# Is Google Squeezing Search Advertisers Until They Leave?

> AI makes businesses cheaper to build. Getting customers remains expensive—and founders funding growth from sales face a different contest from competitors spending venture capital.

By Eric Spivak · November 5, 2026

Canonical: https://blockster.com/is-google-squeezing-search-advertisers-until-they-leave

Google can earn more while an advertiser’s business gets less.

A more expensive click generates more advertising revenue. For the business paying, its value depends on what follows: a serious enquiry, a sale, a customer who returns. Traffic that produces none of those is an expense, however impressive the dashboard looks.

**Growing advertising revenue does not automatically mean advertisers are getting a better deal.**

That tension becomes more consequential as AI makes launching products easier, bringing more businesses into the competition for customers.

Advertiser Max Anderson set out his criticism in a July 23 post that later featured in All-In’s October 30 discussion. His allegations about pricing and targeting describe his experience and interpretation, rather than independently established findings about Google’s entire advertising business.

[Post from @MaxAnderson on X](https://twitter.com/MaxAnderson/status/2080229375773941871)

## AI Lowered the Cost of Building. It Didn’t Level the Playing Field.

Silicon Valley keeps celebrating how easy AI makes starting a business. A small team can build software, produce content and automate work that previously required employees.

But who can afford to get that business in front of customers?

A founder funding growth from sales needs advertising to pay for itself reasonably quickly. A venture-backed competitor may have the money—and investor permission—to absorb losses while pursuing growth.

**They can compete for the same customer under very different financial constraints.**

When well-funded competitors bid aggressively for the same Google searches, a smaller business can reach the limit of what it can profitably pay before its rival reaches the limit of what it is willing to spend. [Google’s auctions](https://support.google.com/google-ads/answer/6297?hl=en) also consider relevance and quality, but those factors do not eliminate the advantage of being able to keep spending.

Venture-backed companies have finite budgets and revenue targets. Their advantage is access to larger reserves and more time to experiment, subsidize prices and acquire customers.

That is what the easy-startup narrative leaves out. AI can lower production costs while increasing competition for attention.

For the independent founder, the question shifts from _Can I build this?_ to **Can I afford to get customers before the money runs out?**

Wispr Flow’s Hector Serrano offers a practical example of the work behind distribution in his October 8 video about building the AI company’s paid-ad program. It illustrates the marketing operation involved, rather than evidence about Google’s auction prices.

[Post from @hectorserrranoo on X](https://twitter.com/hectorserrranoo/status/2108260769603486100)

## The Problem With Paying for Activity

Clicks, form submissions and profitable customers are different things.

An advertiser can record more conversions while its sales team receives fewer worthwhile enquiries. [Google’s invalid-traffic protections](https://support.google.com/google-ads/answer/11182074?hl=en) address fraudulent or otherwise invalid activity; they cannot guarantee that every genuine visitor becomes a valuable customer.

Automation makes measurement more important. [Google’s AI Max](https://blog.google/products/ads-commerce/dsa-upgrade-to-ai-max-2026/) can expand search matching, customize advertising text and select landing pages. Google says these tools improve performance, but advertisers still need to connect reported results to completed sales and profit.

The practical test is straightforward: **does the customer generate enough profit to justify what it cost to acquire them?**

## All-In’s Warning: Advertisers Can Pull Back

On the [October 30 episode of All-In](https://www.youtube.com/watch?v=p1Dy4e4ff0s&t=3717s), David Friedberg questioned whether Google’s ad pricing was extracting too much from advertisers.

His concern was that better earnings today could weaken customers’ willingness to spend tomorrow.

> “Google is now, in some cases, over-earning for those clicks.”
>
> — David Friedberg, All-In, October 30, 2026

Friedberg argued that advertisers would eventually respond by reducing spending. Chamath Palihapitiya also discussed allegations about changes to Google’s auction mechanics, while acknowledging that he had not verified them.

Jason Calacanis raised the broader threat: AI assistants can supply answers or complete tasks directly, changing the role of the paid click. David Sacks countered that search revenue was still growing and Alphabet was successfully diversifying.

## What the Numbers Show

Alphabet’s results show continued growth, with Cloud expanding substantially faster than Search.

**YTD covers January–September 2026.**

| Metric | Q3 2026 | Annual growth | YTD 2026 | Annual growth |
| --- | --- | --- | --- | --- |
| Alphabet revenue | $127.6B | +25% | $357.3B | +23.6% |
| Google Search & other revenue | $63.35B | +12% | $187.0B | +15.8% |
| Google Cloud revenue | $30.7B | +103% | $75.5B | +84.0% |
| Alphabet operating income | $40.6B | +30% | $121.0B | +30.0% |

_Source:_ _[Alphabet’s Q3 filing](https://www.sec.gov/Archives/edgar/data/1652044/000165204426000084/goog-20260930.htm)__. Growth compares equivalent periods in 2025; figures are rounded._

Search’s latest quarterly growth trails its year-to-date rate, but the business is still expanding.

Advertising benchmarks also complicate a universal decline narrative. [LocaliQ’s 2026 report](https://localiq.com/blog/search-advertising-benchmarks/), covering Google and Microsoft campaigns, found average click costs of **$5.42**, while average cost per lead fell to **$66.69**. A cheaper recorded lead, however, does not establish that an individual advertiser acquired a profitable customer.

Watch the All-In discussion below, beginning with Google at **1:01:57**.

[Watch the video on YouTube](https://www.youtube.com/watch?v=p1Dy4e4ff0s)

## The Next Three Years

Google must make AI advertising useful enough that businesses keep paying, while retaining users who increasingly expect direct answers.

This is an editorial outlook, rather than company guidance or a financial forecast.

| Period | Opportunity | Main risk |
| --- | --- | --- |
| 2027 | AI search delivers better enquiries and sales. | More activity fails to produce better advertiser returns. |
| 2028 | Cloud profits justify infrastructure investment. | Equipment costs and depreciation outpace the returns. |
| 2029 | Google remains the starting point for purchase decisions. | Competing assistants take over that customer relationship. |

As Blockster explored in its coverage of [AI’s growing demand for power and infrastructure](https://blockster.com/ai-intelligence-abundant-energy-scarce-asset-power-investment), building the next generation of services requires substantial resources.

Keeping advertisers requires something simpler: delivering value.

Silicon Valley keeps boasting about how easy it is to start a business in the age of AI because AI can build and operate almost anything. But that creates a new problem: **distribution and funding.** How are normal businesses supposed to compete for customers on Google against VC-backed companies with huge budgets that can afford to wait much longer to turn a profit?