On October 28, Alphabet reported its third quarter. The next day, its stock fell about 10%, roughly half a trillion dollars in market value, after Google said AI Mode searches earn it less than regular searches. If you buy Google Ads, the question is whether AI search is making your ads show less often, cost more, or bring in fewer leads.
We pulled our clients’ accounts to find out. In the Google Ads search accounts we manage, a click costs 4% more than it did a year ago, which is the same increase Google reported across all of its advertisers for the quarter. A lead costs about 7% more. Ads are losing no more auctions to competitors than they did a year ago. Whether ads are showing less often overall is a question our accounts can’t answer, because those totals follow our clients’ budgets. Google’s own numbers say AI Mode shows fewer ads per search and that people are searching more, and the net result was 8% more ad clicks sold than a year ago. The stock price is Google’s problem. There is nothing for you to change.
One thing did move. In Local Services Ads, the typical account’s cost per lead rose about 9%. We can’t tie that to AI, and it’s a number you can check yourself in your Local Services Ads dashboard.
What Google actually said
Google’s search advertising revenue grew 12% in the third quarter, down from 19% and 17% in the two quarters before. Its chief business officer said AI Mode queries had an impact “because of the lower monetization we were seeing in AI Mode,” and Sundar Pichai said Google is “focused on building the best Search user experience, followed by monetization.” Investors heard that and sold. But the same report says people are searching more than ever, with query growth the highest in five years, and that Google sold 8% more paid clicks than a year ago at an average price 4% higher. Google’s problem is revenue per search, and it earns less per AI Mode search because it shows fewer ads there, not because the ads it shows got cheaper. If anything, fewer ad slots should push prices up. Revenue per search is not a number any advertiser pays.
What our clients’ accounts show
We compared the last 12 months (November 2025 through October 2026) with the 12 months before, across the Google Ads search accounts we manage that ran in both periods, a mix of local service businesses and B2B and national companies. We looked only at ratios, because totals like impressions and clicks mostly track how much our clients chose to spend. AI Mode launched in May 2025 and its use grew through the year we measured, so if it were changing what a click or a lead costs, this comparison would show it.
A click cost 4% more. On the typical account, it was flat, and the price fell on more accounts than it rose on.
A lead (a form fill or a phone call) cost about 7% more across the whole group. On the accounts whose budgets held steady, it cost less than the year before. That is in line with the click price, and within the year-to-year noise in how conversions get counted.
Then impression share, with a caveat. Google reports the share of auctions your ad was eligible for but lost because your bid or ad quality wasn’t competitive enough. That number only counts auctions that ran. If Google serves an AI Mode result with no ads at all, no auction happens and impression share never sees it, so it can’t tell you whether AI is removing ad slots entirely. The best evidence on that is Google’s own figure above: it sold 8% more paid clicks than a year ago. What impression share can show is a squeeze inside the auctions that still run. If AI Overviews cut the ad block from four slots to one, more advertisers would lose on rank and that number would climb. It went from 31% to 28%, and on the typical account it didn’t change at all.
Local Services Ads
Local Services Ads (the “Google Guaranteed” listings at the top of local searches, where you pay per lead rather than per click) are the one place something moved. Across the accounts we manage that ran both years, the typical account’s cost per lead rose about 9%, and it rose on most of them. On the accounts whose budgets held steady, leads were down about 11% for about 4% more money.
Google sets lead prices in that program through its own auction, and this is a small group of accounts, so we can’t tie it to AI. But if you run Local Services Ads, cost per lead is the number to watch, and you can see it in your dashboard any time by dividing what you spent by the leads you were charged for.
Ads inside AI answers
Google’s fix for its revenue problem is to put ads inside AI Overviews and AI Mode. On the call, it announced those ads are expanding to more countries and to follow-up questions in AI Mode in the US. They run from the same campaigns you already have, in the same auction. Nobody can buy a place in the AI answer itself, which we covered in our last post, and that’s still true. These are ads, labeled as ads, next to the answer. Whatever they do to your results will show up in your cost per lead, the number we already watch.
What to do
Nothing different. Judge Google Ads by what a lead costs and how many you get. If a headline or a vendor tells you Google Ads is dying because of AI, ask for the cost per lead number. In our clients’ accounts, it’s up about 7%, close to the 4% rise in the price of a click.
If a pitch lands in your inbox saying you need a new kind of advertising for the AI era, send it to us. We’ll read it and give you our feedback.