Disrupting the disruptor: How ChatGPT shook Google
The arrival of ChatGPT has triggered a moment of frenzied speculation about the prospect of an AI revolution. In this article, Craig Strong, Aspire’s Product Expert in Residence, considers the implications of this technology on Google’s search business, and a whole host of connected business models.
When you hear about an incumbent being disrupted, the image that forms is that of an old company, resting on its laurels, who failed to adapt to technology, or, blinded by their own success, failed to see a new market opportunity. If there was ever an example of how the rate of innovation and technology has changed the consumer landscape, then here it is; Google the disruptor, has become the disrupted.
ChatGPT from OpenAI, who also owns AI image generator Dall-E, with early backing from a number of tech luminaries including Elon Musk, has already reached 100 million monthly active users, just a couple of months after its launch; a record which has seen it become the fastest growing consumer application in history.
Seeing its capabilities, growth and potential, in what could be a move of strategic genius, Microsoft has made an aggressive public play. They have been investing in ChatGPT since 2019 and now have a position of exclusive cloud integration, revealing a significant investment step-change in 2023 for a multi-year partnership. To demonstrate this, Chat GPT-3.5 has already been integrated into Bing’s new search product.
Google, the fast-follower
The rate of adoption and the explosion in consumer interest in ChatGPT, helped by coverage of Microsoft’s big play, throws into question the impact this all might have on Google’s search and ad businesses, currently estimated to be 81% of its total revenue.
In a Fast-follower response, Google announced that it will begin integrating BARD, a ChatGPT-like AI capability, which it claims has been in the making for some time, built upon the company’s already advanced portfolio of AI offerings such as Google AI and Deepmind.
BARD is a ChatGPT-like AI capability that Google launched in a fast-follower response to its AI competitor.
The jury is out as to whether Google’s offering can demonstrate a competitive capability to that of ChatGPT, and its success will surely be a major factor in how the business maintains its search dominance in the short to medium term, at least.
This also heavily depends on Microsoft's and others' own appetite for disruption. The businesses that see AI as a new capability, not simply a feature set, have the potential to change the entire business model and customer experience for ad-served search.
AI revolution or evolution? Let’s get some perspective
Before conjuring a Hollywood style interpretation of AI, it’s important to note that ChatGPT relies on human-created content in order to generate content of its own.
AI is a synthetic intelligence and doesn’t think, as humans do, with motives and emotions. But what ChatGPT demonstrates so vividly, is the power of AI, to solve problems with extraordinary efficiency.
It’s highly likely that, in time, these technologies will threaten a lot of deployed workforces. Companies will no doubt have to rethink the distribution of skills. But we are not quite there yet.
During this transformation, the way we think about the creation and distribution of data will fundamentally shift, and that means the notion of a search engine, as we know it, might completely change, or even disappear, at some point in the future.
The beginning of the end of the search engine?
To understand the threat to Google and the potential step change in the technology landscape through AI, we need to break down the problem into its component parts and analyse this from a Product Strategy perspective.
Google’s cash cow business today is its ads business, dominated by Google search. When we “Google” something, we’re presented with a series of prioritised responses. Google Ads short-circuits the prioritised responses, by allowing advertisers to pay to be positioned in front of the searcher. The highest bidder gets the best real-estate.
“It's within this simple customer journey that I see ChatGPT being most disruptive, re-inventing the way ads are presented, or even completely tearing apart the business model.”
Imagine cloud applications embedding ChatGPT or similar capabilities into their programmes, removing the need for you to stop and search for answers by making suggestions while you work.
Content could be acquired in new ways, directly from the application itself, and Microsoft is well positioned in this realm with its dominant Office and Windows products. Not only could this significantly improve the user experience by making their primary task richer and more informative, it would reduce the dependence of a web browser altogether.
When you start thinking beyond simple search improvement and, instead, actually utilising AI as a co-creation partner, the role of conventional ads begins to recede.
This doesn’t just threaten Google’s ad-model. It potentially disrupts a lot of revenue channels for advertisers who have been fixed on an eyes-and-clicks model.
We’re unlikely to see a shift in retail or commerce-based search behaviour immediately, but this will surely impact content creators, educators and many in operations which still account for a large portion of Google’s revenue.
If Microsoft and others integrate these AI ChatGPT-like capabilities into their core applications, a new business model will need to emerge for 3rd parties to compete for the responses in new creative ways.
A Product Leader’s dilemma: disrupt or be disrupted?
It certainly seems that Google has been caught short by ChatGPT’s success and Microsoft’s aggressive integration strategy. It might even have damaged Google’s brand image as a leader. And, even before ChatGPT’s arrival, Google was reporting dwindling ad-revenues, seeing their fourth quarterly decline with net income plunging by 34% to $13.6 billion recently.
The biggest threat Google faces may not be the quality of search results or content creation that AI can provide through the likes of ChatGPT, but the ability of Google to disrupt its own ad-based business model before someone else does.
It’s possible, but not inevitable, that Microsoft’s first move with ChatGPT could pull a lot of people from Google to Bing in the short term. But if they don’t integrate this technology to provide higher quality responses, and demonstrate that it can improve the customer journey, then this will be seen as a marketing novelty and only harden Google’s position.
Microsoft landed a public blow on Google, but winning customers requires ensuring they can provide long-term benefits to keep the switchers on Bing. This is not the time to be too gung-ho on a technology-first approach and forget about the primary need of the users.
Product leaders must look beyond the hype
“This isn’t just about embedding AI into your existing operations and business model. AI provides a fundamental shift to explore the re-invention of your business and operating model.”
In just a matter of weeks, AI has broken out of the realms of science fiction and academia into public consciousness and mainstream culture. AI is already rapidly outpacing Moore’s law, and is going to accelerate further, impacting the wider public on a continuous basis. AI stories like this will raise expectations across all industries going forward, setting new standards in information insights, data acquisition, visualisation, video, search and content generation.
It won’t stop there, either.
If you’re reading this and feeling safe having simply embedded AI in the fashion of a feature set, you might be missing the big picture. This isn’t just about embedding AI into your existing operations and business model. AI provides a fundamental shift to explore the re-invention of your business and operating model. Getting this right matters.
AI has already outpaced Moore’s Law
If, for example, AI’s content generation improves relationships with peoples schedules and behaviours - integrating with location data, calendars and voice assistants like Alexa - then the entire business and operating model to reach and market to the customer changes.
A shift in the customer behaviour when searching or using applications, which cuts out a list of ads as options as a result from search, will need to find a place in the generated content or singular response, by-passes today's search engine behaviour.
Similarly, with more information, AI’s recommendation capabilities could profoundly improve, reducing advertising ROI accuracy which transforms the integration with customers and products. We could be moving rapidly towards a much deeper connection model between people, products and services.
The risks to today’s market leaders
We are witnessing the beginnings of an AI arms-race which will permeate all connected systems and all companies to remain competitive. Given the capabilities required to capitalise on AI, a cloud integration strategy to accelerate AI capabilities is more important than ever.
For the likes of AWS, IBM, GCP, Azure, Salesforce, to name just a few, their existing offerings, which are deemed pretty extensive already, will be key platforms in driving this arms race.
Many of the big tech companies today have monetised advertising around content production and presentation. ChatGPT is just one example of the potential to transform content generation and remove the ingrained consumer behaviour of presenting ads with search results.
Business models will form, existing ones will fail and, during this time, some of today’s market leaders will become the has-beens who failed to recognise the gravity and speed of change facing their industries.