Google tests new ad formats as AI shopping agents challenge search revenue

Google is adapting its advertising model as AI agents automate more of the online shopping process, according to comments from Philipp Schindler, the company's chief business officer, on Alphabet's latest earnings call. Schindler said that while automation can remove the repetitive aspects of shopping, users still value discovery, brand loyalty and customer service—factors Google believes can support advertising within agentic shopping experiences.

He described how Google might present users with multiple insurance products, highlighting differences in premiums, deductibles and special offers, rather than defaulting to the cheapest option. This approach aims to integrate ads in a way that supports user decision-making rather than simply replicating traditional ad placements.

Alphabet reported third-quarter revenue of $127.58 billion, slightly below analyst expectations, with earnings per share affected by an $8.2 billion unrealised loss on its SpaceX investment. The company acknowledged that AI-driven searches are up, but monetisation has not kept pace, raising concerns among investors about the long-term impact of AI agents on Google's core search business.

Google has been testing new ad formats, such as sponsored links in AI-generated lists and offers in travel planning, to address these challenges. CMOs and digital leaders should monitor these developments as agentic shopping could reshape digital advertising strategies.