Google’s AI Search Pressures Publishers as Reddit Restricts Access

Google’s AI search tools are exposing a tension at the center of the company’s next phase: they can answer more questions directly, but may generate less revenue per interaction and send fewer visitors to the sites that supply useful information. Reddit’s response—requiring more visitors to sign in—shows how publishers may adapt. That could make content more valuable to Google while raising the cost of building competing AI services.

The financial markets supplied a sharp illustration. On Thursday, Alphabet shares fell 12.6 percent, wiping out about $500 billion in market value. The decline came as investors weighed the scale of Google’s AI infrastructure spending: the company expects capital expenses of up to $205 billion this year and has indicated spending will rise further in 2027. Alphabet also reported negative free cash flow of $9 billion, extending a decline from the previous quarter.

The same day brought a more complicated signal about Google’s AI progress. Demis Hassabis, Google’s chief scientist, pointed to Gemini 4 Carbon, a model then available only to cyber defenders, which topped Artificial Analysis’ Intelligence Index. After delays to new releases and doubts about Google’s position among leading AI developers, the result suggested the company may be regaining ground. Yet a model’s benchmark performance and the economics of the product built around it are separate questions. Investors were focused on the latter.

AI Mode changes the search equation

On Alphabet’s earnings call, chief business officer Philipp Schindler gave a specific reason search revenue growth had slowed even as query volume increased: more people were using AI Mode, which earns less than traditional search. He did not quantify the difference or specify exactly which forms of conventional search he was comparing it with. Still, the admission matters because AI Mode is a distinct interface designed to answer users directly, rather than simply present a list of links and ads.

Google Search remains enormous. Revenue from search and related advertising rose 12 percent to $63.35 billion. But that growth rate was below the 19 percent reported in the first quarter and 17 percent in the second. Revenue was roughly flat against the previous quarter, despite AI Mode reaching about 1 billion monthly users and AI Overviews about 2.5 billion.

That scale makes monetization a central product question. A large audience can support a business, but it does not automatically produce the same revenue as a search page where users see familiar ad placements and click through to websites. Google executives had previously said AI Overviews monetized at about the same rate as traditional search. Schindler’s remarks put a finer point on the distinction: at least for AI Mode, increased use can coincide with weaker revenue per search.

There is also a change in what Google says about traffic sent to publishers. In July, CEO Sundar Pichai told investors that Google’s AI search features delivered billions of clicks to websites each week. His prepared remarks this quarter did not mention website clicks. That omission doesn’t establish that referrals have stopped or quantify how they have changed, but it leaves a useful measure of the old search bargain unanswered.

Pichai compared Google’s current approach with its transition to mobile: the company first made the product work and added advertising later. That later stage is now under way. Google is expanding ads in AI Mode to 10 more countries and adding ads to follow-up questions in the United States. Some placements also include short AI-written explainers based partly on an advertiser’s own site, which that advertiser cannot edit or approve. These formats may help Google find new commercial space inside conversational search, though the reported figures do not yet show whether they will close the revenue gap with traditional search.

Reddit feels the cost of fewer search visits

Reddit’s quarterly results show the publisher side of the same shift. Advertising revenue grew 54 percent to $847 million, but U.S. daily users fell to 50.7 million from 53.2 million in the previous quarter. It was the second consecutive decline. The company also said traffic from search had dropped meaningfully and warned that daily users could fall by a low double-digit percentage in the fourth quarter.

Those figures help explain why Reddit plans to steer more visitors toward signing in. CEO Steve Huffman said an account gives the company more information for ad targeting and is generally associated with higher engagement. He also pointed to protecting Reddit’s data from scrapers and adapting to changing rules in different parts of the world. Reddit had allowed people and automated tools to browse much of its site without accounts; the planned change would make account creation a growing condition of access.

Huffman gave four reasons for the login experience in a post on his own account: improving the user experience, strengthening advertising, addressing safety requirements, and protecting the company’s data from scraping. Reddit said it would test the new experience outside the United States this quarter. The results should help the company estimate how many visitors will accept the added step and how many will leave.

