Google’s AI search is growing queries faster than it can monetize them

Google’s search business is not collapsing. Search and related advertising revenue rose 12% year over year to $63.3 billion in the third quarter, and Alphabet says query growth was the strongest in five years. Yet growth slowed from 17% in the previous quarter, and chief business officer Philipp Schindler acknowledged that lower monetization in AI Mode contributed alongside currency effects and sector-specific advertising changes.

The Information’s reporting shows the mechanism behind that gap. AI Mode queries average three times the length of conventional searches and often represent exploration rather than immediate purchase intent. A user asking for a tent for a specific week-long trip provides richer context than someone typing ‘tent’, but may be further from buying. Google also deliberately shows fewer ads inside AI answers while it tests formats that do not overwhelm the product. Scarcer inventory can raise the price per click without producing more conversions.

Advertisers are seeing both demand and measurement problems. One small-business advertiser said part of a roughly $2,000 daily budget now goes unspent because Google cannot find enough impressions and clicks. Optmyzr estimates, from 21,000 managed accounts, that the share of ad clicks leading to a sale fell 1.4% quarter over quarter and return on ad spend fell 2.9%. Those figures are not a representative measure of all Google advertising, but they align with six advertisers and agencies telling The Information that they are shifting some budget toward Meta.

AI also weakens attribution. A shopper may research inside ChatGPT or Google AI Mode, later return through an ordinary search and buy without clicking the ad that shaped the decision. Google combines reporting for AI Overviews, AI Mode and conventional search, so advertisers cannot isolate the new formats or opt out of them. Brands are responding by supplying richer product data and watching impressions and recommendation placement rather than only clicks.

Google has survived a comparable transition before: Meta’s Reels initially diluted monetization and later recovered as its ad system adapted. Google is now adding conversational ad formats, creative-generation tools and partnerships that import advertisers’ customer data. But the transition is structurally harder than mobile because the answer interface can satisfy the query without sending a click at all. The central question is whether Google can invent an auction for recommendations and conversations before advertisers conclude that the old search budget belongs elsewhere.