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Google AI Mode is now popular enough to dent Google's own ad business, and Google's answer is to put more ads inside it. That was the most important line from Alphabet's third-quarter earnings call on October 28. Within a day, the company had its worst stock market session ever, and the question of how ads will look in AI search moved from marketing blogs to the front pages.
This guide is for people who use Google, not people trading it. We look at what Google actually said, why answers in AI Mode earn less than a classic page of blue links, what "multiturn ads" are, and what you are likely to notice as Google AI Mode ads spread to more people and more countries.
Key Takeaways
- Google's search ad revenue grew 12% to $63.35 billion in the July to September quarter, slower than the 17% growth in the previous quarter.
- Chief business officer Philipp Schindler said fast growth in AI Mode queries weighed on results because AI Mode earns less from ads than traditional Search.
- Google says it is now expanding ads in AI Mode to international markets and adding "multiturn ads" in the US.
- Search is not shrinking: Sundar Pichai said query growth was the highest in five years, and AI Mode searches are on average three times longer than traditional ones.
- For users, expect more sponsored suggestions inside AI answers, especially deeper into a conversation.
What Happened: The Numbers Behind the Headlines
Alphabet reported total revenue of $127.6 billion for the quarter, up 25% from a year earlier, the BBC reported. That sounds strong, but the mix underneath it changed. Here is the breakdown from Eric Seufert's analysis at Mobile Dev Memo:
| Segment (Q3 2026) | Revenue | Growth vs. a year ago |
|---|---|---|
| Total advertising | $82.0 billion | +10.6% |
| Search | $63.4 billion | +12.0% (down from 17% in Q2) |
| YouTube ads | $11.2 billion | +9.2% |
| Network (ads on partner sites) | $7.5 billion | +1.4% |
| Subscriptions, platforms and devices | $14.3 billion | +11.0% |
Two details stand out. First, Search made up 49.7% of Alphabet's revenue, which Seufert says is the first time in the company's modern history that it was less than half. Google Cloud, which grew 103% according to Pichai, is doing more of the heavy lifting. Second, the Network segment, which covers ads Google places on other websites, grew for the first time since the second quarter of 2022.
Investors focused on the spending side too. CNBC reported negative free cash flow of $9.07 billion, against the $2.7 billion analysts expected, while Alphabet kept its full-year capital spending forecast at $195 billion to $205 billion. Shares fell about 13% on Thursday, October 29, wiping out roughly $500 billion in market value and marking Alphabet's worst day since it went public in 2004. (This article is not investment advice; our focus is what the change means for search.)
Those are the numbers. The explanation for them came in a single sentence on the earnings call, and it is about the AI answers you may already be using.
Why Google AI Mode Ads Earn Less (For Now)
AI Mode is the conversational version of Google Search. Instead of a page of links, you get a written answer and can ask follow-up questions. AI Overviews, the summaries that appear at the top of normal results, are its lighter cousin.
On the call, Schindler explained the slowdown this way, as quoted by Seufert:
"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. To be clear, we feel very good about our trajectory here. Our ad experiments have shown promising results, and we're now scaling ads within both AI Overviews and AI Mode to more users and more queries, including, as I mentioned, international markets and multiturn ads in the U.S."
In plain English, a classic Google results page has several ad slots that appear on almost every commercial search. A conversational answer has fewer natural places for ads, and Google is still testing how many people will tolerate and how relevant they can be. When more searches move into AI Mode, fewer of them carry the full set of ads, so revenue grows more slowly even if usage rises.
Google also pointed to other factors. Seufert notes management named currency swings as the largest driver of the slowdown from the previous quarter, along with the EU's elimination of its "de minimis" customs exemption, which affects cheap cross-border shopping. But the AI Mode explanation drew the most attention because it goes to the heart of how Google makes money.
The BBC quoted Kim Scott, who formerly led Google's advertising business, saying the company would "rather eat its own lunch than allow someone else to eat their lunch."
If AI Mode earns less, why is Google pushing people toward it? The answer is in how many people now use it.
How Big Google AI Mode Has Become
Google's own figures show search is not fading. In his remarks on the call, Pichai said:
- Year-over-year query growth is "the highest it's been in the last five years," including commercial queries.
- Queries in AI Mode are on average three times longer than traditional searches.
- One in five AI Mode searches globally use voice, images or documents.
- Google now handles more than 50 billion visual searches per month.
- The Gemini app has reached one billion users.
Seufert puts the user counts at 2.5 billion monthly users for AI Overviews and one billion for AI Mode. He argues these numbers undercut the idea that people are abandoning Google for chatbots. Instead, he says, the real challenge is that the format people are moving to does not yet earn as much per search.
Pichai framed it as a familiar pattern: "Just like our shift to mobile over a decade ago, we are focused on building the best Search user experience, followed by monetization." Google also said on the call that "the majority of AI Mode queries are incremental," meaning most are searches people would not otherwise have made.
