Google (NASDAQ: GOOGL) unveiled a new product at its annual developer conference, Google I/O, with the goal of growing its market dominance in artificial intelligence (AI). Google Search is the company’s flagship product, generating about $200 billion last year, or more than half of its total sales. The product, named AI Mode, directly incorporates AI into Google Search.

Although the change might seem insignificant, the AI sector is probably going to be significantly impacted. Users may be drawn to Google’s integrated AI chatbot for Google Search instead of competing AI apps and services. Furthermore, based on the current situation, AI Mode may be the first AI product to generate a significant profit.

How does AI mode operate, and what is it?

Google Search now has a new option called AI Mode. In essence, it’s an AI chatbot integrated into Google Search that lets users ask more in-depth, lengthy queries and receive direct responses in addition to a carefully chosen list of pertinent links.

AI Mode is a more effective technique to search than sifting through ten blue links or hopping between forums and blogs to get the answer to their query. It removes the element of guesswork from determining the right response and enables the user to pose more in-depth follow-up queries.

The inclusion of AI Mode is essential for Google. Its most crucial product, Google Search, was beginning to falter without it. Because of the speed and ease of AI-powered search, people were choosing to use chatbots like ChatGPT instead, and this trend began to pose a serious threat to Google.

Investors noted a decline in Google Search

After Apple (NASDAQ: AAPL) executive Eddy Cue testified that Safari searches, which use Google Search by default, decreased in April for the first time because more users were beginning to use AI-powered tools to search instead of traditional search engines, Alphabet’s stock fell by almost 7% on May 7.

Even though this was just one aspect of Google Search’s decline, it was a clear indication to the market that users’ search preferences were shifting. If Google didn’t act fast, that tiny crack could grow into a much larger one, which could lead to Google losing control of the product that gave the company its dominance (Search).

Google’s AI mode is already designed to generate revenue

Google’s AI Mode provides a clear and dependable route to revenue, in contrast to the majority of AI chatbots available on the market. AI Mode will probably become profitable due to the same factor that makes Google Search so profitable: advertising.

In the first quarter of 2025 alone, Google earned $66.89 billion in ad income, and they have already declared that ads will be placed in AI Mode.

AI Mode might be used, for instance, to look up “how to build a website for a small business with limited resources.” They will receive a thorough response that includes a detailed guide and advice on how to choose a product, engage with their audience, test it, and launch it. Google reaffirmed the notion that it is incorporating what it already knows how to monetise into its newest product by saying, “In some cases, a website builder might be a good next step, so we may show a helpful ad that can help them get started.”

This alone distinguishes Google’s AI Mode from other AI startups that are presently having financial difficulties. Large language models (LLMs) are costly to run. Because it takes enormous sums of money to train, deploy, and maintain them, these businesses are raising billions of dollars just to stay afloat.

None of the major players have yet to achieve profitability, despite the enormous amounts being invested. Even though some make money by selling access to their APIs or through memberships, it’s still far less than what they need to pay. It was recently disclosed that OpenAI anticipates a total loss of $44 billion from 2023 to 2028. They’re not alone, either. Nearly all of the big AI companies are in a similar situation. Additionally, investors are starting to put pressure on them by inquiring about the timing of the payouts. At the absolute least, many businesses don’t anticipate making money from their AI initiatives until the end of the decade.

However, Google is unlikely to encounter such circumstance. To be fair, the firm has already found out how to make money off of AI Mode, which is only one of several AI apps and services they provide. Google is just implementing what they already know generates revenue into its new search interface, as opposed to attempting to discover its way to profitability for the first time, as many of the AI businesses in the market are doing.

Google uses AI Mode to safeguard Search

Google Search was undoubtedly endangered by AI, which prompted the corporation to take action. Google added AI Mode to safeguard their cash cow, not to stay relevant. Google may have adopted the old saying, “If you can’t beat them, join them,” when it integrated AI into Google Search. This is because Google’s advertising revenue would be negatively impacted if Google Search were to lose market share to its AI rivals, which could have a big effect on the company’s financial situation.

At the same time, Google is in a much stronger position now that AI is a part of Search. With AI Mode, Google has a genuine chance to entice customers back and overtake rival AI platforms for market share. Unlike most of those platforms, Google has the infrastructure necessary to turn a profit on its AI product right away.