Google: AI additions to search should drive rivals away

For Google, artificial intelligence represents both a threat and an opportunity. Microsoft’s first integration of artificial intelligence into its Bing search engine posed the first real challenge to Google’s search dominance in years. But Google’s investments should protect its market share.

A competitor’s success is not a good reason to implement the change. But it seems to have electrified Google. On Wednesday at the company’s showcase I/O event (called for the 1 and 0 at the start and end of a googol) it announced a significant update to its online core research business, with conversational responses provided by artificial intelligence tools.

This is not a complete review. The links will still appear. It will start as an invite-only experiment. The event did not arouse gasps of amazement from the audience. As the market leader, Google has the most to lose if it rushes to roll out poorly performing features.

But continued development will serve the company well as lawmakers get nervous about the risks of AI. Google’s plan to watermark AI-generated content means it’s carving out a smart role for itself as industry monitor.

Bing will not overthrow Google search. As of March, Bing had 100 million daily active users. Google has over a billion of them. It holds a 94% share of the mobile search engine market in the United States, according to web traffic site StatCounter. It seems safe unless Bing can remove it as default on Apple or Samsung devices, which is unlikely. Research revenue was expected to decline in the first quarter, but was up 2% year over year.

Adding more AI integrated services means increasing costs. Google’s parent company Alphabet expects capital expenditure to exceed last year’s $31.5 billion total. But Alphabet’s advertising business is huge. Can afford to spend more than Microsoft. R&D spending was 60% higher than Microsoft’s last year. However, at 14% of revenues, that wasn’t much higher than Microsoft’s 12%.

There are no projections yet on exactly how AI services will drive revenue. Will advertisers pay more to appear alongside AI generative responses? Maintaining margins requires cost cuts elsewhere. More details on exactly how AI will improve advertising and cloud revenues would be welcome.