NEW YORK / ConSynSer / – Meta’s advertising revenue grew 26% in the third quarter, more than double the 12% growth posted by Google’s search unit, as artificial intelligence reshapes online advertising. Meta’s ad revenue rose to US$63.1 billion from $50.1 billion a year earlier. Google’s Search and other division brought in $63.4 billion. The 14-point gap is the widest in Meta’s favour since 2021 and puts the two businesses almost level in size.
The divergence reflects gains Meta’s core ad unit is drawing from AI, while chatbots such as ChatGPT take share from search. Consumers are clicking fewer blue links as they turn to AI assistants, reducing Google’s ad revenue. Anthropic’s Claude and Meta’s recently launched Muse assistant add to the competition. At the same time, users are spending more time scrolling on Instagram, giving Meta more advertising opportunities. Google said search queries hit a record high in the quarter, even as revenue growth slowed.
Nate Elliott, an analyst covering AI at Emarketer, told CNBC the shift is a double-edged sword. He said people may find AI tools they prefer to Google as AI changes how they discover information. If those tools prove better, search habits could change for the first time in a generation. Elliott said that would be potentially catastrophic for Google’s ad business. Google also earned about $11 billion from YouTube in the quarter.
AI tools drive Meta’s advertising rebound
Meta needed AI to revive its ad business after Apple’s 2021 iOS privacy change limited its ability to target iPhone users. In 2022, Meta’s revenue fell for the first and only time in its history. The company has since built AI into its ad products, including the Meta AI business assistant in its Ads Manager system. Chief Financial Officer Susan Li said advertisers following its recommendations drove almost 5% more conversions.
Li said those advertisers also increased their ad spending by 9% compared with similar non-adopters. Almost 10 million advertisers used at least one of Meta’s AI tools in the third quarter, she said. Google is deploying its Gemini models across its entire ads infrastructure, according to chief business officer Philipp Schindler. Its AI Overviews and AI Mode, however, mostly give users summaries rather than links to other sites.
Investors weigh huge AI spending plans
Alphabet shares plunged more than 12% after its third-quarter report, wiping out about $500 billion in market value in its worst day ever. Meta stock fell 14% in October, its worst month since October 2022. Both companies’ AI build-outs have pushed them into negative free cash flow. Google projects up to $205 billion in capital spending this year, while Meta expects up to $145 billion, backed by a planned US$95 billion stock sale.
Google’s cloud division grew more than 100% to $31 billion in quarterly revenue, driven by demand for its tensor processing units. Ads now account for less than two-thirds of Google’s revenue, while Meta relies on ads for 98% of sales. Meta is investing in AI models and agents to build a subscription business. Wedbush analysts said Alphabet shares are unlikely to perform until the search narrative changes.