Google CEO Sundar Pichai said its investment in AI is paying off in two ways: fueling search engagement and spurring cloud computing revenues. That’s a good example of one way AI will be monetized in many instances: indirectly, as existing products are improved.
Google services revenue--which includes search--grew 13 percent in the third quarter of 2024.
On the other hand, for at least some infrastructure providers, AI will drive usage of cloud computing resources as well, in this case Google Cloud, whose revenues grew 35 percent in the third quarter of 2024.
Also, as expected, the cost of inference has declined dramatically. “Since we first began testing AI Overviews, we have lowered machine cost per query significantly,” said Pichai. “ In 18 months, we reduced cost by more than 90 percent for these queries.”
And though an argument can be made that AI might cannibalize some significant amount of search, Google has found, since AI Overview was introduced, that “strong engagement” leads to “increasing overall search usage and user satisfaction,” Pichai noted. “People are asking longer and more complex questions and exploring a wider range of websites.”
That, in turn, fuels the advertising revenue potential.
Google Cloud usage to support AI operations also has skyrocketed. “Gemini API calls have grown nearly 40 times in a six-month period,” Pichai said.
Likewise, Google Cloud has seen 80 percent growth in BigQuery ML (machine language) operations over a six-month period, he noted.
AI capital investment levels will remain an issue for some time, given the huge leap in capex for AI infrastructure, models and inference that happened in 2023 and has continued into 2024. Google itself projects an increase in AI capex spending for 2025, as well.
Some idea of the ramp up of investment can be seen in venture capital investments alone, and excluding investments by leading firms such as Google, Microsoft, Meta, Apple and Amazon, to support generative and other forms of AI.
Those figures do not include any sums spent by enterprises, software or hardware firms to create AI features, apps or platforms. Nor doe those amounts include investment by hyperscale app providers or device firms to add AI features to their existing products.
The big takeaway from Alphabet’s most-recent earnings call is that significant revenue attributable at least in part to AI investments has been seen.
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