The same call also mentioned Google's newest AI models. Pichai announced Gemini 4 Carbon, described as Google's strongest model, a day after the company unveiled its Genie 4 world model, which we covered in our Google Genie 4 explainer.
What Google AI Mode Ads Will Look Like for Users
Google has not published a full design guide for the new formats, so here is what is confirmed and what is still unclear.
Confirmed
- More ads in AI answers. Google is "scaling high-quality ads within AI Overviews and AI Mode to more users and queries," according to the call remarks quoted by Seufert.
- International rollout. Google said it is taking its AI Mode ad footprint global for the first time, expanding ads in AI Mode into international markets.
- Multiturn ads in the US. These are ads that appear deeper in a conversation, after you have asked follow-up questions.
Why multiturn ads matter
Seufert's explanation is useful here. When you start a search, Google only knows a little about what you want. After three or four follow-up questions, it knows much more. Ask about "winter running shoes," then "for wide feet," then "under $120," and the system has a clear picture of your intent. An ad shown at that point can be far more specific. That is why he calls follow-up queries "arguably, more valuable" for advertising.
Still unclear
- How many ads each AI answer will carry, and how clearly they will be labeled in every market.
- Which countries get AI Mode ads first, and when.
- Whether there will be any way to see AI answers without ads.
A practical habit for now: when an AI answer recommends a product or service, look for a "Sponsored" label and compare it with the organic suggestions. This matters most for holiday shopping, when price comparisons count. Our Black Friday 2026 guide has tips for checking deals before you buy.
Ads inside AI answers do not only affect searchers. They also change the economics for millions of websites.
What It Means for Websites, Shops and Small Advertisers
Here the picture is more speculative, and we will label it that way.
Seufert raises one possible link with the Network segment's surprise growth. Google's automated campaign system, Performance Max, chases conversions across Google's inventory. If search ads became less effective as people moved into AI Mode, he suggests the system may have shifted some spending to ads on partner websites. He calls this one possibility and notes the change was small, about $101 million, so it could also be normal ups and downs.
For advertisers, the takeaway is that ad placements are changing faster than they have in years. For publishers, the long-running concern is that AI answers reduce clicks to websites. Google has not shared click-through data for AI Mode, so we cannot say how large that effect is.
Other big tech companies are facing the same balancing act between AI spending and their core businesses. Meta's funding plans are covered in our story on Meta's $95 billion AI raise. Apple is making its own big product bets too, as our look at the touchscreen MacBook Pro explains. Reuters reported that the cash burn reflects the huge cost of the AI buildout, and that Alphabet, Microsoft, Amazon and Meta are projected to spend well over $700 billion combined in 2026 on data centers, chips and networking. NBC News noted that the one-day loss in Alphabet's value was the second-largest wipeout in US market history.
The Bigger Picture: Google's Bet
The CNBC report captured both sides. Ben Barringer of Quilter Cheviot said Google "faces an innovator's dilemma." Rosenblatt Securities analyst Scott Devitt countered: "I don't think it's a sea change," adding that Google's huge base of search users could become AI customers.
Seufert compares the situation to Meta's Reels. When Meta pushed short videos in 2022, they earned less per view than the regular feed and dragged on revenue. About a year later, Meta said Reels had become "net neutral" to ad revenue as targeting improved. Google appears to be betting on a similar path. Whether AI Mode follows it is the big open question for 2027.
For ordinary users, the short version is simple: AI answers are here to stay, and they will increasingly include ads.
FAQ: Google AI Mode Ads
What is Google AI Mode?
AI Mode is a conversational version of Google Search that gives written answers and lets you ask follow-up questions. Google says it has about one billion monthly users.
Are there ads in Google AI Mode?
Yes. Google has been testing ads in AI Mode and AI Overviews and said on October 28 that it is scaling them to more users and queries, including international markets.
What are multiturn ads?
They are ads shown later in a conversation, after you have asked follow-up questions. Google is adding them in the US. Because the system understands your needs better by then, the ads can be more specific.
Why did AI Mode affect Google's ad revenue?
Google's chief business officer said AI Mode currently earns less from ads than traditional Search, so fast growth in AI Mode queries slowed search ad growth to 12% in the third quarter.
Is Google Search usage falling?
No. Sundar Pichai said year-over-year query growth in the third quarter was the highest in five years.
Sources
- Google: Q3 2026 earnings call, remarks from our CEO
- Mobile Dev Memo (Eric Seufert): Alphabet Q3 2026 earnings, AI Mode's monetization penalty
- CNBC: Alphabet's worst day ever
- BBC News: Google value plunges as its own AI search hits ad sales
- NBC News: Alphabet, AI and advertising
- Reuters via Investing.com: Alphabet's heavy cloud spending drives bigger-than-expected cash burn
Editor at Trend Ranker covering US trends, tech, travel and deals. We research from primary sources (official sites, press releases, data) and update posts when facts change. Editorial policy