If your website traffic has dropped over the last year or two, you’re not imagining it. Google now answers a lot of questions right on the search page, so fewer people click through to your site.
What caught my eye last week is that Google is starting to feel the same pressure.
In its latest quarterly results, Google’s search revenue grew 12%. That’s still a lot of money (over US$63 billion in three months), but it’s down from 17% the quarter before. When analysts asked why, Google said one of the reasons was its new AI Mode. People are using it heavily, but it earns less money per search than the old list of links and ads.
The share market didn’t like that. Alphabet had its biggest one-day drop since it listed.
I’ll be upfront: this isn’t Google falling over. They said currency movements were the biggest factor in the slowdown, and they haven’t said how much AI Mode actually cost them. But it’s the first time they’ve admitted publicly that their AI search makes less money than their traditional search.
Why it matters
Google’s model has always been simple. You search, you see ads, someone clicks, and a business pays for that click. AI answers break that. If the question gets answered on the page, there’s less reason to click on anything, whether it’s an ad or your website.
So Google is stuck. It has to build AI search to stop people moving to ChatGPT and others, but every question its AI answers fully is a click it can’t sell.
What AI Mode is, and what’s changing in Australia
AI Mode is the chat-style option in Google Search. Instead of giving you a list of links, Google’s AI breaks your question into a series of searches, writes an answer and lets you keep asking follow-up questions. It’s been available in Australia since October 2025.
People ask it longer, more detailed questions. Google says AI Mode searches are on average three times longer than traditional ones (that’s US data). Someone who used to type “plumber Ipswich” might now ask for a plumber who does after-hours callouts, has good reviews and can come today.
On the same day it reported its results, Google announced it’s now rolling out ads in AI Mode to Australia and nine other countries. They’re labelled “Sponsored”. In the US it’s already gone a step further, with ads showing on follow-up questions too.
If you run Google Ads here, a few things are worth knowing. Ads already appear inside AI Overviews in Australia (that’s the AI summary at the top of normal search results). Google’s own help page says those ads come from your existing Search, Shopping and Performance Max campaigns, you can’t opt out, and there’s no separate report showing how they performed there. Early coverage of the AI Mode rollout reports it works the same way.
In plain terms, your ads can start turning up inside AI answers without you changing anything, and you won’t easily see what that placement is costing or earning you. That’s why tracking enquiries properly (point 2 below) matters more now.
What I’d be doing as a business owner
- Expect ads in AI answers to get pushier. Google has only just started putting ads in AI Mode here. When a platform’s revenue is under pressure, advertisers usually end up paying for it. If you run Google Ads, keep a close eye on what you’re paying for each enquiry.
- Stop judging your marketing by traffic alone. Fewer people will visit your site, but the ones who do are usually further along in deciding to buy. Track enquiries and sales, not visits.
- Build an audience you own. Your email list and customer relationships don’t depend on Google’s algorithm or its quarterly results. A CRM and a bit of automation make that much easier to keep up.
- Make sure the AI knows who you are. If the answer appears on Google’s page, being the business it mentions matters more than being third in the list. That’s what answer engine optimisation (AEO) and good local SEO are for.
Google will probably work out how to make money from AI search, like it did with mobile. But I wouldn’t build your marketing around a model that its own creator is still figuring out.
Want to know how your business shows up in Google’s AI answers? Let’s talk.
Sources: Alphabet’s Q3 2026 results and earnings call (transcript); Fortune on the share price fall; Google’s announcement of ads in AI Mode in more countries; Google Ads Help: About ads and AI Overviews; PPC Land on how AI Mode ads work; AdNews on the Australian AI Mode launch.