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| Google's search advertising revenue has declined |
Google's revenue from advertising on its search engine has fallen because of its own artificial intelligence (AI). The cause is the AI-generated summaries that appear when someone searches for something on Google. Following the news of the decline in ad revenue, the market value of Google's parent company, Alphabet, fell by more than $500 billion last Thursday.
Alphabet's Chief Business Officer, Philipp Schindler, said that when users ask a question in the search engine, Google's "AI Mode" gives a direct, conversational answer. As a result, revenue has dropped from the ads shown alongside the traditional results that Google Search displays in response to users' queries. However, Schindler remains optimistic about this new search model.
Google's role in finding answers for users around the world is being challenged by the rapid advance of AI. Millions of people are now using AI tools such as ChatGPT and Claude instead of Google's search engine. AI-based chatbots like ChatGPT and Claude can provide detailed answers to a wide range of questions.
Kim Scott, the former head of Google's advertising division, said that Google would rather harm its own search business with its own AI technology than let another company take over its space. He said that one of the foundations on which Google was built was making long-term investments in technology, and that the company does not mind short-term losses if they come as a result.
Alphabet released its financial report on Wednesday. It said that in the three months to September this year, the company's total revenue rose 25 percent compared with the previous year, reaching $127.6 billion. However, the company failed to meet analysts' expectations. In particular, advertising revenue came in below expectations, causing concern among investors.
After the financial report was released, Alphabet's share price fell by more than 12 percent, dropping to its lowest level in six months. By the close of trading on Thursday, Alphabet's total market capitalization had fallen to $3.46 trillion. Tracy Woo, principal analyst at the research firm Forrester, said that Alphabet's disappointing search business results showed how difficult it is to fund massive investments in AI while also holding on to the strong position of established businesses.