After 24 years, internet search may finally become a competitive space, due to the launch of ChatGPT, which has scared the Google C-suite to launch a Red Team to compete, after Google has dominated the space for 2 decades (beating Yahoo and Bing fairly decisively to get to an 84% market share).
Some high-level thoughts:
ChatGPT is from OpenAI, which has a strategic alliance with its biggest investor, Microsoft. CEO Nadella is pushing hard to get ChatGPT technology into Bing Search and Azure APIs, and if frankly out-executing Google in a big way. Bing is the 2nd biggest player in search, with only a 9% market share.
Google is responding with its Red Team to look at launching Sparrow from its Deepmind subsidiary, or perhaps LaMDA from its Google AI subsidiary. Both make top-notch chat technology to compete with AI (Google is the top AI research org in the world), but have done a poor job launching useful products.
Meanwhile, 2 new search startups have joined the fray. First, You Chat from the former head of Salesforce AI (You.com / Richard Socher) offers a great new approach to search. Second, NeevaAI Chat from the former heads of Google Search (Neeva.com / Sridhar Ramaswamy (ex-SVP of Ads at Google) and Vivek Raghunathan (ex-VP of Monetization at YouTube)) are moving to get chat search into their very-competitive and disruptive subscription-based search service. Arguably, both companies’ regular organic search results are better than Google, and their recently launched chat search will make their products much more competitive (they’re already better than ChatGPT in that they include reference links in their answers and are less likely to make up plausible nonsense). I'm really excited to see these companies give both Google and Bing a run for their money, and push the boundaries of what search could be.
Google’s core business, search, is still growing and highly profitable ($258bn in revenues in 2021, $76bn in profit, with 81% of revenue from search and 92%+ from ads). The company prints money with every search results page it displays (and users are complaining more that the results are worse).
A search chatbot, however, likely needs a new monetization strategy, and it’s unclear whether it could be as profitable as Google’s current search. Google could launch a successful chatbot, and potentially make it profitable – but if the profits are lower than Google’s current search, the company would still lose. This self-cannibalization, often leading to demand-side disruption, is Google’s dilemma. Meta had a similar problem with short-form video, where Reels was less profitable and competed with its main feeds - it just leaned into it by taking some short-run cannibalization to build a strong business in the long run.
Finally, the main thing Google has going for it is locked-in distribution. It pays Apple ~$15bn annually to be the sole default search provider in iOS and Safari, and it pays Mozilla ~$350mm for that role in Firefox. It also controls Android and Chrome, the largest mobile operating system and browser in the world (with 71% and 65% market share in those markets). When you add what it gets from Firefox/Safari and iOS, that goes to 91% browser market share and 99% mobile OS share). This is frankly an impregnable position and may pose antitrust issues.
So how much greater does the search experience from chat have to be to overcome distribution? We shall see - I love the intensifying competition here.