Ad Tech Briefing: Google’s AI-reckoning

Google’s legal team was right?

It’s also likely to serve as an important footnote in the future filings of Google’s legal department, with tuned-in observers likely to recall how it was able to cite rapid AI advancements as proof of a fiercely competitive and evolving tech landscape.

Even if Google did lose both trials (on paper, at least) last year, it can be argued the above argument was made successfully to justify it continuing without forced divestiture, and in Q3 (it would appear) this argument impacted the biggest company in advertising’s bottom line.

Since then, Google has spent much of the year telling advertisers and investors that AI will make its search business bigger, not smaller. However, last week’s earnings offered the clearest indication yet that delivering on that promise is proving complicated.

On Oct. 28, Google’s parent company Alphabet reported that its search queries were growing at their fastest annual rate in five years, with total Q3 revenues nearing $127.6 billion, up 25% year-on-year.

By the numbers

However, a deeper analysis reveals a more troubling trend for the hegemon of Madison Avenue: more people are searching, but Google’s AI-driven search experiences aren’t yet generating ad revenue at the same rate as conventional search.

However, revenue from Google’s “Search & other” operations increased 12% to $63.35 billion, with Google’s chief business officer Philipp Schindler acknowledging as much during the company’s third-quarter earnings call, telling analysts that AI Mode’s comparatively limited monetization had contributed to the slowdown.

The disclosure is significant because search remains Google’s biggest financial engine and supports its (increasingly expensive) AI ambitions.

Advertising revenue, i.e., search in combination with other areas of its media operations, such as “YouTube” (Q3 revenues of $11.2 billion) and “Network” (Q3 revenues of $7.45 billion) — that’s the ad tech side, which is continuing its prolonged decline in revenue — accounts for approximately 64% of Alphabet’s revenue, down from 72% a year earlier.

More queries, less revenue per opportunity

Wall Street was unimpressed. Alphabet shares fell approximately 12.6% on Oct. 29, erasing close to $500 billion in market value, as investors questioned the economics of the company’s AI transition with coverage in the immediate aftermath of the results highlighting disappointment in Google’s revenue performance.

Google maintains that AI is expanding search activity rather than merely replacing existing queries. Sundar Pichai, CEO, Alphabet, told analysts that AI Mode queries are, on average, three times longer than traditional searches, while approximately one in five involves voice, images or documents.

However, executives also acknowledged that AI Mode currently monetizes at a lower rate, and further hinted that it is now expanding advertising within AI Mode internationally and introducing multi-turn advertisements in the U.S., allowing commercial placements to appear during extended conversations.

Ad tech’s continued struggles

Meanwhile, the continued struggles of “Google Network” revenues, i.e., ad tech, is likely to stimulate further grimacing from publishers, with this unit generating a modest 1.4% gain in revenues during the period, with this trend accompanied by an overall increase in traffic acquisition costs, or “TAC,” of approximately 10% during the period.

Overall, TAC hit $16.4 billion, with the figures highlighting how higher impression prices can mask shrinking volumes as publishers contend with declining search referrals and unpredictable traffic. This creates an awkward backdrop for Google’s court-ordered ad tech remedies. Prebid’s proposed auction overhaul could improve publisher control and interoperability, but neither can restore lost audiences or guarantee advertiser demand.

What we’ve heard

“Can we really blame Apple for blocking ID tech?”

— Alessandro De Zanche in AdExchanger argues that the industry’s response to Safari restrictions must also address longstanding privacy and security weaknesses.

Numbers to know

Figures from DataTrue’s The Consent Gap 2026:

• 242: Websites tested across retail, healthcare, banking, higher education and media.
• 43%: Sites, equivalent to 104 of 242, that failed DataTrue’s core privacy checks.
• 80%: Sites with advertising tracking, 139 of 173, that offered no obvious opt-out mechanism.
• 76%: Sites with advertising tracking that did not fully honor Global Privacy Control signals.

What we’ve covered

Amazon’s Ads nears $20 billion in Q3 as it bets on agentic AI to fuel further growth

Amazon’s advertising business continues expanding as the company gives AI greater responsibility for campaign execution.

Apple’s Safari block hands WPP a fresh case for InfoSum

WPP argues that its data collaboration strategy is less exposed to Apple’s restrictions than identity infrastructure built around cross-site matching.

What we’re reading

Pinterest opens video, display inventory to programmatic buyers

Pinterest expands programmatic access through partners including Amazon, Google and Yahoo.

Senators demand Meta answer for ‘pervert glasses’ following 404 Media investigation

Lawmakers seek answers about privacy safeguards and the use of footage captured by Meta’s smart glasses.

Meta considered a ‘whisper campaign’ to discredit its biggest critic, court documents show

Gizmodo examines court documents describing discussions about undermining social psychologist Jonathan Haidt.

Meta’s $25 billion privacy fine in New Mexico is a big number. But is it a big deal for ad tech

AdExchanger considers whether enormous financial penalties meaningfully change platform behavior. Meta plans to appeal.