It has only been six months since ChatGPT launched, sparking a new revolution in artificial intelligence (AI), but one thing seems clear. Microsoft (MSFT +3.64%) and Alphabet (GOOG +1.09%) (GOOGL +1.31%) are going to be two of the companies that most shape the way we use AI.
Like two heavyweight fighters, these tech titans have taken turns trying to one-up each other in the past few months. Microsoft, which has a strategic partnership with ChatGPT creator OpenAI, has already integrated the chatbot technology into a wide range of products, including its Azure cloud infrastructure service, Edge browser, and Bing search engine.
Alphabet, after an initial stumble in February when it introduced ChatGPT competitor Bard AI, impressed investors at its I/O conference with an upgraded version of the chatbot running on a new large language model (LLM), called PaLM.
Microsoft CEO Satya Nadella has made it clear that he sees search as the biggest prize to be won in AI, but can the Windows maker dethrone the king of search? Let's look at what Bing is doing with AI.
Image source: Getty Images.
AI and Bing
Microsoft first launched its ChatGPT-enabled version of Bing in February, but it was restricted by a waitlist. During that time, Bing grew to more than 100 million daily active users, and daily downloads of the Bing mobile app increased by four times, giving the insurgent search engine a significant boost.
Last month, the company opened up the new Bing to all users and added new features, including giving answers with images and videos, adding a chat history feature that records past chats and allows you to pick where you've left off, being able to share chats, and allowing developers to build new features.
The company said Bing would become integrated into ChatGPT, opening up another channel to grow Bing's usage as ChatGPT now has more than 100 million active users.
NASDAQ: MSFT
Key Data Points
Microsoft could have a huge opportunity here, because nearly half of Web searches go unanswered, showing that conventional search often comes up short as a means of finding information, which offers an opening for disruption.
What it means for Google
Search is a massive market, and Google owns more than 90% market share in most of the world. Using Google for search is as engrained as any other digital habit, and globally, there are approximately 9 billion Google searches a day.
According to third-party estimates, Google's market share doesn't seem to have changed significantly since the launch of the new Bing.
However, Google also faces another challenge from ChatGPT and Bing. Google's search business model relies on advertising revenue, which comes in the form of paid listings above "organic" ones. Chat-based search could make it more difficult to sell ads and get clicks.
What's next in search
Large entrenched markets are difficult to shift, and even breakthrough inventions like the iPhone take years to take over a market.
It's too early to tell where the battle for search is going, but dislodging Google's leadership won't be easy. However, Google doesn't have to lose its search supremacy to take a hit from AI-based search.
In addition to the threat to the advertising business, Alphabet will have to spend money to add new AI-based features and defend its market share in a way that it never previously had. In fact, Microsoft CEO Satya Nadella predicted, "From now on, the [gross margin] of search is going to drop forever" because of the increased computing costs to support artificial intelligence.
As Nadella sees it, the best search product will win. That isn't necessarily true, though, as Google has an advantage because of habits formed over years of using it for search. But it will still have to keep up with Microsoft.
Alphabet stock initially stumbled back in February, when it rolled out Bard AI, but since then the stock has surged and it's now up roughly 40% year to date.
Based on the stock movement, investors no longer see Bing or AI-based search as a threat, but that seems like an oversight.
At this point, Google still has more to lose from AI in search than it has to gain.
