On October 28, Google said it was scaling ads in AI Mode to India and nine other countries. The company says those ads will be marked Sponsored. Google’s announcement

Later that day, its parent company Alphabet reported earnings. Shares fell about 10% in after-hours trading.

Alphabet’s revenue and ad sales missed analyst expectations, while investors were also weighing its heavy AI spending. But on the earnings call, Google’s own explanation of its Search business revealed why the two stories belong together. Reuters

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Alphabet brought in $127.6 billion in the third quarter, up 25% from a year earlier. That was less than the $128.2 billion analysts expected, according to LSEG data cited by Reuters. Google’s ad sales also fell short of expectations. Alphabet’s results, Reuters

The spending side matters too: Alphabet expects its capital spending in 2027 to rise significantly from this year’s forecast of $195 billion to $205 billion. That spending includes infrastructure such as data centres and servers. Earnings call transcript

Google says its Search query growth was the fastest it had been in five years. At the same time, revenue from Search and related services grew 12% year over year, down from 17% growth in the previous quarter. Revenue was still growing, just more slowly. Q3 results, Q2 results

An analyst asked about that gap on the earnings call. Philipp Schindler, Alphabet’s chief business officer, said the growth in AI Mode queries had affected Search growth because monetisation, or how effectively Google earns money from that activity, was lower in AI Mode. He didn’t quantify the effect or specify the comparison. Earnings call transcript

He also named other factors, including currency changes, which he called the largest reason Search growth slowed between the two quarters. Google Cloud revenue more than doubled in the same quarter, driven in part by AI infrastructure and services. One part of Google’s AI business is growing quickly while another is still working out how to earn more from its growing usage. Alphabet’s results

Here’s an example from Google’s own ad documentation.

Someone asks why their pool is green and how to clean it. The AI response might suggest testing the water, brushing the pool and vacuuming debris. Google says it could then show a Sponsored listing for a pool vacuum or algae treatment.

Notice the move. The person didn’t ask to buy a vacuum. The answer’s suggested next steps gave Google a way to match a product to the conversation. That is Google’s example, not a promise that the same ad will appear for every such question.

For Google, that creates a possible ad opportunity before someone has even searched for a product name. These ads use the same auction and cost-per-click or conversion-based bidding as regular Search ads. It’s one way Google can try to earn from more of those AI Mode questions. Google Ads Help

Google says ads can appear within or alongside an AI response. It also says paid advertising does not influence the organic AI answer. That’s Google’s stated policy; it doesn’t mean every AI answer or advertised product should be trusted without checking. Google Ads Help

There’s another detail: Google can add a short AI-generated explanation alongside sponsored options to say how they relate to your question. Google says this text can draw on the query, the AI response and public pages, including an advertiser’s website. Advertisers cannot write or approve that explanation themselves. The product listing is still an ad. Google Ads Help

Say you’re looking for an air purifier for your bedroom and AI Mode suggests what to consider.

This is a decision routine, not a search result I’ve tested. Google is scaling the ads in India, so you may not see the same layout or an ad on every query. Google currently lists English as an eligible language for ads inside AI Mode. Its announcement of ads on follow-up questions was specific to the US. Google’s rollout, Google Ads Help

If you run ads for a business, there’s a separate detail worth knowing: eligible existing Search, Shopping and Performance Max campaigns can appear in these AI experiences automatically. Google says advertisers can’t opt out of AI Mode alone, and performance is included in standard reports in aggregate. Check your campaign search terms and costs, while recognising those reports don’t isolate AI Mode performance. Google Ads Help

The pool owner asked how to clean green water. Google’s example could end with a vacuum ad. Before comparing brands, there’s a smaller question to answer: do I need a vacuum in the first place?

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