Why Google Is Struggling To Reinvent Its $160 Billion Search Engine To Survive The A.I. Revolution

Back in 2016, Alphabet CEO Sundar Pichai declared Google to be an "A.I.-first" company. But now, six years later, when AI is witnessing a massive boom, a Google rival is grabbing all the attention. It's none other than Satya Nadella's Microsoft.

Google Struggling Amid Microsoft's Gamechanger In The Form Of ChatGPT

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It's fair to say that last year's debut of Microsoft backed ChatGPT caught Google off guard and set off a flurry of scrambled attempts by it to match the generative A.I. offerings being rolled out by ChatGPT creator OpenAI.

This year, at the company¡¯s huge annual I/O developer conference in May, Sundar Pichai wanted to show off what Google built in those six months. He revealed a new Gmail feature called Help Me Write, which automatically drafts whole emails based on a text prompt; an A.I.-powered immersive view in Google Maps that builds a realistic 3D preview of a user¡¯s route; generative A.I. photo editing tools; and much more. He talks about the powerful PaLM 2 large language model (LLM) that underpins much of this technology, including Bard, Google¡¯s ChatGPT competitor. And he mentions a powerful family of A.I. models under development, called Gemini, that could immensely expand A.I.¡¯s impact¡ªand its risks, as per the Fortune report.

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When Sundar Pichai Danced Around Google Search's Question

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But Pichai danced around the topic that so many in the audience, and watching from around the world on a livestream, most want to hear about: What¡¯s the plan for Google Search? Google Search, after all, is Google¡¯s first and foremost product, driving more than $160 billion in revenue last year¡ªabout 60% of Alphabet¡¯s total. Now that A.I. chatbots can deliver information from across the internet, not as a list of links but in conversational prose, what happens to this profit machine?

The Google CEO barely flicked at the issue at the top of his keynote. "With a bold and responsible approach, we are reimagining all our core products, including Search," Pichai says. It¡¯s an oddly muted way to introduce the product on which the fate of his company¡ªand his legacy¡ªmay depend. You can sense the audience¡¯s impatience to hear more in every round of tepid, polite applause Pichai receives for the rest of his address.

But CEO Pichai never returns to the topic. Instead, he leaves it to Cathy Edwards, Google¡¯s vice president of Search, to explain what the company calls, awkwardly, "search generative experience," or SGE. A combination of search and generative A.I., it returns a single, summarised "snapshot" answer to a user¡¯s search, along with links to websites that corroborate it. Users can ask follow-up questions, much as they would with a chatbot.

It¡¯s a potentially impressive answer generator. But will it generate revenue? That question is at the heart of Google¡¯s innovator¡¯s dilemma in present times.

Alphabet says SGE is "an experiment." But CEO Pichai has made it clear that SGE or something a lot like it will play a key role in Search¡¯s future. "These are going to be part of the mainstream search experience," the CEO told Bloomberg last month. The technology is certainly not there yet. SGE is relatively slow, and like all generative A.I., it¡¯s prone to a phenomenon computer scientists call "hallucination," confidently delivering invented information. That can be dangerous in a search engine, as Pichai readily acknowledges. If a parent Googles Tylenol dosage for their child, as he told Bloomberg, "there¡¯s no room to get that wrong."

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SGE¡¯s arrival is an indication of just how quickly Google has bounced back in the AI arms race. The technology draws on Google¡¯s decades of experience in A.I. and search, demonstrating how much firepower Alphabet can bring to bear. But it also exposes Alphabet¡¯s vulnerability in this moment of profound change. Chatbot-style information gathering threatens to cannibalise Google¡¯s traditional Search and its incredibly lucrative advertising-driven business model. Ominously, many people prefer ChatGPT¡¯s answers to Google¡¯s familiar list of links.

No Strategy Yet For Search Engines Amid AI Boom

While Google has the tools to be great at A.I., what it doesn¡¯t have yet is a strategy that comes anywhere near matching the ad revenue that turned Alphabet into the world¡¯s 17th-biggest company. How Google plays this transition will determine whether it will survive, as both a verb and a company, well into the next decade.

Although ChatGPT itself did not have access to the internet, many observers correctly speculated that it would be relatively easy to give AI-powered chatbots access to a search engine to help inform their responses. For many queries, ChatGPT¡¯s unified response seemed better than having to wade through multiple links to cobble together information. Plus, the chatbot could write code, compose haikus, craft high school history papers, create marketing plans, and offer life coaching. A Google search can¡¯t do that.

What A Google Employee Working On Bard Says

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Jack Krawczyk, 38, is a boomerang Googler. He joined the company in his twenties, then left in 2011 to work at a startup and, later, at streaming radio services Pandora and WeWork. He came back in 2020 to work on Google Assistant, Google¡¯s answer to Apple¡¯s Siri and Amazon¡¯s Alexa.

Google¡¯s LaMDA chatbot fascinated Krawczyk, who wondered if it could improve Assistant¡¯s functionality. "I know I couldn¡¯t shut up about it for most of 2022, if not 2021," he says. What held the idea back, Krawczyk tells me, was reliability¡ªthat persistent problem of "hallucination." Would users be okay with answers that sounded confident but were wrong?

