Google lost about $500 billion in market value in one day last week. Search revenue still grew 12%, just slower than Wall Street expected. Part of the reason, Google said, is that AI Mode earns less per search than a normal results page. Currency was the bigger factor, to be fair. Search ads are not going away. But more discovery now happens inside AI answers, and nobody has worked out how to sell ads in them at the old rate.
What Google Said on 28 October
Alphabet reported its third quarter on 28 October 2026. Revenue rose 25% to $127.6 billion, and Google Search and other revenue rose 12% to $63.35 billion. Search queries grew at their fastest year-over-year rate in five years. The next day the shares fell 12.6%, their worst day ever, erasing $500 billion of market value.
According to Alphabet's Q3 2026 earnings release, Google Search and other revenue grew from $56.57 billion to $63.35 billion. In the same release, Sundar Pichai said "our year-over-year query growth rate is the highest it's been in the last five years." More questions were asked, and each one earned a little less.
According to NBC News, Alphabet shares sank 12.6% on 29 October, the stock's worst one-day drop, wiping out $500 billion in market value.
On the call, Chief Business Officer Philipp Schindler listed why search slowed from the second quarter. According to Search Engine Roundtable's report of the call, currency came first: "It was the single largest driver of search deceleration relative to Q2." Then came AI Mode: "the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode."
Twenty months earlier the message was the opposite. According to Benzinga, Schindler told investors in February 2025 that AI Overviews earned at "approximately the same rate" as conventional results. The difference is the surface. An AI Overview sits on top of a results page that still carries its ads. AI Mode replaces that page with a conversation, and the ads have not caught up.
Why Ads in AI Answers Earn Less
Ads in AI answers sit beside the answer, labelled as sponsored, and never inside it. Google and OpenAI both say so in writing. A results page has ten links and several ad slots to sell. An AI answer has one recommendation, and no advertiser can buy it. That is why revenue per query falls while queries rise.
Google is now pushing ads into AI Mode harder. According to Google, ads in AI Mode expanded on 28 October to ten more countries, including Australia, India, Malaysia and Singapore. Brazil, Mexico and the UK follow in the fourth quarter, and multi-turn ads, which appear in follow-up questions, launched in the US. The post states that "Ads will be clearly labeled as 'Sponsored.'"
OpenAI draws the same line. According to OpenAI, ads in ChatGPT began on 9 February 2026 for Free and Go users. Its post says "Ads do not influence the answers ChatGPT gives you." They are "always clearly labeled as sponsored and visually separated from the organic answer." During the test, ads are also not eligible near sensitive or regulated topics such as health.
The business is growing anyway. According to OpenAI, ChatGPT Ads reached a $1 billion annualised run rate by 31 August 2026. Tens of thousands of advertisers use it in over 40 countries. So both companies are selling the slot next to the recommendation, and both keep the recommendation itself off the market. We all knew this was coming: fewer links on the page means fewer ads. What nobody expected was how much it would cost Google the first time it showed up in a quarterly report.
The Click Is Shrinking on Both Sides
Paid clicks are not the only ones under pressure. When an AI Overview appears, the top organic result gets 58% fewer clicks, and 68% of US Google searches now end without any click. You used to compete for the click. On AI surfaces, you compete for the mention.
According to Ahrefs, an AI Overview on the page correlated with a 58% lower click-through rate for the top-ranking page in December 2025. The study covered 300,000 keywords and put the gap at 34.5% a year earlier. According to SparkToro, using Similarweb panel data, 68.01% of US Google searches ended without a click between January and April 2026.
According to Pew Research Center, people who saw an AI summary clicked a traditional result on 8% of visits, against 15% without one. They clicked a link inside the summary on 1% of visits. Being cited in the answer rarely sends a click, but it decides which brand the reader hears about.
Who Feels This First
Businesses that grew on search ads feel it first: gyms, aesthetic clinics, dental practices, any service customers find by searching rather than referral. Their customers are already asking AI. Most of those businesses are not in the answer yet.
According to BrightLocal, 45% of US consumers used an AI tool for local business recommendations in the past year, up from 6% the year before. ChatGPT led at 31%, with Google's AI Mode at 23%. The survey covered 1,002 US adults.
The supply side has not caught up. According to SOCi's 2026 Local Visibility Index, ChatGPT recommended 1.2% of the brand locations studied, Perplexity 7.4% and Gemini 11.0%. The same brands appeared in Google's local 3-pack 35.9% of the time. Customers have moved to the new surface faster than the businesses they are asking about.
Clinics have an extra reason to pay attention. OpenAI's published ads policy keeps ads away from health topics for now. For a question like "which clinic should I see about this", there is no paid route into ChatGPT yet. The earned mention is the only way in.
What We Think Brands Should Do
Keep the search ads that convert, and start earning the answer alongside them. GEO (generative engine optimisation) is the work of getting your brand named when someone asks an AI assistant. No one bids per query for that mention. We cover the mechanics in how to show up in Google AI Overviews and AI Mode and in our notes from Google I/O 2026.
The first step is to know where you stand. We open every engagement with a free AI visibility assessment. We ask ChatGPT and Gemini the questions your customers ask, then show you who gets named. One gym we work with ranked last of nine tracked gyms in those answers in July. After nine weeks of work it ranked first, and its share of answers rose from 5.6% to 24.5%. The full figures are in the Horizon Wellness Club case study. Our approach for gyms and fitness studios and other service businesses is on our site.
FAQs
Did Google say AI Mode loses money?
No. Google said AI Mode earns less per query than classic search, and that most of those queries are new. On the same call, Schindler said "the majority of AI Mode queries are incremental, creating more monetization opportunities over time," according to the call transcript.
Will ads in AI answers replace search ads?
Not soon. Google is expanding ads in AI Mode to more countries, and ChatGPT Ads has a $1 billion run rate. In both products the ad sits beside the answer, labelled sponsored, and neither company sells a place inside the answer itself.
Should we stop running search ads?
No. Search revenue still grew 12% last quarter, and search ads still convert. Add GEO alongside them so you are also named when a customer asks an AI instead of typing a search.
Conclusion
Google will keep growing AI Mode whether or not it earns the same per query. Pichai compared it to mobile: "we are focused on building the best Search user experience, followed by monetization." While that gap stays open, the brands that get named in the answer are the ones that earned it. Start by finding out what AI says about you today.