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Google Search and Generative AI: Navigating the Paradigm Shift

Google Search and Generative AI

Published on Apr 17, 2024

Google is contemplating a significant shift in its search business. As per Financial Times, the tech giant is exploring the possibility of introducing paid premium features driven by generative AI to Google Search. With generative AI poised to thoroughly restructure traditional setups, search engines, as we know them, are on the brink of undergoing substantial transformation. 

While the decision regarding the launch timing and availability of the premium version to the public is still pending, if implemented, this would mark the first time Google places any of its core products behind a paywall. The traditional search engine, however, is expected to remain free. 

Previously, the company successfully incorporated AI into its search engine through Lens, an image recognition technology that now facilitates 12 billion visual searches monthly — a four-fold increase in just two years. With new generative AI capabilities in Search, Google aims to streamline the search process, enabling users to grasp topics quicker, discover fresh perspectives and insights, and accomplish tasks more effortlessly. Beta testing of the "Search Generative Experience" (SGE) has already commenced in Search Labs, and according to a study by BrightEdge, 84% of Google search queries yield results powered by SGE. 

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Since the launch of ChatGPT in November 2022, Google has faced pressure to upgrade its models to stay competitive as chatbots threaten to disrupt the traditional search engine paradigm, which comprises a list of links and the lucrative ads accompanying them. Microsoft, in collaboration with OpenAI, introduced an enhanced GPT-powered search and chatbot, now known as Copilot, in its Bing search over a year ago. Moreover, several startups have entered the market, recognizing the growth potential in this arena. For instance, Arc Browser, based in New York, integrates Perplexity and utilizes models like GPT-4, Claude 2.1, and Gemini Pro for its search engine.  

Despite the competition, Google's dominance remains unchallenged, holding 91.37% of the market share, as reported by Globalstats. While its monopoly seems secure for now, given the rapid pace of AI adoption and innovation, Google is taking precautions and hedging its bets to stay ahead. 

Generative AI

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However, making this version the default option poses a significant risk to Google's existing business model, which relies heavily on its advertising revenue. In 2023, Google's search and advertisement business generated $175 billion in revenue, constituting over half of its total sales. This model could face disruption if the search engine starts offering comprehensive AI-generated answers that remove the need for users to click through to advertisers' websites. 

Furthermore, this concern has a ripple effect on all websites across the internet. Numerous online publishers reliant on Google for internet traffic are concerned that fewer users will visit their websites if Google's AI-powered search extracts information directly from their web pages and presents it to users without requiring them to click through. Forbes reports that this shift is referred to as the "zero-click world," with experts predicting a potential decrease in web traffic ranging from 15% to 25%. 

Another significant challenge to the sustainability of this model is the unit cost. AI-powered search results are more expensive for Google to provide compared to its traditional responses because generative AI consumes significantly more computing resources. This is the rationale for the paid model the company is considering, as it allows them to pass on these costs to consumers. Considering that OpenAI has achieved an annualized revenue of $2 billion through consumer subscriptions, according to Financial Times, Alphabet could potentially experience a similar boost.  

A related challenge is that Google must balance integrating AI into search with the imperative of not alienating its user base. Since its launch, Google Search has been free to use for all its users, an experience that its user base has been acclimated to and has come to expect. Google’s contemplation of putting certain features behind a paywall is going to fundamentally change the user experience. To ensure a seamless and sustainable transition, Google must explore alternative operating and business models. 

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However, a survey conducted by Search Engine Journal revealed that 29% of adults would be inclined to switch to AI-powered search, and 25% of users expressed trust in AI-generated search results. Trust in these systems among consumers is expected to only rise, indicating an inevitable shift to this new model of search. AI has the potential to enhance the search experience. However, Google and its competitors must embrace the expansive potential of the technology while finding new business models to maintain their primary profit driver. 

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