OpenAI poses a bigger threat to Google than US regulators

Google faces a bigger threat from Sam Altman’s OpenAI while awaiting a decision from antitrust regulators in Washington on leveling the playing field in the internet search industry.

The U.S. decision Monday that Google had built an illegal search monopoly is seen as a major victory for regulators. But the growing number of people using AI tools, including OpenAI’s popular chatbot ChatGPT, is already eroding Google’s dominance, sources, investors and analysts say.

“I think for Google right now AI (is) much bigger than the ruling. AI is also fundamentally changing how the search product works,” said Arvind Jain, a former Google engineer who spent a decade working on products including Search.

Jain, who now runs corporate search firm Glean, said the impact of AI was immediate compared to the effects of rulings like these, which are subject to appeal and take a long time to affect the market.

Google has long been synonymous with search, with about 90% of the global market share and about $175 billion in annual revenue from the business. Even Apple, which prefers to create all the software and most of the hardware that goes into its devices, has allowed Google to become its default search engine for a hefty fee.

But the days of preferential treatment for a fee were over before a series of antitrust lawsuits were resolved. In its AI venture, Apple announced a partnership with OpenAI to bring ChatGPT to its upcoming devices, emphasizing the nonexclusive nature of the deal and talking about the likelihood of Google joining as another partner.

Analysts say the ruling against Google will accelerate Apple’s transition to AI-based search services if the company is forced to end its search partnership with Google.

Microsoft-backed OpenAI said last month it also plans to enter the search engine market by slowly rolling out SearchGPT, an AI-powered search engine that provides real-time access to information from the web.

SEARCH GPT

One former Google executive predicted that “AI will advance faster than the DOJ can act against Google. The entire monopoly will end, in other words, the speed at which AI takes over search.”

Both former Google executives and many Wall Street analysts agree that Google has the raw materials it needs to lead in AI—a large language model to train its AI and a search engine. But the company’s efforts seem to be falling flat in the face of OpenAI’s push to appeal to younger users.

The popularity of generative AI caught Google by surprise. Despite being the source of foundational research on the technology, it didn’t release a consumer product until ChatGPT became the fastest-growing consumer app in early 2023.

“The biggest threat to Google may be Google itself — trust is key to implementing any AI, and the initial missteps with the search overhaul showed that Google engineers were focused more on getting things done quickly than getting things done right, trying to keep up with OpenAI and other solutions,” said Rebecca Wettemann, CEO and principal analyst at research firm Valoir.

Wettemann was referring to Google’s AI Overviews feature, a new feature that uses artificial intelligence to answer search queries that appear before links. The feature has drawn criticism from publishers who have seen a decline in referral traffic from Google, and has been criticized for displaying errors including telling users to eat glue and saying Barack Obama is a Muslim. Google restricted the feature earlier this year.

Gil Luria, an analyst at DA Davidson, believes that regulatory scrutiny and the threat of AI are related. “Part of the reason (DOJ) is attacking Google’s business practices is because the market is in a fluid state right now, and they want to make sure that Google doesn’t expand its current market dominance.”

While the antitrust ruling won’t have a big impact on Google yet, it should open up the search market to more players, said Richard Socher, CEO and founder of AI-powered search startup You.com and a former chief scientist at Salesforce.

However, he added that ending Google’s dominance in the search market would be “very difficult.”

“Nobody’s made a huge dent in Google’s search dominance yet…we’ll see if this is the next domino that falls into place to actually give consumers more choices, real choices.”

(Reporting by Aditya Soni in Bengaluru and Kenrick Cai in San Francisco; Editing by Sayantani Ghosh and Nick Zieminski)