Googling Is for Old People. That’s a Problem for Google. - WSJ
If Google were a ship, it would be the Titanic in the hours before it struck an iceberg—riding high, supposedly unsinkable, and about to encounter a force of nature that could make its name synonymous with catastrophe.
The trends moving against Google are so numerous and interrelated that the Justice Department’s attempt to dismantle the company—the specifics of which were unveiled Nov. 20—could be the least of its problems.
The company’s core business is under siege. People are increasingly getting answers from artificial intelligence. Younger generations are using other platforms to gather information. And the quality of the results delivered by its search engine is deteriorating as the web is flooded with AI-generated content. Taken together, these forces could lead to long-term decline in Google search traffic, and the outsize profits generated from it, which prop up its parent company Alphabet’s GOOGL 1.50%increase; green up pointing triangle
money-losing bets on things like its Waymo self-driving unit.
The first danger facing Google is clear and present: When people want to search for information or go shopping on the internet, they are shifting to Google’s competitors, and advertising dollars are following them. In 2025, eMarketer projects, Google’s share of the U.S. search-advertising market will fall below 50% for the first time since the company began tracking it.
In responding to government antitrust inquiries, Google itself makes this point often: “Evidence at trial shows we face fierce competition from a broad range of competitors.”
This shift is due largely to users’ bypassing Google to start their search for goods on Amazon. It’s handing Amazon billions in advertiser dollars. Meanwhile, TikTok has less than 4% of U.S. digital ad revenue, but significant potential to expand its share of the pie. A recent TikTok pitch to advertisers reported on by The Wall Street Journal said that 23% of its users searched for something within 30 seconds of opening the app, and its global search volume was three billion a day.
The second threat is the rise of “answer engines” like Perplexity which, well, do what they say on the tin. OpenAI has added internet search to ChatGPT, Meta Platforms is exploring building its own search engine, and even AI chatbots that can’t search the internet are proving increasingly capable at addressing many questions. They’re also becoming ever more widespread, as Microsoft and Apple integrate them directly into the operating systems of all the devices they make or support.
“Google had this seemingly insurmountable position in search, until AI came around, and now AI is to search what e-commerce was to Walmart,” says Melissa Schilling, a professor of management at New York University’s Stern School of Business. Another comparable moment was when Microsoft missed the importance of the smartphone, and the iPhone upended its dominance of consumer computing, she adds.
Of course, Google is hard at work trying to make sure that if anyone is going to disrupt the search paradigm with AI, it’s Google itself. Earlier this year, Google rolled out AI summaries of its own search results to all users in the U.S. The company has said that such innovation is in direct response to intense competition from AI at both startups and tech giants.
The third trend that threatens Google is one the company may not be able to do much about, and that makes it the most dangerous—the degradation of the overall ecosystem of websites that Google has shaped, and on which it depends.
Much has been said about how search results are declining overall, no matter how we search the web, because of the proliferation of AI-generated content. Absent any other trends, this would by itself be a huge problem for Google. But the company’s response—eliminating the need to click on links at all by offering AI-generated summaries—could accelerate the decline of the web.
The reason is that the internet is an ecosystem, with Google as one of the primary providers of traffic—and therefore revenue. Without the traffic that Google sends across the web, the incentive and resources to continue producing websites attractive to Google’s search algorithm will decline.
Joerg Klueckmann, head of marketing at European fintech giant Finastra, worries about just that. Once more people are relying on AI to answer questions as much as early adopters like him are, traffic to websites will dry up. “And then, what do you do with your search-engine marketing team? What does that mean for all the websites we have out there?”
This process has already begun. While Google reported strong revenue growth last quarter, the rate at which people clicked on ads that appear in search results was down 8% compared with a year ago, according to data from advertising platform Skai. It’s not clear why this is happening, but one logical conclusion is that it’s the result of Google’s own AI-based summaries, which eliminate the need to click on sponsored links or scroll down to where the ads are.
One study from January by search-engine-optimization software company Authoritas found that Google’s AI answers in its search results could upend rankings and traffic to existing websites. And ad sales firm Raptive has projected that the full rollout of this change to search could erase $2 billion in revenue for publishers.
Even though the rise of AI has the potential to finally unseat Google, it’s likely to take a long time before Google’s dominance truly fades, says David Yoffie, a professor at Harvard Business School.
“We know from behavioral economics that people tend to get into certain routines, and in the absence of a spectacularly better product, people tend to stick with that,” he adds.
After the government’s recent victory in an antitrust case against Google, the Justice Department is proposing that the search giant should be prevented from giving preferential access to its search engine on devices that use its Android mobile operating system. It’s also proposing that it sell off its popular Chrome browser, among other remedies.
