At the altar of AI capex, Google is sacrificing the golden goose

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Max Anderson

@MaxAnderson

As someone who has personally spent $500k / mo+ on Google Ads for years, I can tell you with certainty:

This revenue growth in Search is artificial & extremely unhealthy for Google’s business long term

Search volumes are declining as legacy search is being increasingly cannibalized by non-monetized LLM queries

Google’s response?

Manufacture revenue growth via short-sighted, highly extractive, customer-hostile tactics. I.e. charge advertisers more for lower quality clicks, including clicks they do not want and explicitly did not approve Google to charge them for

A few examples to illustrate:

For all of its history until recently, Google operated on a 2nd price auction model

I.e. if you bid $5 CPC and the next highest bidder bids $1 CPC, Google charged you $1.01 for the click (one penny more than the 2nd highest bidder) rather than the $5 you bid

This was a genius move by Google early on as it incentivizes advertisers to input their true maximum willingness to pay rather than trying to play the game of bidding low and constantly adjusting to try to stay just ahead of the next highest bidder while still not paying too much

However recently, Google silently deprecated the 2nd price auction and began charging advertisers as much as their bid and budget caps allow, regardless of what anyone else is bidding

It’s a short-sighted cash grab at the expense of the long term health of the advertiser ecosystem

Making thing worse, Google also recently nerfed keyword targeting precision

Google previously had precise keyword targeting settings that allowed advertisers pick individual search phrases to bid on, defined down to the character w/ exact match or phrase match targeting

This was one of the core features that made search advertising magic, enabling advertisers to run extremely precise campaigns based on exactly what their target customer typed

But now, even if you bid on a specific term or phrase using the strictest exact -match targeting settings, Google will show your ad across 1000’s of unrelated keywords, labeling them as as “exact match (close variant)”

The definition of “close variant” means whatever they want it to and changes constantly. The result is advertisers get billed for clicks that are totally irrelevant to their business and that their targeting settings explicitly forbid Google from targeting. Google does it anyway and there’s no ability to turn this off

So now exact match is broad match, and broad match is just meaningless spam

This is all very bad for advertisers, but for Google, it allows them to show your ad and bill you for clicks across 1000x more searches that were previously going unmonetized (mainly because they’re garbage queries no one wants)

This is how you grow revenue atop declining search volumes

Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day

And the extra spend is entirely on the garbage keywords Google arbitrarily throws in as “exact match (close variants)” which have no value to our business, but can’t be turned off

Google offers no refunds nor any recourse for overspend or spend on keywords you explicitly did not target

These are not the actions of a healthy business. These are the actions of company whose core business is in decline but desperately needs to pump quarterly earnings so Wall Street will continue to fund insane capex while hopefully looking through their rapidly deteriorating negative free cash flow

Google operated a benevolent monopoly for the better part of 25 yrs

Meaning the value Google captured from Search was but a small fraction of the value it created, and that spread produced a potential energy that justified expectations of high earnings growth far, far into the future

This is now no longer the case

At the alter of AI capex, Google is sacrificing the golden goose

Sundar Pichai

@sundarpichai

Jul 22

Q2 was an amazing quarter, with our AI investments redefining what’s possible across every part of our business.

Alphabet revenue grew 24% YoY and Google Cloud accelerated to 82% growth. We saw exciting momentum across the board from Search to YouTube to the Gemini app (which

9:51 AM · Jul 23, 20262.2MViews

Max Anderson

@MaxAnderson

Jul 23

Will 😎

@wwa_3

Jul 23

Replying to @MaxAnderson and @BackTheBunny

I spend over 1mm/mo on Google across 40 accounts and I can confirm that every bit of this is true.

42K

Max Anderson

@MaxAnderson

Jul 23

Mike

@Mikey8oi

Jul 23

Replying to @MaxAnderson

No where near your spend but even with a much more limited budget, everything you say is 100% accurate. Moved away from google ads completely. Since roughly summer of 2022 or 23, it’s been downhill.

37K

Max Anderson

@MaxAnderson

Jul 23

PlotTwistInc

@theplanisyourf1

Jul 23

Replying to @MaxAnderson

i can confirm, until march 2025 we were paying 0,06$ cpc for our "top brand exact" campaigns, bidding for top of page... after 9 of March 2025 everything changed in a day, now we have to pay 0,30$, same queries, same bidding method.

32K

Max Anderson

@MaxAnderson

Jul 24

clay

@clay_ripma

Jul 23

Replying to @MaxAnderson

this is highly accurate and tracks with what i see in all of our google accounts. absolute scam.

12K

Max Anderson

@MaxAnderson

Jul 24

don't stop, get it get it

@raredegen

Jul 23

Replying to @MaxAnderson

This aligns perfectly with what I've been seeing for many of my ad clients. Exact match is not exact match. Phrase match seems to be going even broader, and broad match is just garbage. Better have your negative keyword list tight.

11K

Max Anderson

@MaxAnderson

Jul 24

On the community note re: 2nd price auction

There are multiple examples where I am the only bidder on certain keywords, bidding against myself across 3-4 distinct domains

For example first domain will be bidding $0.90 CPC, next domain bidding $0.80 CPC, next domain bidding

5.9K

Will 😎

@wwa_3

Jul 23

I spend over 1mm/mo on Google across 40 accounts and I can confirm that every bit of this is true.

60K

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