The market for search is worth $200 billion, expected to grow at 10% every year to $400 billion in 2035, with a fat 60% gross margin. 90% of this is owned by one player, Google, which guards it as jealously as its very own Kohinoor.
For decades, enemies and competitors have fruitlessly pounded its thick walls. Microsoft has been trying for decades now, but has only about a 4% share to show for it, though even with this thin sliver, it is a $12.6 billion business for it.
Yahoo had battered its search head against the same walls years ago, only to ignominiously retreat from the battlefield. So did smaller, nimbler players—the intellectual Wolfram Alpha, the privacy-focused DuckDuckGo and an ad-free Neeva, which created a minor stir but was smothered by its much larger competitor.
Google, meanwhile, continues to dominate. Its latest quarterly earnings reveal 12% search revenue growth to $88.3 billion. It is still the clear leader, with the best and fastest results.
It is a veritable synonym for search, a verb for many, and its use of AI to hone search results keeps getting better every year. However, perhaps for the first time, its citadel does not appear as formidable as it once did.
Competitors continue to snap at its heels, and this time they have a new weapon in their arsenal—Generative AI. The first one to make a mark was Perplexity, a startup that treats search differently.
Rather than serving up 10 links, it combs the web and uses AI to write a succinct summary of its findings and annotates the same with the sources used for its answer.
It was Microsoft, though, which was first off the block, integrating OpenAI’s ChatGPT deeply into its Bing search, with CEO Satya Nadella gleefully proclaiming that it would make the incumbent “800-pound gorilla dance” with its latest innovation.
However, the music seems to have stopped for Nadella, as Google shrugged that off and continued its dominance. OpenAI is just launching its ChatGPT search; while it looks very much like Perplexity, its 200 million-plus weekly users give it a scale advantage.
A bigger threat is Meta, which is reportedly working on its own search product. Meta boasts world-class AI capabilities with its LlaMA family of large language models (LLMs), and can rival Google in distribution, reaching 3.5 billion people daily.
Google has been no slouch in incorporating its Gemini LLM into its own search engine. However, its efforts seem to be half-hearted. Its ‘10 blue links’ still hold pride of place, with GenAI-based search as a reluctant and apologetic afterthought.
Google is sitting atop the horns of the Innovator’s Dilemma—which explains why established leaders focus too much on their current successes, missing or undermining new technologies or business models that initially serve only a small market but eventually disrupt the entire industry.
The risk of launching something that would cannibalize its own business seems to be too great for Google. Therefore, the main screen still has all sponsored results, and the rest of the screen is all advertising.
Monopolistic leadership has undermined its user experience: the page prioritizes ad links over actual results the user is looking for, as the company seems to prioritize advertisers over end users.
As Perplexity founder Aravind Srinivas put it: “The one thing that Google got wrong is that the same unit of information that stands for truth, which is the links, is also the same unit of information that the advertiser bids on. So that’s where there’s a conflict between serving the user and serving the advertiser.”
Then there are regulators in the EU, US and India that are circling their wagons, questioning Google’s dominance and inevitably hobbling risk-taking and innovation.
That is why I believe that the only real credible threat to Google is not from outside, but within. It might surprise people to know that the Transformer, the driving force behind Generative AI, was built by Google Labs.
However, due to either the Dilemma or reputation risk, Google did not do much with it, while a startup called OpenAI ran with it and changed the world.
Thus, it’s the Trojan Horse of GenAI within the ramparts of Google’s fort that could be the reason for its downfall, and not its various foes battering its walls from outside without making headway.
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