Why AI is boosting Meta's ad business while hurting Google search — SkimNews
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- Meta generated $63.1 billion in third-quarter ad revenue, up 26% from a year earlier, while Google’s Search unit rose 12% to $63.4 billion—the 14-point gap was Meta’s widest in its favor since 2021.
- Meta AI business assistant recommendations drove almost 5% more conversions and 9% higher advertising investment than similar non-adopters; nearly 10 million advertisers used a Meta AI tool in the third quarter, with Simply Organic Maple reporting 57% more purchases and 36% lower cost per purchase.
- Google said search queries reached a record in the quarter even as revenue growth slowed, with AI Overviews and AI Mode primarily giving users summaries rather than links; ChatGPT, Claude and Muse added alternative ways to find products and information.
- UBS said Meta’s ad strength and the threat from Muse and agents brought search-cannibalization fears back to the forefront, while Wedbush said GOOGL shares were unlikely to work until the search narrative changed and Google demonstrated monetization through new ad products.
- Alphabet shares fell more than 12% after its disappointing third-quarter report, the worst single-day stock decline in its history, wiping out about $500 billion in market value.
- Meta expects up to $145 billion in capital expenditures this year, versus Google’s projection of up to $205 billion, as both companies’ AI infrastructure buildouts push them into negative free cash flow.
- Google reported that its cloud computing division grew more than 100% to $31 billion in quarterly revenue; advertising now accounts for less than two-thirds of Google’s sales, compared with 98% of Meta’s.
Why it matters: Meta’s 26% ad growth versus Google Search’s 12% puts nearly equal-sized businesses on opposite sides of AI-driven discovery. For Google, record query volume alongside slowing revenue shows the key change is monetization: AI summaries and assistants answer users without sending them to the links that historically carried search ads.
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