Google announced on 28 October that it was expanding ads in AI Mode to international markets, as third-quarter Search advertising growth slowed to 12% from 17% in the second quarter, TechCrunch reported. The decision came on Alphabet’s third-quarter earnings call and extends advertising in Google’s AI-powered Search experience beyond the US.
Key points
- Alphabet’s revenue rose 25% to $127.6 billion in the third quarter, while Search advertising growth eased from 19% in the first quarter to 12%.
- Google is extending AI Mode ads internationally and introducing multi-turn ads in AI Mode in the US.
- Google Search and Other advertising generated $63.350 billion, up 12% from $56.567 billion a year earlier.
- Alphabet’s quarterly capital expenditure rose 114% to $51.355 billion from $23.953 billion a year earlier.
Schindler takes AI Mode ads overseas
Philipp Schindler, Google’s chief business officer, told investors the company was showing ads in more AI Overviews and AI Mode results. The international expansion is accompanied by multi-turn ads in AI Mode in the US. Schindler described the move as “taking our monetization footprint global for the first time”.
Google announced new Gemini-powered advertising formats in May, including ads that respond to a user’s questions and sponsored recommendations within AI-generated answers. The October decision broadens where the company offers advertising in AI Mode. Schindler said click-through rates for sponsored product listings there were already comparable to those for organic listings. Google also said its user research found that people considered the ads relevant.
Google chief executive Sundar Pichai said AI Mode queries were three times longer on average than traditional searches. One in five AI Mode searches worldwide involved voice, images or documents, he said, while Google had passed 50 billion visual searches a month. Pichai said Search queries had grown at their fastest year-on-year rate in five years and credited AI features with changing how people searched.
Search and Other reaches $63.350 billion
Google Search and Other advertising revenue rose 12% to $63.350 billion in the third quarter from $56.567 billion a year earlier, Storyboard18 reported. Search advertising growth had been 19% in the first quarter and 17% in the second. Alphabet shares fell 8% following the results, according to TechCrunch.
Elsewhere in Google’s advertising business, YouTube revenue increased 9% to $11.207 billion from $10.261 billion a year earlier. Google Network advertising revenue rose 1% to $7.455 billion from $7.354 billion. Subscriptions, platforms and devices brought in $14.290 billion, an 11% increase from $12.870 billion. Together, those categories and Search and Other generated $96.302 billion in Google Services revenue, up 11% from $87.052 billion.
Google Services operating income increased to $39.157 billion from $33.527 billion, while its operating margin rose to 40.7% from 38.5%. At the Alphabet level, third-quarter revenue grew 25% to $127.6 billion. Net income available to common stockholders fell 25% to $26.170 billion from $34.979 billion, and diluted earnings per share declined 26% to $2.12 from $2.87.
Alphabet capital spending reaches $51.355 billion
Google Cloud revenue rose 103% to $30.7 billion in the quarter, according to TechCrunch. The Gemini app exceeded one billion monthly users. Alphabet also reported that its models, including Gemini accessed through direct API usage, processed approximately 32 billion tokens a minute, up 40% from the previous quarter, according to Storyboard18.
Alphabet’s total costs and expenses rose 22% to $87.001 billion in the third quarter. Sales and marketing spending increased 22% to $8.804 billion from $7.205 billion a year earlier. Research and development expenditure rose 36% to $20.640 billion from $15.151 billion. Operating income increased 30% to $40.576 billion from $31.228 billion, and the operating margin improved to 31.8% from 30.5%.
Alphabet’s capital expenditure reached $51.355 billion in the third quarter, up 114% from $23.953 billion a year earlier. It also increased from $44.924 billion in the second quarter, a sequential rise of 14%.