"We were waiting for a moment where we got a signal to say, ¡®I¡¯m ready for an interaction that feels very convincing,¡¯?" says Krawczyk. "We started to see those signals" last fall, he says, not mentioning that they included the giant flashing billboard of ChatGPT¡¯s popularity.

Krawczyk is the senior director of product on the Bard team. Although it drew on research Google had been developing for years, Bard was built quickly following ChatGPT¡¯s launch. The new chatbot was unveiled on Feb. 6, just days ahead of Microsoft¡¯s debut of Bing Chat. The company won¡¯t reveal how many people worked on the project. But some indications of the pressure the company was under have emerged.

Bard was not designed to be a search tool, even though it can provide links to relevant internet sites. Bard¡¯s purpose, Krawczyk says, is to serve as ¡°a creative collaborator.¡± In his telling, Bard is primarily about retrieving ideas from your own mind. ¡°It¡¯s about taking that piece of information, that sort of abstract concept that you have in your head, and expanding it,¡± he says. ¡°It¡¯s about augmenting your imagination.¡± Google Search, Krawczyk says, is like a telescope; Bard is like a mirror.

Exactly what people are seeing in Bard¡¯s mirror is hard to say. The chatbot¡¯s debut was rocky. In the blog post announcing Bard, an accompanying screenshot of its output included the erroneous statement that the James Webb Space Telescope, launched in 2021, took the first pictures of a planet outside our solar system. (In fact, an Earth-based telescope achieved that feat in 2004.) It turned out to be a $100 billion mistake. That¡¯s how much market value Alphabet lost in the 48 hours after journalists reported the error. Meanwhile, Google has warned its own staff not to put too much faith in Bard. In June, it issued a memo reminding employees not to rely on coding suggestions from Bard or other chatbots without careful review.

Also, Google declined to reveal how many users Bard has, as per Fortune report. But third-party data offers signs of progress. Bard website visits increased from about 50 million in April to 142.6 million in June, according to SimilarWeb. That still trails far behind ChatGPT¡¯s 1.8 billion visits in the same month.

Also Read: TCS Confirms Plan To Build Its Own ChatGPT Like AI Tool

What Is The Biggest Issue For Google?

Google¡¯s new generative A.I. tool allows users to find answers to more complex, multistep queries than they might have been able to with a traditional Google Search, according to Elizabeth Reid, Google¡¯s vice president of Search.

The biggest issue is that Google doesn¡¯t know if it can make as much money from ads around generative AI content as it has from traditional Google Search.

¡°We are continuing to experiment with ads,¡± Reid says. This includes placing ads in different positions around the SGE page, as well as what Reid calls opportunities for ¡°native¡± ads built into the snapshot answer¡ªalthough Google will have to figure out how to make clear to users that a given portion of a response is paid for. Reid also said Google was thinking about how to add additional ¡°exits¡± throughout the SGE page, providing more opportunities for people to link out to third-party websites.

The solution to that ¡°exit¡± problem is of vital interest to publishers and advertisers who depend on Google¡¯s search results to drive traffic to their sites¡ªand who are already freaking out. With snapshot answers, people may be far less likely to click through on links. News publishers are particularly incensed: With its current LLM approach, Google essentially scrapes information from their sites, without compensation, and uses that data to build A.I. that may destroy their business.

Many large news organisations have begun negotiations, seeking millions of dollars per year to grant Google access to their content. In July, the Associated Press became the first news organisation to sign a deal of this kind with OpenAI, although financial terms were not disclosed.

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Of course, if people don¡¯t click through on links, that also poses an existential threat to Alphabet itself. It remains far from clear that the business model that drives 80% of Google¡¯s revenues¡ªadvertising¡ªis the best fit for chatbots and assistants. OpenAI, for example, has chosen a subscription model for its ChatGPT Plus service, charging users $20 per month. Alphabet has many subscription businesses, from YouTube Premium to various features in its Fitbit wearables. But none are anywhere near as lucrative as advertising.

Nor has the company grown any of them as quickly. Google¡¯s non-advertising revenue, excluding its Cloud service and "other bets" companies, grew just 3.5% in 2022, to $29 billion, while ad revenue leaped ahead at twice that rate, to $224 billion. It¡¯s also not clear that Google could convert a meaningful mass of people accustomed to free internet searches into paying subscribers. Another ominous finding of Bloomberg Intelligence¡¯s A.I. survey is that most people of all ages, 93%, said they would not want to pay more than $10 per month for access to an A.I. chatbot.

If generative A.I. becomes a Google search engine killer, where can Google look for growth? Its cloud business, for one, is likely to benefit. Google has long built its A.I. prowess into its cloud services, and analysts say the boom is perking up customer interest. Google was the only major cloud provider to gain market share in the past year, edging up to 11%. Google Cloud also turned a profit for the first time in the first quarter of 2023.

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