Alphabet's Google search revenue growth has decelerated by 17.2% year-over-year, a significant slowdown the company attributes directly to AI Overviews—its new AI-powered search feature.
The paradox is striking: AI Overviews are driving search query volume to its highest annual growth rate in five years. More people are searching than ever. Yet each search generates less revenue because AI-summarized results, even when displaying ads, monetize less effectively than traditional search results. Users get instant answers without clicking through to websites, reducing engagement and ad revenue per query.
This tension reveals a fundamental challenge in Google's AI strategy. The company is prioritizing search innovation and user experience by deploying AI, but that same innovation is directly undermining the ad-based revenue model that funds the entire business. The feature drives traffic but cannibalizes the monetization that makes that traffic valuable.