Meta's advertising business grew faster than Google's search business in the third quarter, and analysts link the gap to artificial intelligence. Meta's ad revenue rose 26% to $63.1 billion, up from $50.1 billion a year earlier. Google's search division grew 12% to $63.4 billion.
CNBC reports that Meta CEO Mark Zuckerberg has said his company's AI investments are producing better targeting tools for advertisers on Facebook and Instagram. Meta CFO Susan Li said advertisers that adopted the company's AI business assistant "drove almost 5% more conversions" and "increased their advertising investment by 9% compared with similar non-adopters." She cited syrup producer Simply Organic Maple, which saw a 57% increase in purchases and a 36% decrease in cost per purchase after using the assistant.
Google faces a different AI problem, according to the report. Chatbots such as ChatGPT and Anthropic's Claude are becoming alternatives to search, and users click fewer links. Google's AI Overviews and AI Mode show summaries instead of links to other sites. Nate Elliott, an analyst at Emarketer, told CNBC that if people find chatbots better for finding information, "people's search habits might change for the first time in a generation. That's potentially catastrophic for Google's ad business." Google said search queries hit a record high in the quarter, but its revenue growth is slowing.
Alphabet, Google's parent company, fell more than 12% after its third-quarter earnings report, wiping out about $500 billion in market value. Meta's stock fell 14% in October. Investors are questioning whether the heavy AI infrastructure spending at both companies will generate enough revenue. Google projects up to $205 billion in capital expenditures this year, and Meta expects to spend up to $145 billion.