Google Expands AI Search Ads Globally as Core Advertising Growth Decelerates to 12%

Google AI Search Ads Expand to International Markets

Google is taking AI Search ads global for the first time, marking a strategic shift as the company works to monetize generative AI amid decelerating growth in its core advertising business1

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. The announcement came during Alphabet's Q3 earnings call, where the company reported $127.6 billion in revenue, up 25% year-over-year1

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. However, Alphabet shares fell 8% following the results as investors absorbed signs of slowing momentum in search advertising1

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Philipp Schindler, Google's chief business officer, revealed that the company is scaling high-quality ads within AI Overviews and AI Mode to more users and queries1

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. This expansion includes multi-turn ads in AI Mode in the U.S. alongside the international rollout1

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. Early results show promise, with click-through rates for sponsored product listings in AI Mode already comparable to organic listings1

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Search Advertising Growth Slows Despite AI Investments

Google Search revenue grew 12% year-over-year in Q3, a notable deceleration from 17% growth in Q2 and 19% in Q11

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. This slowdown intensifies pressure on Google to transform its expanding AI features into meaningful advertising revenue streams. The Search and Other business generated $63.3 billion in Q2, representing approximately 53% of Alphabet's total revenue3

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, making it the company's dominant revenue engine.

Despite the deceleration, CEO Sundar Pichai emphasized that AI investments are driving overall search query growth at the highest year-over-year rate in five years1

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. Queries in AI Mode are three times longer on average than traditional searches, while one in five AI Mode searches globally involves voice, images, or documents1

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. Google has also surpassed 50 billion visual searches per month1

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AI Monetization Strategies Face Critical Test

Google's AI monetization strategies are being tested as the company navigates a paradox: AI-powered Search experiences that successfully answer questions and complete tasks could reduce traditional ad exposure. Christopher Gannatti, WisdomTree's Global Head of Research, identified this risk, stating that "agentic search could disrupt advertising economics before new revenue scales"3

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. If fewer users navigate traditional search results pages where ads have historically appeared, Google must prove that advertisements remain equally valuable within AI-driven advertising expansion.

The company is developing new formats to address this challenge. Building on its May announcement of Gemini-powered ad formats, Google now offers conversational discovery ads that respond to users' questions and sponsored recommendations integrated into AI-generated answers1

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. AI Overviews reach more than 2.5 billion users, while AI Mode has surpassed 1 billion monthly users3

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. Ads can now appear above or below AI Overviews in more than 200 markets3

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Google Cloud Surges as Diversification Accelerates

While search advertising faces headwinds, Google Cloud revenue surged 103% year-over-year to $30.7 billion in Q31

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. Alphabet's Google Services division, which includes Search, generated $96.3 billion in revenue, up 11% year-over-year1

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. The results followed a packed quarter that included the release of Gemini 4 Argon, the growth of the Gemini app to one billion monthly users, and the launch of the Pixel 11 lineup1

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WisdomTree increased its Alphabet weighting to 4.2%, citing cloud growth, TPU integration, and Gemini-powered enterprise agents, alongside attractive valuation relative to peers3

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. However, the firm continues monitoring whether advertising economics could face pressure before newer revenue streams reach sufficient scale3

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. Watch for how conversational queries and longer search patterns translate into sustained advertising revenue, and whether Google's agentic shopping features can create new monetization opportunities without compromising user experience.