Google’s AI Search Grows Faster Than Its Ad Revenue

Big Tech earnings this week highlighted a monetization dilemma for AI-integrated search. Google’s AI Mode is delivering its fastest year-over-year query growth in five years, yet advertising revenue grew just 12%, the slowest rate in five quarters Forrester Blogs. Reddit CEO Steve Huffman said Google search referrals declined “meaningfully” in Q3, and Reddit’s earnings call put the October decline at more than 1 million referrals per week on average.

For Google, AI Mode currently has far fewer ads than classic search, so the company announced plans to scale ads in both AI Mode and AI Overviews across a wider range of queries, expand ads into international markets for the first time, and launch multiturn ads in AI Mode, where sponsored results appear in follow-up questions, across the US.

Forrester predicts conversational ads will become a multibillion-dollar channel. The tension between query growth and ad revenue reinforces that outlook. Increasing ad density is one lever; developing advertising that actually performs in a conversational experience is another. Consumers increasingly ask questions, refine needs through follow-up prompts, and make decisions without navigating through lists of results or vendor sites, so advertising must work differently.

Google is responding by expanding ads in AI Mode and AI Overviews across more users and queries and experimenting with new monetization approaches. OpenAI is shifting ChatGPT from an incremental user-growth story to a yield-management story by adding ads that are visually separate from organic responses, noting that trust in ChatGPT’s answers makes its ad inventory valuable.