Google value plunges by $500bn as its own AI search hits ad sales
Google said the lower monetization of AI Mode contributed to slower growth in search advertising, alongside other factors.
TL;DR
- Alphabet lost just over $500bn in market value on Thursday after its results raised concerns about search advertising.
- Google said AI Mode queries monetized less effectively and contributed to slower search-ad growth.
- The company did not quantify that effect, and said foreign exchange was the largest factor behind the slowdown from the previous quarter.
Alphabet’s market value fell by just over $500bn on Thursday after its results raised concerns about its search advertising business. The BBC reported that Google executives linked pressure on ad revenue in part to its AI-based search features. [1]
Google Chief Business Officer Philipp Schindler said growth in AI Mode queries affected search-ad revenue growth because the feature monetized less effectively. He also identified foreign exchange as the largest factor behind the slowdown from the previous quarter. [2]
Search revenue rose 12% in the quarter, down from 17% growth in the previous quarter, AFP reported. Search Engine Land said Google reported faster search query growth despite the slower advertising-revenue growth. [2] [3]
Google did not disclose the size of AI Mode’s contribution to the slowdown or how much less each query earns. The figures do not establish how the economics will develop as the company changes its ads. [2]
Why it matters
Search advertising is a major source of revenue for Alphabet. The tension between growing AI use and ad monetization matters to how a leading AI provider funds its infrastructure.
Editor's note
Google identified several causes of slower growth; the isolated effect of AI Mode was not disclosed. Reports differ slightly on the rounded search-revenue total, so that amount is omitted.