total revenue grew 25% in the third quarter with or without currency adjustment, and Ashkenazi described FX as a slight headwind on year-on-year growth. In the second quarter the figures were 24% as reported and 23% at constant currency, so currency had added about a point back then. Quarter on quarter, revenue rose 6% as reported, or 7% at constant currency.

Search growth dropped from 17% to 12%. Alphabet does not give a constant-currency growth figure for search, so the release cannot settle the split. If search moves with currency the way the whole company did, currency would explain perhaps one or two of those five points. It could still be the biggest single factor, but the other factors together would account for more of the slowdown. Ashkenazi separately put the drag from lapping last year's search acceleration at about three points in Q3.

Sundar Pichai said query growth was at a five-year high, but Google did not give the figure or explain how queries are counted inside an AI Mode session. The call transcript puts AI Mode queries at about three times the length of a standard search, and Google now sells ads into back-and-forth AI Mode conversations in the US. If every follow-up counts as a separate query, longer conversations alone would lift the number even if people searched no more often.

Treat the five-year high with caution until Google says how it counts. The same question hung over Reddit's search referral drop, where Google reported its fastest query growth in five years and no click figure.

Shopping and Performance Max campaigns already qualify for AI Mode ads

Pichai credited AI for the query growth, and Schindler's plan to close the gap has three parts: show ads in AI Overviews and AI Mode to more people on more queries, launch AI Mode ads outside the US for the first time, and bring multi-turn AI Mode ads to the US. He said Google's ad experiments have shown promising results, without giving a figure.

Google announced the US multi-turn ads on 28 October. They let an advertiser's ad appear on follow-up queries within an AI Mode conversation. In the same announcement Google said ads in AI Mode are scaling to ten more countries including Canada and Australia, with Brazil, Mexico and the United Kingdom planned for the fourth quarter of 2026. Search, Shopping and Performance Max were the eligible campaign types when Google brought AI Mode ads to Australia, and Google's help page on ads in AI-powered experiences says every existing campaign of those types is automatically eligible.

Advertisers cannot target only AI Overviews or AI Mode, and cannot opt out of them separately from Search. Existing guardrails such as negative keywords, brand exclusions and asset pinning still apply, and exact and phrase match keywords only serve when the query itself shows commercial intent, not on broader exploratory questions. Ads served in AI answers sit inside the standard Search reports and are mixed through the search terms report, so there is no separate line to watch.

Ads may take organic slots in AI Mode

One line from the call matters more for SEO than for investors. Schindler said click-through rates "are already similar between sponsored and organic product list items within AI Mode." SEO and paid search have long been planned separately because ads and organic results sit in different places on a standard results page and people click them differently.

Space inside an AI Mode answer is limited. If Google adds ad units to lift revenue per query, and sponsored product listings already get clicked as often as organic ones, advertisers will want those slots. Organic results would then compete with paid inventory for the same few positions. That is our interpretation of the two statements; Google has not said it.

Google also claimed that most AI Mode queries are additional searches rather than replacements, and that many come early in the buying process with new commercial intent. That cannot be verified outside Google. If that is right, brands are being chosen for those moments within the AI answer itself, ahead of any click.

Adthena counts ad placements but not clicks

Ad load inside AI answers already has a count. Adthena's Holiday AI Paid Search Report found about 175,100 paid placements across Google's AI Overview and AI Mode panels in the US from June to September, in five holiday shopping categories. Apparel took about 111,000 and consumer electronics about 55,000. Travel had roughly 6,500, beauty about 2,100 and toys and games around 685.

The report tracks where ads appeared and nothing else: no clicks, spend or conversions on either surface. Adthena sells ad tracking for Google and ChatGPT, so treat the counts as a vendor's sample. The same report counts 204,489 ChatGPT ad placements in the same categories and months, which puts a volume figure next to the earlier evidence of ChatGPT ad visits earning less than paid search visits.

Adthena also compared AI Overview appearances in Google results in August 2025 and August 2026. US appearances rose 89%, from 304 million to 575 million, the UK and EU rose 160%, and Australia rose 536%. Adthena does not say which queries it tracked or whether it used the same set in both years, so the Australian figure cannot be set against the US one with any precision.

Check the fourth-quarter results for how Google counts AI Mode queries

Ashkenazi has already flagged that in the fourth-quarter results, expected in early February, currency will be a slightly bigger drag and tougher comparisons will take a couple of points off growth. Look for a defined query growth figure or an explanation of how AI Mode follow-ups are counted, search growth with currency and comparison effects set aside, a separate revenue figure for ads in AI Overviews and AI Mode, and a number behind the "promising results" from ad tests.

Australian sites should track AI answer citations

Start tracking now, while ads inside AI Mode are still scaling up in Australia. The surface and the inventory on it are growing at the same time here: Adthena's count has Australian AI Overview appearances up 536% in a year, and every existing Search, Shopping and Performance Max campaign is already eligible to appear inside those answers. Choose the searches most important to your business and, for each one, log:

• whether the AI answer links to your site
• which competitors it links to
• whether sponsored units now appear next to those links

Run the same check next quarter to see whether ads are displacing organic citations. That gives you evidence to take into budget discussions. Google reports these numbers only in aggregate, so your own tracking is the only view of your position.

On the paid side, review Search, Shopping and Performance Max campaigns through the search terms report, and set negative keywords and brand exclusions where an AI answer is pulling in queries you do not want to pay for. Exact and phrase match keywords will not reach the broader exploratory questions, so the queries to watch there come from broad match, AI Max for Search, Shopping and Performance Max. Ad load in your own categories can be checked now, without waiting for the fourth-quarter report.