• The rollout of AI Mode is a natural progression, building on the strong momentum Google has seen with its AI Overview feature.
• AI Mode is a wedge, aimed squarely at a fast-growing segment of power users – those navigating complex, multi-step queries where traditional search starts to break down.
• Unlike standalone AI search startups, AI Mode is deeply embedded in Google’s vast ecosystem.

Are we witnessing the end of keyword-based search as we know it? The traditional ritual of typing a few words and scrolling through pages of blue links is quickly giving way to something far more intelligent. And the company that revolutionized search 25 years ago is very much a part of this most profound change happening since then. With over $200 billion in annual revenue riding on its search business, Google is now trying to rewrite the rules of the game by bringing in AI. “This feels very far from a zero-sum moment… The kinds of use cases we are serving in search are dramatically expanding (because of AI),” said Sundar Pichai, CEO of Google, at the company’s annual I/O conference last month.

Google also unveiled AI Mode, a new experimental feature built on its cutting-edge Gemini 2.5 model, at the conference. Initially launching in the US, AI Mode marks a decisive step toward AI-native search within the familiar Google interface.

Google’s AI Mode

Source: Google “AI Mode” Official Demo

Core Capabilities of AI Mode

Source: Google, Counterpoint Research

Another move after ‘AI Overview’ small win

The rollout of AI Mode is a natural progression, building on the strong momentum Google has seen with its AI Overview feature, an AI-generated summary layered above traditional search results. Since its debut at last year’s Google I/O, AI Overview has scaled rapidly, now serving over 1.5 billion monthly users across more than 200 countries. In key markets like the US and India, search queries have surged by over 10%, signaling that AI enhancements are driving real engagement. This provides a clear signal that AI is not cannibalizing Google’s ad-driven search empire but amplifying it.

AI Mode has been brought as a major new feature – clearly positioned as a key catalyst for driving the next phase of growth in Google’s search business. Going by Google VP and Head of Search Liz Reid’s statements, it seems that the key goal for AI Mode is to actively gather user feedback, iterate fast and ultimately “graduate” these innovations (see the second exhibit) into core search experience over time.

In other words, instead of looking at how AI can empower search, the ultimate question is how search, as the core business of Google, can become the best AI funnel. It is also a vision that aligns with Pichai’s bold proclamation: “I think AI is going to be bigger than the internet.”

A response to mounting competitive threats

Taking a broader view of the industry, Google Search remains dominant, holding over 90% market share for years. Yet, it now faces its most serious threat to date – from a new generation of AI-native challengers like ChatGPT Search and Perplexity AI.

While Alphabet’s Q3 FY24 earnings show strong performance – $49.4 billion in search ad revenue, up 12% YoY, fueled in part by AI-driven enhancements, the competitive landscape is evolving even faster. ChatGPT now draws an estimated 500 million monthly users, while Perplexity has grown to over 15 million.

The search and discovery market isn’t just getting bigger – it’s getting smarter. As users grow more sophisticated, their expectations are evolving just as fast. They no longer want to find information, they want to understand it – instantly, conversationally and in context.

That’s why, after parsing several interviews with Liz Reid, one strategic throughline becomes clear – Google isn’t trying to kill the blue links. Instead, AI Mode is a wedge, aimed squarely at a fast-growing segment of power users – those navigating complex, multi-step queries where traditional search starts to break down. These are the same early adopters flocking to ChatGPT and Perplexity.

In other words, the real game that AI Mode is in isn’t replacing legacy search – it’s capturing the next generation of search behavior before someone else does.

A multi-front defense strategy

Realizing these existential threats, Google’s AI Mode leverages its unique advantages while rapidly innovating in AI.

Unlike standalone AI search startups, AI Mode is deeply embedded in Google’s vast ecosystem – pulling from live sports, stock data, product catalogs and more. This integration not only fortifies Google’s advertising moat but also delivers monetizable experiences that rivals simply can’t replicate.

On the performance front, Google combines its state-of-the-art GenAI models with decades of investment in search infrastructure, its expansive Knowledge Graph, and real-time data systems. These assets form a computational advantage that few can match.

It is notable that AI Mode is also equipped with a novel technique called “query fan-out” – issuing multiple related searches across sub-topics and data sources simultaneously and then synthesizing them into a unified, user-friendly answer. The result: greater breadth, richer context, and a smarter search experience built for the AI era.

Conclusion

Google’s urgency in rolling out AI Mode is a positive sign for its prospects. It has recognized that AI is not a feature to be bolted on, but a core evolution of the product. The next few years will test Google’s ability to innovate at startup speed while leveraging its massive strengths.

For now, Google's approach positions it well to defend its search empire. But in the rapidly evolving world of AI, today's advantages can quickly become tomorrow's vulnerabilities. The search war is far from over – it's just beginning.