Alphabet shares drop 13% as AI spending and slower Search growth unsettle advertisers
Alphabet shares fell about 13% on Thursday after third-quarter results showed Search revenue growing more slowly while the company ramps up spending on AI. Capital expenditure reached $51.36 billion in the quarter, with free cash flow at negative $9.07 billion.
Marketers have seized on the numbers as evidence that Google is protecting revenue at their expense, pointing to unwanted traffic, broader keyword matching and rising costs. Max Anderson argued the company is charging advertisers more for lower-quality traffic, while Daniel Koss compared the approach to traditional media raising prices as demand falls.
Some of the practices cited sit within Google's published rules. Ad Rank thresholds can produce high cost per clicks without a competing ad directly below, and daily budgets are averages that allow most campaigns to spend up to twice the figure in a single day. Neither rule explains away spending on clicks that produce few qualified leads.
Google has pointed to similar click-through rates for sponsored and organic product listings in AI Mode, but that shows willingness to click rather than how those visitors convert. AI Mode performance is currently folded into standard campaign and search terms reporting, so advertisers cannot separately compare its acquisition costs, conversion rates or lead quality with other Search traffic.
Reported by Search Engine Journal ↗
Topics: AI Mode, Google Search, AI advertising