Google's own AI search hits its ad revenue as Alphabet loses over $500bn in market value

Google's advertising revenue from its search engine has fallen because of its own artificial intelligence (AI). When users search for something, the AI summary Google now presents is the reason behind the drop. After news of the lower advertising revenue emerged, the market value of Google's parent company Alphabet fell by more than $500 billion on Thursday.

Alphabet's chief business officer Philipp Schindler said Google's 'AI Mode' gives users direct, conversational answers when they ask a question in the search engine. As a result, revenue from the advertisements shown alongside conventional search results has fallen. Schindler, however, remains optimistic about the new search system.

Google's role in finding answers to users' questions around the world has come under challenge because of the rapid advance of AI. Millions of people are now using AI tools such as ChatGPT and Claude instead of Google's search engine, through which detailed answers to various questions can be obtained.

Kim Scott, a former head of Google's advertising division, said Google is willing even to harm its own search business through its own AI technology, but does not want to let any other company take over its business position. She said one of the founding bases of Google was long-term investment in the technology sector, and that the company has no objection even if that means short-term losses.

Alphabet published its financial report on Wednesday. The report said the company's total revenue in the three months to September rose 25 percent from a year earlier to $127.6 billion. However, the company failed to earn as much as analysts had expected; in particular, advertising revenue coming in below expectations has caused concern among investors.

After the financial report was published, Alphabet's share price fell by more than 12 percent to its lowest level in six months. At the end of Thursday's trading, Alphabet's total market value stood at $3.46 trillion.

Tracy Wu, a principal analyst at research firm Forrester, said Alphabet's disappointing search business results have shown how difficult it is to keep established businesses in a strong position while also funding huge investment in the AI sector.