Google search and AI ‘experiences’

“Overall, total organic click volume from Google Search to websites has been relatively stable year-over-year. Additionally, average click quality has increased and we’re actually sending slightly more quality clicks to websites than a year ago (by quality clicks, we mean those where users don’t quickly click back — typically a signal that a user is interested in the website). This data is in contrast to third-party reports that inaccurately suggest dramatic declines in aggregate traffic — often based on flawed methodologies, isolated examples, or traffic changes that occurred prior to the roll out of AI features in Search.”

“We take a distinct approach in how we build our AI experiences: they’re built to highlight the web. In other words, it’s not the web or AI — it’s both. We’ve trained our models to deeply understand the web and when and how to link to the most relevant sites. And our AI responses feature prominent links, visible citation of sources, and in-line attribution.”

“Reddit’s popularity as a source for AI-powered search engines is also an asset, which should lead to more licensing deals in the future. Revenue from those deals won’t likely displace advertising as Reddit’s main source of income, but it adds high-margin dollars to a business already commanding industry-leading gross margins of 91%.

Reddit’s AI story is only in the early chapters.”

“I would say the deal is consistent with our long held principles about how we work with big tech companies and platforms. It provides fair value exchange in a way that feels sustainable, gives us control over how our work is used and it’s consistent with our long term strategy which is about ‘The Times’ being more essential to more people. And I would say, more broadly, the deal reinforces our principle that our journalism and everything we do is worth paying for and our intellectual property should be valued as such.”

“I would just say in general we continue to be open to doing deals, doing the right kinds of deals. Our approach to licensing is grounded in sort of three principles: Is it consistent with our long term strategy that be more essential to more people? Do we see fair value exchange in a way that feels sustainable? And do we have control over how our content is used across the scope of use?”

“Yes, we it is included in our guidance, and I’ll just give a little more color on exactly how to think about that. We don’t break out revenue by deal. We can say that that Amazon agreement was operational as of the May. So as reflected in our guidance, [it’s] showing an acceleration, in the affiliate licensing other revenue line in Q3 to high single digits from what was 6% in Q2, and that will be the first full quarter with that Amazon agreement, which is playing a role. Just always remember with affiliate licensing and other revenue, it has a lot of moving parts that can kind of create some lumpiness. But we certainly expect that overall line to be a growth driver and Amazon is playing a role there.”

AI is definitely… the agentic chat tools that consumers are using, businesses are using – there’s no question that search referral traffic has gone down for our clients that [have] primarily browser-based websites. It’s important to note, and [CFO David Day] gave the mix before in his part of the script, our business is pretty well diversified.

We have a lot of mobile app business. Obviously, CTV isn’t impacted by this directly. And if you note the types of publishers we have, we have quite a lot of top, globally-known brands and media companies, where they truly are destination sites and weren’t as reliant upon search referrals. And so there’s a bit of protection there for them in terms of their future prospects for the business.

We do work with a broad, broad swath of top publishers [which] produces an awful lot of ad inventory. We’ll process close to a trillion and a half ad requests today. I’d love to say we’ll fill every one of those requests, but obviously we don’t, and therefore, even if there was some deterioration in terms of traffic—which led to less ads going to auction—it probably increases our win rate as a percentage of traffic that we bring… it also probably lowers our processing costs.

We haven’t seen budgets shift. We haven’t seen buyers shy away from open web. And so I think we feel pretty good about where we stand today.

And lastly, it’s pure conjecture but… I don’t think every one of these popular chat agents are going to be able to stand up an ad business the size of Google’s… you know, every one of them hiring 5,000 to 7,000 salespeople, the technology involved in it. They’ll obviously have to have an ad play, and I fully anticipate that we’ll be able to play in that game – as them as publishers and us as sources of demand. So it could be new found publishers for us.”

“I actually think Shopify will very much be one of the major net beneficiaries in this new AI era.

I think we are widely recognized one of the best companies that foster long-term partnership. And so when it comes to partnership in AI—whether it’s Perplexity, where we’re now powering their search results with incredible product across the Shopify product catalog, or OpenAI where we have a direct set of our APIs to help us internally—we are really leveraging it as best as we can. Now we think about it in sort of two ways. The first is from a merchant perspective, how can we make our merchants way more successful, get them to do things faster, more effectively.

So things like Sidekick, Media Editor, Shopify Inbox, Semantic Search, Sidekick, these are things that now every merchant should want when they’re not just getting started, but also scaling their business. And those are things that are only available from Shopify. So, we’re trying to make some of the more mundane tasks far more easy to do and get them to focus on things that only they can — only the merchants can do. And I think that’s an important aspect of what Shopify will bring.

…Obviously, from a talent perspective, having [Mikhail Parakhin] as our new CTO, I mean, his reputation is leading many more people to come to Shopify from the AI and ML industries, and we think we can keep adding some really good (…) talent here even while keeping our overall headcount stable. Internally, however, this is where it gets really interesting, because not only can we use it to make our developers more effective, but also—if you think about our support organization—now we can ensure that our support team is actually having very high-quality conversations with merchants, whereas a lot of low-quality conversations—things like configuring a domain or CNAME or a user name and password issue—that can be handled really elegantly by AI. So whether it’s how we use it internally or how we help our merchants become more successful, we are uniquely positioned, I think, to harness the power of AI.”