2 weeks Ago By Kamya Pandey
Explainer Briefly Slides Google has cut the cost of AI overview generation by over 90% in the past 18 months, the company’s CEO Sundar Pichai explained during its earnings call for the third quarter of the financial year (Q3FY24) ending on September 30. He mentioned that the company was able to do so through “hardware, engineering, and technical breakthroughs,” while at the same time also doubling the size of its custom Gemini model. Pichai had spoken about the company’s efforts to improve the quality of AI overviews while keeping the cost down during previous quarters as well.
“We are focused on matching the right model size to the complexity of the query in order to minimize the impact on costs and latency,” he said in July and as per his statements this quarter, it seems that the company is closer to this goal. In the Q3 earnings call, Pichai mentioned that Google has recently rolled out AI overviews to over a hundred new countries which will expand its reach to “more than one billion users on a monthly basis.” He mentioned that in the countries where Google had already rolled out AI overviews in the past, there is an overall increase in search usage.
“People are asking more complex questions, different types of questions, they are exploring a wider range of websites. And what’s particularly exciting is that this growth actually increases over time as people learn to adapt to that new behavior,” he added. The rationale behind two different search experiences: Currently, Google gives users two kinds of results— the AI overview and then a series of links associated with users’ queries.
An investment firm representative asked Pichai the rationale behind providing these two different types of search services. Pichai responded that Google has been providing direct answers to queries for the past 10 years, except it earlier used to be through “Featured Snippets” (boxes that appeared as a direct response to user queries). “I do think having two surfaces for us allows us to experiment more.
I view this moment as a moment in which there are new use cases which we will be able to do, which we couldn’t have done before,” he said, explaining the advantage of two different interfaces in search. He mentioned that while the company has rolled out AI overviews for over a billion users, it is currently working on other search-related improvements as well. “So I expect Search to continue to evolve significantly in 2025, both in the Search product and in Gemini,” Pichai explained.
Other key developments in Search: Pichai mentioned that people are using Android’s ‘ Circle to Search ’ option for a diverse range of purposes including shopping and translating text. Further, a third of the users who have started using this service, use it weekly as of Q3. The company says that Circle to Search sees higher engagement from users aged 18-24.
Similarly, Google Lens, which allows users to upload/take pictures and search for items, is now used for 20 billion visual searches per month. Impact of the Google search trial: During the earnings call, an investment firm representative asked Pichai about the US Department of Justice’s (DOJ) lawsuit against Google Search. In October this year , the DOJ said that it wants Google to terminate its default agreements for search related products.
Google currently has deals in place with Mozilla and Apple to act as the default search engine in their browsers and also with major mobile manufacturers. The investment firm representative asked Pichai how the company plans to recapture the search usage it could lose as a result of this lawsuit. “Even as the Court acknowledged, clearly we’ve reached a position of success because we have deeply innovated and we are continuing to do so,” Pichai said adding that he believes that the company’s proven track record of attracting customers gives it a strong foundation.
He also mentioned that Google plans to vigorously defend itself in all these cases. How customers use Google Cloud for their AI needs: Pichai mentioned that customers are using Google Cloud in the following different ways—- Focus on investments in servers: Google reported a capital expenditure of $13 billion. The company says it allocated these funds towards investment in servers, data centers, and networking equipment.
In Q3, Google announced plans to invest over $7 billion in data center investments of which $6 billion are for US-based data centers. Google expects its capex for Q4 to remain around the $13 billion mark but increase in 2025. Besides spending money on infrastructure, Google is also allocating funds to promote its AI products.
In Q3, the company spent $7.2 billion on sales and marketing. This reflects a 4.
9% year-on-year increase in such expense, led by investment in advertising and promotional efforts related to the Made by Google launches , as well as for AI and Gemini. Internal reliance on AI: Besides external users, Google is also internally using AI to improve its coding processes. As of Q3, more than a quarter of all of Google’s new code is AI-generated and reviewed by engineers.
YouTube revenue passes the $50 billion mark: Pichai mentioned that this is the first time in the past four quarters that YouTube’s combined ad and subscription revenue passed the $50 billion mark. He attributed this success to services like YouTube TV, NFL Sunday Ticket (a sports broadcasting subscription) and YouTube Music Premium. YouTube ad revenue for the quarter increased by 12% year on year to $8.
9 billion in Q3. Schindler explained that in Q3, Google saw a slight increase in advertising revenue (especially on YouTube) because of election-related ad spending. “We’re leaning into the living room experience with multiview, and a new option for creators to organize content into episodes and seasons, similar to traditional TV,” he said explaining the future direction for YouTube.
The company said that the number of creators making a majority of their YouTube revenue on TV screens is up more than 30% year-on-year. Growth in YouTube shorts: Google is also currently working on closing the revenue gap between YouTube shorts and longer videos. This gap is getting narrower in the US and other highly monetising markets (regions where advertisers pay more for ads).
Google’s Chief Business Officer Philipp Schindler mentioned that among all the channels uploading videos to YouTube each month, 70% are uploading Shorts. Further, YouTube viewers watch over 70 billion shorts each day. Schindler said that Google is giving advertisers the option to book First Position on Shorts blocks in over 40 markets.
With this option, advertisers can ensure that the viewer will see their ad as soon as they open up YouTube shorts. Also read:.
