The future is coming fast. Just weeks after OpenAI unveiled ChatGPT, the transformational chatbot that has already attracted 100 million users, Microsoft (MSFT 0.37%) has announced it's launching a version of its Bing search engine powered by ChatGPT technology.
The move has the potential to upend Alphabet's (GOOG 0.74%) (GOOGL 0.55%) dominance of internet search, a massive, high-margin business that has made Google the most valuable advertising property in the world. Search also contributes more than half of Alphabet's revenue and profits, and that could be up for grabs as the next iteration of search arrives.
Image source: Getty Images.
Meet the new Bing
Microsoft announced its new products at a joint conference with OpenAI, the start-up that it first partnered with in 2019 and has already invested billions in.
Microsoft CEO Satya Nadella spent much of the presentation talking up the transformative power of generative AI, the category of artificial intelligence that includes technologies like ChatGPT that can generate text, images, and more from simple prompts.
"I think this technology is going to reshape pretty much every software category," Nadella said. The focus of the event was on search, which he called the "largest software category on the planet."
He unveiled a new, upgraded version of Bing that is capable of many of the same tasks as ChatGPT. It can answer questions directly with human fluency, and provide specific information. It can take available information and package it for the user, including things like planning a travel itinerary. And you can also ask follow-up questions to get more information and refine your search.
Microsoft displayed the new Bing doing practical tasks like translations and refining a search for a television based on price and the best option to play video games.
The Windows owner also introduced a new GPT-powered version of its Edge browser and showed it doing things like summarizing news articles. Edge users will get access to special Bing features that won't be available on other browsers.
Microsoft did not say specifically which technology was powering the new search engine and browser, but analysts believe it is GPT-4, the latest version of the OpenAI technology that underpins ChatGPT.
Investors clearly approved of the launch, sending Microsoft stock up 4.2% on Tuesday.
The tech giant opened the new Bing to a limited number of people on Tuesday, and anyone else who's interested can sign up for the waiting list at www.bing.com/new.
A new day
Microsoft's confirmation of the new ChatGPT-powered Bing officially sets off a new arms race in technology focused on search. Or as Nadella said, "A race starts today in terms of what you can expect," referring to the new category of AI.
There's no question about what Microsoft is targeting. Alphabet has long held a monopoly in search in most of the world outside of China, and the company is already taking steps to defend its turf.
On Monday, Alphabet announced its new Bard AI, a similar chat-powered search tool that will be made available in the coming weeks.
As the disruptor, however, Microsoft could have an advantage here. It essentially has nothing to lose from pushing the envelope with Bing, while a majority of Alphabet's profits now look more vulnerable than ever before, and the company needs to defend them.
Nadella added: "It's a new day in search, it's a new paradigm for search. Rapid innovation is going to come."
That seems patently true if you've spent even just a few minutes playing around with ChatGPT. The experience is much better than traditional search, and the web-scraping internet search that Google has excelled at seems likely to fade away as chatbot tools get even better.
What that means for the ad-based business model used by Google and other search engines is still unclear, but it does put it at risk. OpenAI has already launched a "plus" tier of ChatGPT priced at $20 a month, and we could see a subscription model emerge in the new search paradigm, rather than just an advertising-based business model. Even Google considered a subscription model in its early days.
What it means for investors
The arrival of generative AI, a disruptive technology, has the potential to reset the winners and losers in search and beyond. The playing field is wide open, and start-ups and other tech giants like Meta Platforms are racing to fill the void. The prize is enormous: Google Search brought in more than $160 billion in revenue last year.
With its partnership with OpenAI dating back to 2019 and a multibillion-dollar investment in the start-up, Microsoft still seems to have the edge here, and it helps that the company has a wide range of applications and products through which to deploy OpenAI's technology.
Things are moving fast, and a lot can change quickly, but Microsoft is clearly being aggressive in trying to seize the opportunity in front of it. After the company missed so many paradigm shifts earlier in its history, that has to be encouraging to its investors.
Microsoft might not topple Google's search empire, but the OpenAI partnership seems likely to move the needle in one way or another for the Windows maker.
