Google’s scramble to reinvent its $160 billion search business and survive the A.I. revolution

Google's scramble to reinvent its $160 billion search business and survive the A.I. revolution

Google’s Journey in the A.I. Arms Race: Pichai’s Challenge to Search Dominance

Google AI

At the annual Google I/O developer conference, Sundar Pichai, CEO of Google’s parent company Alphabet, unveiled a range of innovative products and features that showcase Google’s efforts to stay ahead in the rapidly evolving field of artificial intelligence (A.I.). However, amidst the excitement, one burning question remained unanswered – what is the future of Google Search in this era of generative A.I.?

Pichai’s declaration in 2016 that Google is an “A.I.-first” company set the stage for the current A.I. revolution. But it’s OpenAI’s ChatGPT, backed by Microsoft, that has recently stolen the spotlight. Google was caught off guard by ChatGPT’s debut in November. As a result, Google has been scrambling to match the generative A.I. capabilities of its rival. Pichai’s keynote at the conference aimed to showcase Google’s progress during the past six months.

The new features announced by Pichai include Help Me Write, an A.I.-powered email drafting tool, an immersive A.I.-powered view in Google Maps, generative A.I. photo editing tools, and more. Pichai mentioned the powerful PaLM 2 large language model (LLM) that underpins this technology, as well as Bard, Google’s competitor to ChatGPT. He also alluded to the development of Gemini, a family of A.I. models with immense potential impact, but with potential risks as well.

However, Pichai stayed elusive on the topic that most wanted to hear about – the future of Search. With the rise of A.I. chatbots capable of delivering information conversationally, the traditional Search model could be disrupted. Pichai briefly mentioned Google’s “search generative experience” (SGE), which combines generative A.I. with search, providing a single, summarized answer to a user’s query along with corroborating links. While SGE is still an experiment and has its limitations, Pichai has made it clear that it will play a key role in Search’s future.

This raises the crucial question of revenue generation. Can Google monetize SGE and other generative A.I. experiences as effectively as its traditional Search model? This dilemma is at the heart of Google’s struggle to adapt to the changing landscape. Many users prefer the conversational responses provided by ChatGPT to the traditional list of links offered by Google Search. As Forrester analyst Jay Pattisall predicts, “Search as we know it will disappear.”

Google’s response to the ChatGPT threat has been swift, with the introduction of Bard, its own generative chatbot. However, Google’s cultural challenges, including complacency and bureaucracy, have hindered its ability to turn its A.I. research into successful products. Former employees have criticized the company for lacking a clear mission, urgency, exceptionalism, and effective management. These criticisms reveal the uphill battle Google faces in adapting to the A.I. revolution.

Despite the challenges, Google has made progress. Bard, powered by its PaLM 2 LLM, has shown improvements in its responses. However, the issue of hallucination, where the chatbot confidently provides inaccurate or invented information, remains a significant challenge. Google is actively learning from user feedback to refine Bard and address these concerns. Although Bard’s popularity trails behind ChatGPT, it continues to grow, and Google remains committed to improving its generative A.I. offerings.

The introduction of SGE demonstrates Google’s determination to stay competitive in the A.I. landscape. While SGE has its own set of challenges, including speed and potential plagiarism, Google is actively working on improvements. The company is experimenting with different positions for ads within the SGE page and considering new opportunities for sponsored content. However, the threat of snapshot answers replacing traditional links raises concerns for publishers and advertisers, who rely on search traffic.

To find new avenues for growth, Google is turning to its cloud business, which has seen increased customer interest due to its A.I. capabilities. However, Google still has a long way to go to catch up to competitors like Amazon and Microsoft. Additionally, the future lies in A.I. systems that go beyond generating content, but also perform actions across the internet as digital assistants. Developing such “digital agents” will be critical for Google to stay ahead.

Throughout this journey, regulation will shape Google’s future. The White House has already announced voluntary commitments from top A.I. companies, including Google, to ensure transparency, safety testing, and security. However, additional regulations may be imposed by Congress and the Biden administration. Walker, Google’s Global Affairs Chief, emphasizes the need for responsible regulation and anticipates a long and challenging road ahead.

The fate of Google’s Search dominance hangs in the balance. Will Google successfully navigate the transition from traditional Search to generative A.I.? Can it find an effective business model that matches the revenue generated by advertising? Only time will tell. As the A.I. revolution unfolds, Google must stay agile, innovative, and proactive to secure its future as both a verb and a company.

This article appears in the August/September 2023 issue of Fortune with the headline, “Sundar Pichai and Google face their $160 billion dilemma.”