Huda Thomas@huda.thomas

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Sundar Pichai is out here calling query growth the strongest it's been in five years while the money tells a flatter story. Search brought in $63.35 billion for the quarter. The quarter right before that: $63.27 billion. That is basically a rounding error of movement, and the yearly pace has been sliding from 19% to 17% to 12%, with Google pointing at thinner monetization inside AI Mode as part of the squeeze. More questions, less cash per question. Now stack the spending on top. Capex for the quarter hit $51.4 billion, over twice what it was a year earlier. Free cash flow came out at negative $9.07 billion, following negative $5.86 billion in the second quarter. In 22 years on the public market, Google had never booked a negative free cash flow quarter before this stretch. Nine months in, it sits at negative $4.8 billion. The same window a year ago was positive $48.7 billion. That's the hole the ad plan is supposed to fill. And the fill runs through your inbox. Philipp Schindler said ads are being scaled in AI Overviews and AI Mode across more users and queries, and AI Mode ads are going global for the first time. Then on October 16, a privacy policy got rewritten. The old language was plain: no ad personalization built on Gmail, Drive, or Photos. The new version ends with an exception for anybody who makes that data available to other Google services that support personalized ads. That is everyone who connects Gmail or Photos to the AI. The help page insists ads won't be based directly on the inbox, but the AI can pull summaries, excerpts, and inferences out of it, and that same material can feed ad targeting. Google is testing ads on precisely those users after saying in March it wasn't seeing any. It quit scanning Gmail for ads in 2017 to win business customers, and the AI found a way back in. Here's the part I keep chewing on. AI Mode questions run roughly three times longer than standard searches. People hand an AI way more than they ever typed into a search box. So the product earning Google less per question is the same one learning the most about whoever is asking. The other side has a real case, and I'll give it room. Google Cloud cleared $30.7 billion at a 36% margin, TPU demand is strong across a wide range of customers, and plenty of investors figure that covers everything else. Personal Intelligence is opt-in, advertisers never see anyone's email, and Google says sensitive categories like health get excluded from targeting. But nobody who hooked up Gmail was signing up for ad personalization. They wanted an assistant. The policy describes no separate consent for ads, and disconnecting Gmail from the AI doesn't delete what's already been collected. Three things would go a long way. Ask separately before anything from Gmail or Photos gets near an ad. Delete what the AI pulled from an inbox once someone disconnects. And break out AI Mode ad revenue for investors so the math on whether this pays for itself is visible. Nine years of telling people the inbox was off-limits, undone by the thing that was supposed to be smarter. that's a whole new era

2d

Huda Thomas@huda.thomas

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Sundar Pichai is out here calling query growth the strongest it's been in five years while the money tells a flatter story. Search brought in $63.35 billion for the quarter. The quarter right before that: $63.27 billion. That is basically a rounding error of movement, and the yearly pace has been sliding from 19% to 17% to 12%, with Google pointing at thinner monetization inside AI Mode as part of the squeeze. More questions, less cash per question. Now stack the spending on top. Capex for the quarter hit $51.4 billion, over twice what it was a year earlier. Free cash flow came out at negative $9.07 billion, following negative $5.86 billion in the second quarter. In 22 years on the public market, Google had never booked a negative free cash flow quarter before this stretch. Nine months in, it sits at negative $4.8 billion. The same window a year ago was positive $48.7 billion. That's the hole the ad plan is supposed to fill. And the fill runs through your inbox. Philipp Schindler said ads are being scaled in AI Overviews and AI Mode across more users and queries, and AI Mode ads are going global for the first time. Then on October 16, a privacy policy got rewritten. The old language was plain: no ad personalization built on Gmail, Drive, or Photos. The new version ends with an exception for anybody who makes that data available to other Google services that support personalized ads. That is everyone who connects Gmail or Photos to the AI. The help page insists ads won't be based directly on the inbox, but the AI can pull summaries, excerpts, and inferences out of it, and that same material can feed ad targeting. Google is testing ads on precisely those users after saying in March it wasn't seeing any. It quit scanning Gmail for ads in 2017 to win business customers, and the AI found a way back in. Here's the part I keep chewing on. AI Mode questions run roughly three times longer than standard searches. People hand an AI way more than they ever typed into a search box. So the product earning Google less per question is the same one learning the most about whoever is asking. The other side has a real case, and I'll give it room. Google Cloud cleared $30.7 billion at a 36% margin, TPU demand is strong across a wide range of customers, and plenty of investors figure that covers everything else. Personal Intelligence is opt-in, advertisers never see anyone's email, and Google says sensitive categories like health get excluded from targeting. But nobody who hooked up Gmail was signing up for ad personalization. They wanted an assistant. The policy describes no separate consent for ads, and disconnecting Gmail from the AI doesn't delete what's already been collected. Three things would go a long way. Ask separately before anything from Gmail or Photos gets near an ad. Delete what the AI pulled from an inbox once someone disconnects. And break out AI Mode ad revenue for investors so the math on whether this pays for itself is visible. Nine years of telling people the inbox was off-limits, undone by the thing that was supposed to be smarter. that's a whole new era

2d