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It seems almost every tech story these days is about the power, possibility, and danger of artificial intelligence.
And while the potential of AI often seems boundless in the way its biggest boosters present, the near-term business implications of AI are actually focused on one of tech's most entrenched and profitable products — search.
Google's parent company Alphabet (GOOG) saw shares fall nearly 3% on Monday after a New York Times report on Sunday said Samsung has weighed replacing Google Search with Microsoft's Bing (MSFT) on its devices.
The Times noted this deal put some $3 billion in annual revenue at risk for Google and reported a similar deal with Apple — worth closer to $20 billion — is up this year. Google's Search revenue totaled $162.5 billion in 2022.
Reports suggesting 12% of a business's revenue is at risk rarely sit well with investors. Even if these deals are extended, the subtext is that renewals may come with terms more favorable to the device makers.
That Google's future profits from search might decline, of course, is not entirely new to investors. Two months ago, Microsoft CEO Satya Nadella plainly stated this was going to be the industry's future.
"From now on, the [gross margin] of search is going to drop forever," Nadella said in an interview with the Financial Times in early February. Nadella added: "There is such margin in search, which for us is incremental. For Google it's not, they have to defend it all."
Following these comments, Alphabet stock fell 10%.
But the challenge to Google's Search business is only superficially taking place at the negotiating table. The bigger, more technical challenge is coming from AI.
According to the Times' report, "the assumption inside Google" is that Microsoft's progress on new AI-powered search features is "the main reason" Samsung has considered changing its search partner. Microsoft's Bing is powered by Open AI after Microsoft invested $10 billion in the company back in January.
A report from "60 Minutes" which aired Sunday showed Google's Bard chatbot — which is the company's answer to Open AI's ChatGPT — offer summaries for five books. Unfortunately, none of them were real.
One assumes the executive team at Samsung has seen this report as well.
But turning "Googling" into "Binging" will take more than offering favorable revenue sharing agreements, new software upgrades, or corporate investments.
In the modern tech order, the strongest moat any company or service can build is to become a verb. When people talk about looking up information on their computer or phone, in most cases they don't say they're searching — they're Googling. Google's vice grip on the search market has centered on this branding.
Threats to Google's search dominance, of course, aren't unique to 2023. The magic of the industry's hottest social network — TikTok — is that search is largely replaced with discovery. Search is also at the heart of Amazon's online shopping portal, and Meta's Facebook and Instagram platforms. Every search query done by users on these platforms is a search not done on Google.
But when people talk about anything AI-related, they usually don't reference LLMs or AGI or Bard. Instead, they say "ChatGPT."
Whether AI turns out to be the paradigm-defining technology the tech world believes remains to be seen. But should this possible future come to pass, the earliest phase of this land grab has not been kind to Google.
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