The recent release of ChatGPT by OpenAI has ignited excitement and debates among analysts and reporters, and it is currently open for use to the public for free. ChatGPT’s capabilities are exemplary of artificial intelligence’s potential to upend industries. The chatbot can accurately cover just about any topic in existence, from providing ideal cooking recipes for Saturday night to obtaining a top grade in a world-class MBA programme.
One of the most exciting areas of application for AI is the current model of search engines that, as a society, we use instinctively. Natural Language Programming, among other methods, allows contextually relevant information to be directly returned to the user in an experience set to be faster, more accurate and more concise. On top of this, search engines could play even bigger roles in people's daily lives, now wielding the power to complete tasks by themselves.
Arguably, in the past week, Google has felt the brunt of this disruption more than the rest of us. Despite the highly anticipated unveiling of their AI service ‘Bard’, failed to impress. The parent company’s stock plunged around 9% after Bard returned an incorrect fact to a space-related query. To investors, this failure could signal an inflexion point in the market. Microsoft has partnered with, and invested in, OpenAI since 2019. It was their integration of ChatGPT into the search engine ‘Bing’ that forced Google to scramble and demonstrate their own ability to keep in step with next-gen technology.
Alphabet's recently released 10-K showed that the ‘Google Search & Other’ segment accounted for c.54% of total revenues, highlighting the scale of the threat the company faces. Furthermore, recent data from Statcounter shows Microsoft Bing has a measly 3% of the worldwide search engine market share compared to Google’s 93%.
Microsoft is known to previously have spent billions in a failed attempt to undermine Google’s position as the undisputed search-engine powerhouse. Their current CEO, however, has revelled in the recent breakthrough, calling the crossover of AI and search the most significant advancement the company has seen for over a decade. This presents a rare opportunity for Microsoft and other AI-enabled search engines to improve their reach in a lucrative market worth well over $120 billion annually in the US alone. Entry to the market may have effectively been extended to a far-reaching and diverse pool of AI developers.
There are likely implications for M&A activity too. In a market which has already seen high-profile, billion-dollar deals in recent years, acquisitions may be seen as the best course of action to keep in step with the world of cutting-edge technology. In 2021, R&D expenses at Google and Meta alone exceeded $56 billion, with significant amounts designated for AI. In an area where talent is of such high value, these are highly efficient methods to catch up to competitors. Therefore, Google could be a just short step away from crushing the ongoing revolt and resuming its position as king. Its brand recognition is still unparalleled, evidenced by its name becoming synonymous with online searching.
From the standpoint of a user, the years ahead should offer some very exciting and useful developments which can aid us in countless ways. This is predictable. Looking at the industry though is a completely different story. Progress is as fast as competition is fierce and the competitive landscape will be more volatile than the relatively stagnant years of Google domination.