Google expands ads in AI-powered search to international markets as core ad growth slows

Alphabet, the parent company of Google, announced on Wednesday during its third-quarter earnings call with investors that ads in Google's AI-powered Search experience, AI Mode, will be introduced in international markets. It is the first time the company has taken this monetization globally. The step matters because growth in Google's search advertising is slowing, and the company needs to show that its new AI features can generate substantial revenue.

Results

Alphabet's quarterly revenue reached $127.6 billion, up 25% from a year earlier. Google Search revenue, however, grew 12%, compared with 17% in the second quarter and 19% in the first. Alphabet shares fell 8% after the results were released.

The Google Services division, which includes Search, generated $96.3 billion, up 11% year over year. Google Cloud revenue rose 103% to $30.7 billion.

Ads in AI Mode

Philipp Schindler, Google's chief business officer, said the company is scaling high-quality ads within AI Overviews and AI Mode to more users and queries. The international expansion comes alongside multi-turn ads and AI Mode in the U.S. According to him, click-through rates for sponsored product listings in AI Mode are already comparable to those for organic listings, and user research suggests people find the ads relevant.

The move builds on the Gemini-powered ad formats announced in May, including conversational ads that respond to users' questions and sponsored recommendations within AI-generated answers.

Search usage

Google CEO Sundar Pichai said Search queries grew at their fastest year-over-year pace in five years, though he did not give the exact figure. Queries in AI Mode are on average three times longer than traditional searches, and one in five AI Mode searches globally involves voice, images or documents. Visual searches have surpassed 50 billion per month.