Google’s 'search' monopoly under threat with Gen AI advent

For more than two decades, Google has been the dominant force in online search, building a $175 billion business that has become one of the cornerstones of the internet. Today, Google controls about 90 per cent of the global search market, but this position of power is under threat.

The rise of generative AI and chatbots, including OpenAI’s SearchGPT prototype, are shaking up the market and putting immense pressure on Google to adapt – or risk being eclipsed.

For one, Microsoft has invested $13 billion in OpenAI, and Apple has partnered with the company to integrate ChatGPT into its Siri voice assistant. These moves directly challenge Google’s search monopoly and signal that the American technology giant must act decisively or become obsolete.

Google’s rise to dominance was built on simplicity. Its clean, minimalistic design and powerful algorithms made it easier and faster for users to find information compared to its competitors, such as Yahoo, in the early days of the internet. By efficiently indexing and ranking vast amounts of information, Google established itself as the go-to search engine.

Rise of Gen AI

However, as the web has become more complex and technologies like Gen AI have emerged, Google’s once-groundbreaking model is starting to show its age.

AI-driven tools can generate direct answers to user queries, bypassing the need to sift through multiple links and pages – a process that has been the hallmark of traditional search engines like Google.

This shift in user behaviour is creating an existential threat to Google’s old search model. What was once its greatest asset – simplicity in search – has now become a liability, as AI-driven platforms begin to reshape the way people access information.

Adding to the pressure, upstart competitors like Perplexity, a two-year-old start-up with a $1 billion valuation that’s backed by Amazon founder Jeff Bezos, are gaining traction. These AI tools offer a more streamlined user experience, providing direct answers rather than lists of links, which is likely to draw users away from Google’s traditional search service. Who wants to see those annoying ads cluttering individual web pages when you can get straight answers right away?

For Google, this represents a major threat to its core business model, which relies heavily on advertising revenue. Google search alone generated $48.5 billion of Alphabet's $84.7 billion in revenue in the second quarter of this year.

Perhaps even more concerning for Google are the licensing deals between OpenAI and major publishers, such as the Financial Times, Axel Springer and the Associated Press. These agreements could restrict the availability of content on Google’s search engine, further weakening its stranglehold.

The relationship between Google and content creators has always been fraught, with some publishers voicing frustration over how their content is handled by the company. If AI-driven platforms secure exclusive content deals, it could force users to look elsewhere for information, diminishing Google’s value.

Despite the clear threat, Google has been cautious in its response to the rise of Gen AI. While the company has begun incorporating AI features, such as the AI Overview summaries at the top of search results, some tech commentators believe that Google’s focus on protecting its search and advertising monopoly has led to a more conservative approach to AI development.

Google’s search business remains a cash cow, and the company seems to be wary of making any moves that could cannibalise its existing revenue streams.

A big question facing Google is whether it should follow OpenAI’s lead in securing more licensing deals with publishers. However, such a move could come at a high cost. In 2020, Google pledged to pay news providers $1 billion over three years, but the potential expenses tied to copyright breaches could be substantial, putting pressure on the company’s bottom line.

One potential advantage Google has is its hardware. The newly released Pixel 9 smartphones, which come equipped with Gemini – Google’s personal AI assistant – offer a glimpse into how the company could integrate AI across its devices.

By controlling the Android operating system, Google can deeply embed AI tools into its products, essentially setting an industry standard for Samsung, Xiaomi and other Android phone manufacturers in a way to integrate Gemini. Such integration requires the deep expertise in AI that only Google can muster.

Apple, meanwhile, has created its own AI model called Apple Intelligence, which is built to operate mainly on users’ devices. Unlike large language models like GPT-4, Apple Intelligence is more lightweight. This is a deliberate choice, as Apple prioritises user privacy over the convenience that more powerful cloud-based AI might offer. As a result, Apple does not plan to integrate OpenAI directly into its devices.

Google is taking a different approach. It’s expected to integrate its advanced AI model, Gemini, directly into its Pixel devices, bringing all of Gemini’s powerful features to users.

New 'search' era

However, for Google to fully capitalise on its AI capabilities, it must address deeper issues related to leadership and strategy. The company’s culture of autonomy and freedom has been one of its core strengths. But this same culture may now be hindering Google’s ability to execute a cohesive strategy.

If Google is to remain a global tech superpower, its chief executive, Sundar Pichai, will need to unify the company’s diverse teams – including those running its core search and information services, its computing platforms including Android, plus its AI teams – under a single vision.

The company has come under fire for its cultural and organisational problems, including internal competition and a fragmented structure, which have held back its efforts in AI.

Looking ahead, Google’s ability to stay ahead of the curve will define its future, particularly as voice search continues to evolve. People are looking for quicker and easier ways to get information, and voice search makes it simple by letting them ask questions without having to type.

As smart speakers, voice assistants, and AI-powered smartphones become more common, people will likely move away from typing searches and start using more natural, conversation-like interactions to find information.

To maintain its dominance, Google needs to ensure that its technology not only keeps pace with these changes but leads them. This will require a level of innovation that transcends incremental updates to its existing search model.

Instead, Google must rethink the entire search experience, integrating AI in ways that make information retrieval seamless, whether through voice, text or perhaps even augmented reality.

The battle for the future of search will not be won or lost overnight. Google’s scale and resources still provide it with a significant buffer against competition. But the rise of gen AI has ushered in a new era of search, and whether Google can adapt to these changes will determine its very survival in the years to come.

Howard Yu is LEGO® Professor of Management and Innovation at IMD Business School, and heads IMD’s Center for Future Readiness.