In an interview with Axios, Huffman said he had personally resisted the change because he believes in an open internet. He described the decision as a way to make Reddit the best version of itself, rather than a response to Google. That explanation may describe his intent, but the commercial context is clear: logged-in users are more useful to Reddit’s advertising business, while restricted access can help protect material that AI companies might otherwise collect and use.

Reddit’s dependence on search referrals has grown over time. As low-quality material spread across parts of the web, human-written forum discussions became more useful to people searching for recommendations and first-hand accounts. Google began featuring forum posts more prominently, and Reddit benefited from the resulting traffic. After Reddit restricted access to bots that had been scraping its forums, Google reportedly agreed to pay $60 million per year for a data license. When Reddit closed its forums to crawlers in 2024, Google was the major search engine that retained access to live Reddit results.

The relationship has not been friction-free. In July, Huffman said AI Overviews had not yet benefited Reddit as much as the traditional list of search results. The Wall Street Journal later reported that Reddit had discussed blocking Google’s AI access to its content while the companies negotiated a renewal of their licensing deal. Reddit has also sued Anthropic and Perplexity over data scraping. The pattern is familiar: a publisher wants the audience that search can deliver, but also wants control over how its work is used to build products that may answer questions without sending readers back.

A closed web may favor the biggest AI companies

For years, the arrangement between Google and many publishers was relatively legible. Publishers let Google index their pages; Google sent visitors back through search results. Google made money from ads shown on its pages, while publishers earned from their own ads, subscriptions, or other activity. Google gradually kept more of the search experience on its own pages, answering basic queries directly instead of sending users elsewhere.

That change did not begin with generative AI. Google had long tried to make search results more useful without requiring another click, in part because users wanted quick answers. But AI systems make the shift more consequential: a conversational response can combine information from multiple sources and deliver a result without exposing the same set of links. Google has argued that its AI responses encourage broader searching and lead to valuable clicks. The latest evidence from Google and Reddit complicates that case. AI Mode earns less than traditional search, while Reddit says search traffic has fallen.

The strategic loop is straightforward. AI answers keep more of the interaction on the search platform. Publishers see less traffic or less control over how their material is used, so they restrict access, require accounts, or negotiate licenses. AI products then rely more heavily on data that companies have permission to use. Those that can’t secure access may face a weaker supply of useful material or costly disputes with its owners.

Google appears better placed than most rivals to operate in that environment. Licensing content may add to the cost of each answer, but Google has a much larger business to support that expense. Publishers, meanwhile, have reasons to sell access: licensing can create revenue, and search visibility can still bring users. Reddit’s reported agreement with Google demonstrates the scale of a deal a large platform can make. It also illustrates why the same terms may be harder for smaller AI companies to match.

This is why the sharp share-price decline does not necessarily mean Google is losing its position. Its spending plans and negative free cash flow show that the infrastructure buildout carries a real financial cost. And AI Mode’s weaker monetization is a challenge if usage continues to move away from conventional search. But Google can spread those costs across a vast advertising business, experiment with new ad formats, and pay for data that less well-funded competitors may need.

For the wider web, the result could be a smaller pool of freely accessible material and more content behind account walls or licensing agreements. That can make it harder for new services to assemble comparable answers, while giving established platforms more influence over which sources their systems can use. Readers may still prefer AI Mode for many questions: a direct answer can save the effort of opening and comparing multiple pages. The old search page did not always serve readers well, and few people are attached to clicking through a long list simply because it exists.

Yet those links helped support the sites that created the material search depended on. The unresolved question is whether AI answers can sustain a healthy flow of useful information when fewer users visit its original sources. Google may be able to pay for access and keep building. Publishers will keep adjusting how they distribute their work. The practical test is whether the emerging system gives creators enough reason to keep producing material—and whether other AI developers can afford to use it.