Kent Walker, Google’s president of global affairs, has described the Justice Department’s proposal as “wildly overbroad” and said it would “harm Americans and America’s global technology leadership.” He said Google would file its own proposed remedy to the court in December.
It will take years for the Justice Department case to be resolved, and the ultimate remedy is unlikely to be as significant as what the Justice Department has proposed. The most likely outcome is that Google negotiates some sort of consent decree with the Trump administration—just as Microsoft did with the administration of George W. Bush, says Yoffie.
As with its attempt to break up Microsoft, the government’s case against Google may be outpaced by competitive forces far more powerful than antitrust enforcement.
Thanks all for the use case examples. My job doesn't require any type of research or writing, the most I use a Windows based computer for is admin type email and to look at my roster. @Strawman I also would be very interested in a Strawman meeting regarding the use of AI tools.
I like to keep core investment KPIs to monitor the progress of the companies I hold. As a result of all of your feedback on Google, I'm going to add Google search revenue as a particular KPI, should be a good indictor when the growth slows significantly that something may be happening... However, at the moment doesn't look to be the case based on data from TIKR:
@Slewout of interest I tried to mimic your search in Google's Gemini and Perplexity, Gemini's answers regarding the flights wont as smart/comprehensive as Perplexity but Google was able to point straight to Google flights and gave a reasonable answer. Note, both models used were the free versions. Probably, a good example of how it is easier for Google to monetise and lower the compute cost of that search as it already has the existing back end and scale to do so, however, the end result may not be as good.
I think is all comes down to how Google changes the search bar to integrate AI. If Google search can effectively implement Gemini as the search function and if it functions near as good as AI models such as ChatGPT and Perplexity then they will have a strong chance of fighting the competition. Seamless implementation will be key....
Luckily for Google whatever happens they have other great core businesses that are likely to continue to grow (Cloud and Youtube). I know... I sound like a bit of a fan boy...
@Mujo i forgot to add these interesting charts. people can draw their own conclusions, id say drum in the distance for GOOG, AMZN is making big progress due to piggybacking off its huge retail data.
@Mujo , I tend to agree but am worried about the path to monetisation over the ST/MT on the big capex, especially for GOOG vs. MSFT, for example. Aligned to this is that the D&A will rise soon. GOOG may be vulnerable until revenues pick up. Having said that, the last result was very good, and the management knows the D&A increase is coming; there is some fat in GOOG. undercharging for D&A could be 3 pts of PE, in my estimation.
The chart below shows that search has had competition for ages; LLM will be another pillar in time.
I cant forgive them for letting Chat GPT steal the initiative and become the "name" for LLMs when that should have been a Google product. they were too conservative on hallucinating--maybe.
what that means is GOOG was my largest holding now outside the top 10. still held,
AAPL asleep, waiting to put "whatever works" on the iphone. :/
this is a balanced view of AI MSFT/GOOG etc for any one that is interested. its about 50min but the first 30 minutes are relevant.
i must say that it does not take much for frenzied panic to take hold........i shouldnt be surprised, should i :)
https://podcasts.apple.com/us/podcast/the-ai-revolution-with-silicon-valley-veteran/id1653747327?i=1000600010554
A good article on what is occurring in the Microsoft Bing v Alphabet Google battle: Is Google’s 20-year search dominance about to end? | The Economist
Some key quotes:
"Brian Nowak of Morgan Stanley, a bank, estimates that serving up an answer to a Chatgpt query costs roughly two cents, about seven times more than a Google search, because of the extra computing power required. He reckons that every 10% of Google searches that shift to an ai-powered application by 2025 will, depending on the number of words in an average response, add between $700m and $11.6bn, to Google’s operating costs, equivalent to between 1% and 14% of such spending in 2022."
"To complicate matters further, many costly conversational-search queries will generate little or no ad revenue. Google has said that 80% of its search results do not contain lucrative ads at the top of the search results. Many of these ad-light searches are almost certainly “informational” (“what is the capital of Spain?”), precisely the sort of query where chatbots are most useful—and precisely the sort that advertisers are least interested in (it is hard to know what ad to place next to the word “Madrid”). For generative ai to make real money, it will need to find uses in “navigational” searches (looking for a site’s internet address by its name) and especially “commercial” ones (“Best new ski boots this season”)."
"Google’s other advantage is incumbency. It is the default search engine in Chrome, Alphabet’s browser, which is used by two in three people on the internet, according to StatCounter, a research firm. It is also the go-to search on more than 95% of smartphones in America. The firm also pays Apple roughly $15bn a year to make its search the default on Apple’s devices, such as iPhones, and Safari browser, which accounts for 19% of browsers installed on desktops."