All eyes on Google Search revenue

It’s tough to know what’s going on with Google Search, the cash cow that makes up about half of Alphabet’s revenue and a good chunk of its earnings. There are mixed signals on what’s happening to traffic on Google itself and what’s happening with the traffic it sends elsewhere, and AI seems to be cutting both ways.

On one hand, Google execs have repeatedly said lately that despite rolling out AI overviews that can keep people on Google, the open web is thriving and the search traffic it sends to other websites has been “relatively stable year-over-year.” At the same time, in a recent court filing regarding the company’s ad tech monopoly, Google stated that “the open web is already in rapid decline.” The government’s divestiture remedies, Google said, would make it so that its advertisers would likely “see a further decline in their return on investment from open-web display ads.”

For what it’s worth, the owners of those other websites, and the companies that measure web traffic, have seen traffic decline significantly since Google rolled out those AI tools.

As for traffic to Google itself, the company says it hasn’t been bothered by upstarts like OpenAI’s ChatGPT, saying that its customers are “happier with the experience and are searching more than ever.” The parties don’t exactly make it easy to compare. Most recently, OpenAI said ChatGPT had 800 million weekly users while Google last said its AI Overviews have 2 billion monthly users.

Traffic to Google overall, not just Overviews, is still growing but not nearly as fast as the — much smaller, much more quickly growing — traffic to ChatGPT. According to a report earlier this month from Bank of America Research, which uses Similarweb data, global daily average web visits (including desktop and mobile web, but not app traffic) to Google in September were up 1% year over year to 2.8 billion. Meanwhile, visits to ChatGPT were up up 90% to 197 million.

ChatGPT traffic is higher than traffic to Google’s Gemini, but overall traffic to Google is way higher than traffic to ChatGPT. As JPMorgan recently wrote in a note, “While Gemini’s 450M+ MAUs still trail ChatGPT’s 800M+ WAUs, Google is increasingly integrating Gemini across its product ecosystem with billions of users, including Search, Chrome, Gmail, & more, and we expect engagement to improve as Google’s accelerated pace of AI innovation continues.” Got it?

Google’s revenue from Search ads keeps going up — nearly 12% in Q2 compared with a year earlier — but perhaps the company is squeezing more blood from that stone. BofA said in another note this month that it expects “increasing data use, & ad spend to offset organic search traffic declines.”

The Street thinks Search revenue will jump another 12% to $55 billion in the third quarter, which the company reports tomorrow.

Anyway, all eyes will be on that Search number for any signs of flagging from AI competition.