Google is bringing ads to AI Mode globally as it admits that the new take on Search brings “lower monetization,” all while $GOOG stock is seeing a fairly major drop.
Alphabet’s Q3 earnings call yesterday saw Google’s Philipp Schindler acknowledging that AI Mode, the company’s Gemini-powered new take on Search, has “lower monetization” compared to traditional Search. So the “strong growth” of AI Mode didn’t have as much of a positive impact on Google’s bottom line simply because the mode doesn’t generate as much revenue.
…It’s worth noting that the strong growth in AI Mode queries had an impact because of the lower monetization we’re 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…
In a blog post the same day, Google announced that AI Mode would be getting ads in global markets. US users will also start to see “multiturn ads” in follow-up queries.
Our research shows that people are comfortable with ads in AI Mode and find them highly relevant. In fact, click-through rates are already similar between sponsored and organic product list items within AI Mode.
Now we’re scaling ads in AI Mode in Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines, and Singapore. In Q4 2026, we plan to expand to additional locales, including Brazil, Mexico, and the United Kingdom.
Meanwhile, $GOOG stock dipped by 27 points around the time of the earnings call and has continued to drop on October 29. It currently sits around $280, just a few points higher than a March 30 low of $273.14. The 12% drop reduces Google’s market cap by over $500 billion. NBC News points out that it is the second-biggest drop behind Nvidia’s $589 billion drop in 2025.
The drop is not directly due to AI Mode itself, but is attributed to weaker-than-expected earnings in Q3. Ad revenue from Search still makes up roughly half of Google’s overall revenue.
Our Daniel Bader expands on this in the latest issue of Inbox, our twice-weekly free newsletter:
…But investors are looking at the capital expenditure tied up in future data center buildouts and getting nervous that, if the bubble bursts, even these well-capitalized companies will take massive hits.
The biggest question surrounding Google’s stock performance is whether it can sufficiently monetize AI-powered search before demand for its traditional search inventory falls off a cliff. As the company sends less and less traffic to the open web, it’s touting the fact that AI Mode and AI Overviews keep people on Google for three times as long as traditional search.
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