AI is improving Meta’s ability to sell ads, while Google must adapt its search business to a world where users increasingly expect answers without clicking links.
MARKET INSIDER — Artificial intelligence is creating different opportunities and risks for the two companies that dominate digital advertising. At Meta, better recommendations and campaign tools are helping advertisers reach customers and encouraging users to spend more time on its platforms. At Google, conversational AI is challenging how searches become advertising revenue, even as search activity continues to grow. Third-quarter figures capture the divergence: Meta’s advertising revenue increased 26%, compared with 12% for Google Search and other. Both businesses are expanding, but investors face different questions about their ability to translate AI adoption into sustainable cash generation.
Key Highlights
- Meta’s quarterly advertising revenue reached $63.1 billion, nearly matching Google Search and other revenue of $63.4 billion.
- Google faces pressure to monetize AI-generated answers as it competes with alternative discovery tools.
- Strong demand has not removed concerns about infrastructure spending, with both companies reporting negative free cash flow.
Similar revenue, different growth trajectories
Meta’s advertising revenue rose from approximately $50.1 billion a year earlier to $63.1 billion in the third quarter. Google Search and other generated $63.4 billion, up 12%.
The 14-percentage-point growth gap was the widest in Meta’s favor since 2021, according to CNBC.
The comparison has an important boundary: Meta’s advertising business is being measured against Google’s Search and other category, rather than Google’s entire advertising operation. YouTube contributed approximately another $11 billion in quarterly revenue.
Nor do the figures show Google Search shrinking. Its revenue continues to rise, but the slower pace has intensified questions about whether AI-driven changes in consumer behavior are affecting monetization.
Why AI fits Meta’s existing advertising model
Meta’s platforms are built around discovering content while scrolling. AI can improve that experience by recommending posts and videos that keep users engaged, while helping advertisers identify relevant audiences and create effective campaigns.
That gives Meta several ways to benefit within its established business. More engagement can create additional advertising opportunities. Better campaign performance can encourage businesses to increase spending.
Meta’s reported operating metrics support that broader picture. Third-quarter ad impressions increased 10%, while the average price per ad rose 14%. Management attributed the gains to factors including engagement, advertising performance and improved macroeconomic conditions. The results therefore should not be attributed entirely to AI.
Chief Financial Officer Susan Li said advertisers adopting recommendations from Meta’s business assistant recorded almost 5% more conversions and spent 9% more than comparable non-adopters. Almost 10 million advertisers used at least one of Meta’s AI tools during the quarter, she said.
Those are company-reported results. They indicate promising adoption and performance, but do not establish the return on Meta’s entire AI investment program.
Google must adapt how search generates revenue
Google faces a more direct challenge to the interface underpinning its core business.
Traditional search connects a query with a page of results and advertising opportunities. Chatbots and AI-generated summaries can resolve a user’s question within the interface, reducing the need to visit other websites.
That does not automatically eliminate advertising. It changes where commercial messages can appear and how advertisers measure their value.
Google is responding through AI Overviews, AI Mode and Gemini-powered advertising tools. Chief Business Officer Philipp Schindler said the company was deploying Gemini across its advertising infrastructure to improve ad quality and advertiser capabilities.
Google also reported record search queries during the quarter. That complicates a simple narrative of users abandoning the service: activity can rise while revenue growth slows.
The financial question is whether Google can monetize those changing interactions effectively. Fewer outbound clicks alone do not establish how much advertising revenue AI has displaced.
AI competition extends beyond Google’s own products
External assistants add another layer of uncertainty.
ChatGPT, Claude and Meta’s Muse offer alternative ways to research products, compare options and obtain information. If users begin those activities elsewhere, Google could face pressure at the point where consumers first express purchase intent.
Emarketer analyst Nate Elliott told CNBC that AI could change search habits that have remained relatively stable for a generation.
For Google, the challenge is therefore both defensive and commercial: retain users while developing advertising formats suited to conversational discovery.
For advertisers, the same shift creates a measurement problem. A recommendation generated by an assistant may influence a purchase without producing the familiar sequence of search, click and conversion.
Cloud provides Alphabet with another growth engine
Alphabet has a larger revenue base outside advertising than Meta.
Google Cloud’s quarterly revenue more than doubled to roughly $31 billion, supported by demand for infrastructure and AI computing. Search remains critical, but cloud gives the company another way to earn revenue from the technology reshaping its advertising business.
Meta is also pursuing diversification through AI agents, models and subscriptions. However, advertising still accounts for approximately 98% of its sales, compared with less than two-thirds of Alphabet’s revenue.
This creates contrasting exposures. Meta is showing faster growth in advertising but remains heavily dependent on it. Alphabet has greater diversification while facing uncertainty around its most established business.
The spending test applies to both companies
Investors are also examining the cash required to sustain these ambitions.
Alphabet projects capital expenditure of up to $205 billion this year, while Meta expects up to $145 billion. Both companies have moved into negative free cash flow as investment absorbs cash generated by their operations.
Meta’s advertising gains demonstrate that AI can improve an existing business. They do not establish that every new model, agent or data center investment will generate an attractive return.
Google’s challenge is to show that AI can sustain Search monetization while its cloud business expands. Meta’s is to demonstrate that stronger advertising and emerging revenue streams can justify the scale of its spending.
The next evidence will come from conversion performance, advertiser spending, new-product revenue and cash generation—not simply the number of AI users or the size of infrastructure commitments.
