Google Search Is Changing. What Comes Next?

Google Search is changing fast as AI reshapes how people search and how advertising shows up alongside it.

Matt Whelan, our Managing Partner, shares his take on what Google’s latest results tell us about the future of search advertising, and why careful campaign oversight matters more than ever.

Google’s Q3 earnings announcement did not go down well with the market, with Alphabet losing almost $500bn of value overnight.

Yet in the announcement CEO Sundar Pichai said Google was experiencing its highest year-over-year search query growth in 5 years.

Google’s ad revenue accounts for two thirds of Alphabet’s total revenue, with the vast majority of that coming from search. And search revenue grew 12%. So, what’s spooked the market?

This query growth is driven by changing search behaviour, with more searches coming from AI mode. Google’s AI search products are not yet monetised to the level of traditional search, and their appearance is starting to cannibalise the legacy search listings. This is resulting in a drop in revenue per query, and that 12% revenue growth figure still missed target by $1.5bn.

What might this mean for search advertising in the near future?

Google is experimenting with ads in its AI listings, with more and more examples being spotted in the wild, especially in US results pages. Presumably the pressure will be on to ramp up monetisation and restore confidence. But Google will need to be careful in how it does this – this is the biggest disruption to its entrenched position as the dominant force in search in 20 years, and it cannot afford to over-monetise and let people explore a better user experience elsewhere. It’s more likely they will try and drive increased yield from existing ad products. We’ve seen increased CPCs and more expansive query matching in our campaigns, and many other businesses are reporting the same. Careful campaign oversight in Google Ads is more important than ever to maximise your ROI, even though there can be more temptation to let the platform’s automations simply handle everything for you.

Google is making big investments in the AI space, so things will continue to change quickly. Ironically these investments are part of the problem for the market, which is also reacting to the significant reported downturn in free cash flow. Its Gemini model has significantly advanced over recent months, and certain search experiences are changing on a week-to-week basis. It will be interesting to see how these changes drive ad innovation in a channel that has become critical to most advertisers' sales funnels.