Google's AI earns it less than its links

An analyst's question, on a Wednesday evening

On Wednesday, October 28, after Wall Street closed, Alphabet reported its third-quarter results. JPMorgan analyst Doug Anmuth pointed to an oddity. By Sundar Pichai's own account, queries on Google are growing faster than at any point in five years, yet Search revenue is slowing. Is that because Google shows fewer ads in its AI-generated answers, which make up a growing share of queries?

Philipp Schindler, Google's chief business officer, answered in three steps. First, currency: "the single largest driver" of the deceleration, in his words. Second, sector effects: some Asia-Pacific advertisers hit by the EU ending its de minimis exemption for small parcels, and a second quarter inflated by the World Cup. Third, AI Mode. According to the call transcript, the strong growth in AI Mode queries had an impact "because of the lower monetization we were seeing in AI Mode."

AI Mode is the tab where Google stops offering ten blue links and gives you a full conversation instead, written by Gemini. Lower than what? Schindler didn't say. The analyst's question was about Search revenue, and the natural reading is the classic results page, but that's our inference, not Google's wording. And the same evening, Google announced ads inside those answers.

Numbers going nowhere

According to Alphabet's press release, Search revenue came to $63.35 billion in the third quarter, up 12% year over year. Growth was 17% in the second quarter and 19% in the first.

Quarter to quarter, Search went from $63.27 billion to $63.35 billion. That's basically flat. Google puts currency first among the culprits and AI third. But AI is on the list, and no competitor put it there.

Alphabet spent $51.4 billion on capital expenditure in the quarter, more than double the $24 billion of a year earlier. Free cash flow was negative $9.1 billion, partly because of a European Commission fine paid during the period. Outside regular trading hours, the stock was down around 10%, according to Yahoo Finance data: $291.89 on Thursday morning at 10:38 Paris time (9:38 GMT), against $324.89 at Wednesday's close.

A year ago, the pitch was different

At the same quarterly meeting in October 2025, the same Philipp Schindler sounded reassuring. For AI Overviews, the generated summaries that sit on top of search results, Google was seeing monetization "at approximately the same rate" as classic search, even at the ad levels of the time. As for AI Mode, Google was still testing.

Overviews aren't the conversational mode, so the comparison has limits. But the tone has shifted. A year ago Google was pleased with its summaries. This year it concedes that its conversational mode earns less.

Google doesn't say how much less, or what share of queries AI Mode represents. It's an admission without a measurement.

Why an answer might pay less than a page of links

Think of the classic results page as a high street. To get from your question to your answer, you walk past shop windows: ads at the top, product listings on the side, the links you click. Every window is for rent.

AI Mode is a guide who takes you by the arm and walks you straight to your destination, down a back alley with nothing to rent. According to Google, you ask questions about three times longer than in a classic search, and you get a written answer. Fewer windows on the way, so less rent.

Google tells it differently. According to Schindler, many of these queries come early in the shopping journey, and most are searches people wouldn't have run otherwise: so, more chances to sell later. That's Google's reading, and nobody outside the company can check it.

Google's answer: rent windows in the alley

The same evening, Google announced on its advertising blog that ads in AI Mode were scaling to ten countries: Australia, Canada, India, Kenya, Malaysia, New Zealand, Nigeria, Pakistan, the Philippines and Singapore. More markets follow in the fourth quarter, "including Brazil, Mexico, and the United Kingdom." In the US, ads can now also appear in follow-up questions, as the conversation unfolds.

The ads carry a "Sponsored" label. Google says users click sponsored product listings in AI Mode about as often as the others, a figure drawn from its own US data over two weeks between August and September.

One detail in the advertiser help page stands out. Around some ads, Gemini can write a short explainer, drawing on your question, the answer and public sources such as the advertiser's website. The advertiser can't write it, approve it or opt out. So Google's AI will also be the one presenting the ad.

And in France?

AI Mode arrived in France on July 22, alongside AI Overviews, which the country had held off for two years. The ads aren't following. No European Union country is among the ten of October 28, or among those Google names for the end of the year, a list it doesn't give in full: the only European market mentioned is the United Kingdom. Google's help page, checked on October 29, still limits these ads to English, the US and a handful of English-speaking markets, and promises gradual expansion to other countries and languages.

Google doesn't say why Europe is missing, or when it might arrive. For now, in France, AI Mode runs without built-in ads.

It's the same AI Mode that, in Germany, attributed one doctor's conviction to another, and that Google declined to correct until a court issued an injunction against it. These are also the answers news sites complain about, because they keep readers on the page. In the US, a federal judge dismissed the Variety and Rolling Stone case while writing that Google takes their content without compensation.

An answer that will soon have a sponsor

Until now, you could assume the generated answer was a bad deal for websites and a good one for Google. On Wednesday evening, Google conceded it isn't that simple: the answer that deprives publishers of clicks also pays Google less than the old page of links. It won't say how much less.

Its fix is to put windows in the alley. The answer will soon have a sponsor, in ten more countries. For the sites that fed it, Google announced nothing on Wednesday: no more clicks, and no share of the rent.