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When AI Search Breaks the Web's Business Model

3 November 2026

Two interesting observations came out of Google’s and Reddit’s earnings calls last week, and together they tell us something about how AI is changing the economics of the internet.

On October 28, during Alphabet’s earnings call, Google’s Chief Business Officer Philipp Schindler acknowledged that queries in Google’s AI Mode were generating less advertising revenue than traditional searches.

A day later, Reddit CEO Steve Huffman made an equally interesting observation:

“The reality is the AI Mode does not drive traffic. Not for us, and not to anybody as far as I know.”

I found these statements interesting because they describe two sides of a business model that has supported much of the internet for decades.

How the traditional model worked:

  1. Websites published content and allowed Google to index it.
  2. Google displayed links to those websites in search results.
  3. People clicked those links and visited the websites.
  4. Websites earned revenue through advertising, subscriptions or purchases, while Google earned revenue from advertisements displayed alongside search results.

It wasn’t a perfect arrangement, but both sides benefited from the traffic.

How AI search is changing this model:

  1. Google uses information from websites to generate AI-powered answers directly within search.
  2. Users can get the information they need without necessarily visiting the original websites.
  3. Websites may receive fewer visitors, even though their content continues to contribute to search results.
  4. Google faces its own challenge because AI Mode currently generates less advertising revenue per query than traditional search.

For decades, much of the open web operated on an implicit exchange: websites made their content discoverable, search engines sent them visitors, and those visits helped fund the creation of more content.

AI is changing that exchange because the value of content can now be consumed without necessarily generating a visit to its source.

For users, this is often a better experience. But for the websites and communities producing that information, the economics become more complicated.

References:

Sketchnote: How AI search changes the web's business model