Google has acknowledged that advertising in its AI Mode earns less per query than advertising in traditional search, a rare admission that helps explain why Search revenue growth slowed even as people searched more than ever. Chief business officer Philipp Schindler told investors on Alphabet’s third-quarter earnings call that strong growth in AI Mode queries had weighed on results because of the lower monetization in the new format, while stressing that Google still feels good about its trajectory.
What Schindler actually said
Schindler’s comment came in answer to a question about why Search advertising growth slowed from the second quarter to the third, despite Google reporting its fastest Search query growth in five years. He pointed first to foreign exchange as the largest driver of the slowdown, then to shifts in retail and media spending.
“It’s worth noting that the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode,” Schindler said on the call. He did not say how much less revenue an AI Mode query generates than a traditional search, nor its share of the slowdown, leaving the size of the gap undisclosed.
The admission matters because it cuts against the reassuring line Google used for AI Overviews, the AI answers feature, where the company said ads earned about the same as they did without the AI summary. AI Mode is a different product: a full conversational search experience, not a summary box above traditional results.
Why the timing matters
Alphabet reported third-quarter revenue of $127.6 billion, up 25 percent from a year earlier, but advertising revenue grew just 10.5 percent, below what analysts had expected. Google Search and other advertising revenue rose 12 percent to $63.3 billion, down from 17 percent growth in the second quarter, and Alphabet’s shares fell sharply in after-hours trading.
Schindler coupled the warning with a promise: monetization should improve over time as Google scales its ad experiments. The company is now expanding ads in AI Mode to more countries, alongside multiturn ads in the United States, which let advertisers show ads across the follow-up questions in a single AI Mode conversation rather than only on the first query.
AI Mode queries are, on average, three times longer than traditional searches, and one in five AI Mode searches uses voice, images, or documents. Schindler argued that many of those queries are incremental, meaning people search more because AI Mode exists, creating more chances to show ads even if each one pays less.
Shopping is the early test
Product advertising is where the new economics are clearest. Schindler said click-through rates are already similar between sponsored and organic product listings inside AI Mode, a comparison that covers product cards only, not every link or citation the feature shows. Google did not publish the actual rates or explain how it measured them.
The shopping angle is already visible to users. Google has been testing carousels that mix sponsored and organic products in AI Mode, with headers that can read “Sponsored” and “All products.” How clearly paid listings are labeled in that blended format will shape whether shoppers trust what the AI recommends.
Google also pointed to progress elsewhere in its ad business. Gemini models helped advertisers create more than 1.5 billion campaign assets in the third quarter, seven times the year-earlier total, and AI-driven improvements in Discover delivered 18 percent more advertiser value. The message: AI is lifting the ad machine, even while AI Mode monetizes more slowly.
Why It Matters
For advertisers, the admission reframes how AI search should be judged. More queries do not automatically mean more revenue per search, and early AI Mode traffic may convert differently from the traditional results advertisers have optimized for over two decades. Budgets, bidding, and measurement built for classic search will need rethinking as conversational queries take a larger share.
For Google, the stakes are the core business itself. Search advertising still pays for nearly everything else the company builds, from cloud to research. If AI Mode keeps growing faster than its monetization, Google must either close the gap quickly or accept slower ad growth, which is why the company is pushing AI tools for advertisers.
Background
Google launched AI Mode as its conversational search experience in 2025 and has since expanded it to more users, queries, and countries, with advertising following close behind.
Source: Search Engine Roundtable report and Search Engine Land coverage
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