The End of Search? Not for Google’s Ad Revenue

What search engine are you relying on these days?

Lately, it feels like everyone’s adopted AI as their go-to search tool, especially after DeepSeek’s surge earlier this year.

The convenience is undeniable. Instead of sifting through web pages for keywords, AI serves up the answers directly. Who wouldn’t prefer that?

Google, for instance, rolled out its AI Overview feature, providing immediate AI-generated answers at the top of search results. And often, lightning fast answers.

Initially, this integration was largely perceived as a defensive maneuver or counter-strategy by these tech giants.

The rationale is straightforward: increased AI searches inevitably translate to fewer users engaging with conventional search engines.

Many AI products even touted their mission to disrupt and replace traditional search.

However, Google’s recent Q2 earnings announcement throws a wrench into that narrative. The tech giant reported a 14% year-over-year revenue increase, reaching a staggering $96.4 billion. Surprisingly, $54.2 billion of this massive figure still comes from advertising.

While Google’s cloud services and AI sectors are experiencing rapid growth, contributing $13.6 billion, advertising remains the undisputed revenue king, especially within Google Search.

At first glance, the data might seem unremarkable. But is it really? Consider the implications.

Advertising is traditionally the bread and butter of search engines. If users are increasingly relying on AI-generated responses, it stands to reason that fewer people are clicking on ad-supported websites.

Yet, Google’s ad revenue hasn’t just held steady – it’s actually increased! Where is this revenue coming from if not from clicks drawn away by AI answers?

The answer, as it turns out, lies within the AI Overview itself.

Google has cleverly integrated advertisements directly into the AI Overview – placing them prominently at the top and bottom of the AI-generated responses.

While AI search may reduce overall website traffic, the silver lining is that websites mentioned in AI-generated responses gain a new avenue for increased traffic.

This explains Google’s strategic decision to embed ads within the AI experience. By retaining users through AI and simultaneously monetizing the experience, they’ve seemingly resolved a potential dilemma.

But, the inherent contradiction remains: many users turn to AI search precisely to avoid advertisements. Integrating ads directly into the AI response arguably defeats that purpose.

This isn’t exactly new ground. Even within platforms like DeepSeek, advertising opportunities are emerging, forming a nascent ecosystem.

In the traditional search engine era, Search Engine Optimization (SEO) was a booming industry. According to 21st Century Business Herald, the SEO ecosystem was a $90 billion market.

Now, with the rise of AI search, SEO firms are adapting, offering “Generative Engine Optimization” (GEO) services. GEO, in essence, is advertising within AI search results, with some companies branding themselves as “DeepSeek promotion companies.”

LeadLeo Research estimates the domestic GEO market at around 2.1 billion yuan this year, projecting a growth to 24.2 billion yuan by 2027. Within five years, the GEO market could potentially reach 300 billion yuan.

Consider the numerous beauty salons promoting themselves as “DeepSeek recommended” – leveraging the perceived authority of AI-driven results.

So, if search engines and advertisers are both profiting, who’s losing out?

The answer: content websites.

In the SEO era, these individuals would likely be visiting content websites, generating revenue for those sites. Now, a recent study on AI Overviews and SEO reveals that if Google Search displays an AI Overview, the click-through rate (CTR) for top-ranking organic results decreases by an average of 34.5%.

Imagine painstakingly crafting content to rank first on a search results page, only to see users bypass it entirely, opting for the AI’s summarized version.

Last Friday, Google’s head of search, Liz Reid, addressed these concerns in a blog post.

She argued that the claims made by some media outlets and research firms were premature, dismissing the notion that Google’s AI search is causing a decline in website traffic.

According to Google’s own data, overall search engine click volume has remained relatively stable compared to last year, with some websites experiencing increased clicks while others have seen a decrease.

She noted that forums, videos, podcasts, in-depth reviews, original articles, and websites with deep analysis are receiving more clicks from AI search because AI flags these quality sites, and users want to read the original articles.

Those with lower quality might be feeling the pinch.

Beyond the immediate impact on content creators, the broader implications for the content ecosystem are significant. The proliferation of AI-generated content is not a trivial matter. Although AI draws its answers from the internet, the AI-generated answers are also going on the internet to be training material to the next generation of AI.

It’s akin to making copies of copies, with each iteration further distorting the original information. This increasing margin of error accelerates model decay.

In the long run, the amount of high-quality, human-generated content online may diminish, leading to a decline in AI’s learning capabilities. This affects not only Google, but also xAI, Perplexity, and other AI platforms that will increasingly cite low-quality AI-generated web pages. Model decay is a common problem. Nobody cares, until it’s too late.

Furthermore, Google faces ongoing antitrust scrutiny from the U.S. Department of Justice (DoJ). Earlier this year, the DoJ was seeking to potentially break up Google’s Chrome browser.

The argument was that, unchecked, Google could leverage AI to further cement its search engine dominance and integrate it into search and other online products, potentially distorting the competitive landscape.

Recently, even upstart Perplexity cheekily suggested acquiring Chrome.

Google’s current strategy of leveraging AI Overviews while simultaneously capturing traffic and ad revenue for itself could provide regulators with fresh ammunition, potentially leading to further scrutiny and regulatory battles.

So, what’s the solution? The integration of AI into search is inevitable. It’s a broad trend of AI entering our lives.

But, for ultimate authority and in-depth understanding, stick with primary research — and perhaps Gemini 3.