Google AI Announcements
The Six Five team discusses Google AI announcements.
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Daniel Newman: Let’s talk about Google. I want to talk about it through the lens of competition before I actually talk about what they announced. A lot of the press that we talked to, Pat, and you talked to a lot of press, I talked to a lot of press about this announcement, it was kind of like, “Is Google screwed here? Is this game over for Google?” So we all know Google’s gotten into cloud and we know Google has some big bets, but Google’s revenue largely comes from search. Its search on Google, its search on YouTube, its advertising.
And make no mistake about it, the advertising model of yesterday is going to be disrupted significantly. And I’ll make it really easy. When you try the new Bing, there’s going to be a left side and a right side, okay? The left side is basically going to look like the search of yester year. Now, for Bing, this was a big watershed moment because Bing search on the left side, I don’t know about you, Pat, I know we want to be diplomatic here, but I use Edge browser, but I go to Google for search. I just don’t find the Bing searches to historically have been very good. Now, with this new model, it’s already better. So I already noticed straight away the searches are closer in quality to Google. That’s a big thing. Again, this is my early readout. I haven’t spent a ton of time with it, but my early readout is the traditional search has improved from where it was. The right side of the screen is the generative AI.
The right side of the screen is where it’ll prompt, it’ll fill things in, or you scroll up and you get to the natural language processing where you actually add the chat function to actually query that way by searching using questions and then prompting additional questions and seeing multi-term conversational AI where you’re getting more data and more insights. And that’s really interesting, and that’s going to change everything. And this is what Google really has to answer to is the history was display ads, the history was you search something, you’d find results, and they could populate ads around it so that you could target some sort of commercial activity, whether that’s buying a product or clicking on a link that somebody has set up to pay per click to a website. The generative AI does a lot of abstracting and summation.
So I asked the question, “Help me set up a vacation, a five-day vacation for Mexico.” And basically, they showed this example and give me an itinerary. This thing literally draws out a five-day itinerary. And then the example was, “Well, then help me write a letter that I could share with my family that explains the trip to everybody.” So in that whole generative process, it ends up creating a flow of content that historically you would’ve had to click through, you would’ve clicked through to a Travelzoo website, you would’ve clicked through to an Expedia website, you would’ve clicked through, and you would’ve had to aggregate all this. Well, it’s done this for you. So it begs a question about the business model ’cause right now Google gets paid by all those companies every time you ended up clicking on one of those sites. What’s Microsoft’s plan?
Meaning that they say, “Well, we still think people are going to click.” I’m saying, “I’m not so sure.” I’m not sure people are going to click and I’m certain they’re going to click less. So this is what Google is up against too, is if people can go to Bing and you can get a letter written, you can get an itinerary planned, and you can get it all generated in AI in a single readable window, it doesn’t require clicking down, how do you replace the economic value? And so even in Microsoft’s $2 billion per percent question, this needs to be answered because if people aren’t clicking on the display ads, where does the money come from? I do think there’s going to be an interesting opportunity from a model standpoint, Pat, for people to basically pay to be prioritized in the model. Meaning it’s going to be different where you generatively come up by priority. ‘Cause Pat, if there’s 10,000 travel articles, how does ChatGPT decide which ones get prioritized? Really interesting question.
Can you build a training in to train to prioritize certain models based upon pay? I think so, I think that’s possible. So long story short, I’ll get here on Bard, I’ll make it a minute and I’m going to hand that over to you to talk more about, Pat. But Bard is going to do similar things. Google didn’t really tell us much about what it is, they basically said this is in dispute and we have something coming and it’s going to be very exciting. My guess personally was they had no intention of rolling it out this soon, they were forced to move everything forward. I also want to say though, as an advocate of Google, is I don’t see the business changing as much as people think.
I do see Microsoft picking up a couple of points of market share near term because there will be a lot of enthusiasm and excitement about this. But if Google can land quickly, they have a couple massive advantages. One is search on mobile, every Android device defaults to Google. And honestly, right now, I think Apple too, it defaults to Google, even when you search in Safari. So right now, the fact that the whole mobile ecosystem leads with Google is still going to be a massive hurdle for Microsoft. So there’s a lot more I want to say about that, but I’ve talked a lot straight in a row, so I want to hand it back to you and let you cover the rest of this one.
Patrick Moorhead: Listen, this needs a lot more effort than 5 to 10 minutes. I am glad you brought up the cost piece ’cause even for Microsoft, the cost per transaction is troubling. It’s only troubling because there wasn’t a thesis provided. I did appreciate, on Microsoft’s analyst call, that they did get in into what I thought was a profit dollar, which is, “Listen, we’re not part of this market share right now. It’s all accretive, so don’t even worry about how much this costs if we can make a ton of money on it.” I completely understand that. So Google stock, I think declined, in total, what, 10, 15% in two days, lost over $100 billion in value. And I understand why. I got up at 7:30 AM, I guess 5:30 AM Pacific to watch Google’s AI event. And essentially the key message is they talked about Google’s supremacy in AI today, across Photo, Translate, Lens. And I think it has a really good point. I mean, these are all products that I use, less Lens, more Photos and Translate and some of the interesting stuff that they infuse into Gmail.
But they do have the consumer lead today, no doubt. And on the commercial side, on the cloud side, they use AI pretty effectively as a land and expand tool. The other key message was, “Hey, these LLMs, large language models, are not new to us. Essentially, we rewrote the book on it in 2017,” which they went out of their way. Then they went into Bard. But it’s super light, and I think what got everybody excited was that the answer was wrong. I think it could be debatable if it was wrong, but by the way, all the searches I’ve done on the new AI-infused Bing, they’re not always right. But when you’re doing a demo, you darn better get it right.
The examples that Microsoft used on stage, I videoed many of them and so did you, they were perfect. The video cut off early. I mean, you could see on my Twitter feed, the video went private for me before the entire event was over. That does not imbue confidence. One of the bigger mistakes I think Google made was they said, this is literally, I don’t know, 12 hours after Microsoft opens up these new features to millions of people, Google says that Bard is now with trusted testers. And sometimes “I’ve been accused of saying that the world revolves around me, Pat, or you think the world revolves around me,” but essentially Dan, have you received your invite as a trusted tester for Bard?
Daniel Newman: No.
Patrick Moorhead: Yeah, so unless-
Daniel Newman: Unless I missed an email.
Patrick Moorhead: Yeah, so I haven’t either and therefore you and I are not trusted, and I think that is an absolute mistake and they should have thought through how they used those words. What I think they were trying to communicate is that generative AI is scary, okay? And we can’t just unleash it onto the world. They didn’t stick that one at all and their stock was down and they got clobber. Now, I’m going to talk out of the other side of my mouth, or what might seem like that, and say this is a very long game. You do not replace somebody who’s number one overnight. Even when we saw the fascination of what were brand new social media sites like Twitter and Instagram, it didn’t just make Facebook go away. So the ball though is certainly in Google’s court by judging in what happened to the stock price, which I think a lot was fueled by what Microsoft CEO Satya Nadella said in interviews, essentially saying the profit margin of the advertising industry is going to get a radical reconstruction. Those weren’t his exact words, those were my takeaways. I totally get what’s going to happen.
So if I’m Google moving forward, I would go out and get a lot of feedback, not pretend like sometimes I think Google sometimes appears to me that, “Hey, we don’t need to talk to anybody or ask anybody’s input ’cause we’re the smartest people in the room.” I think that’s a mistake right now. And I think they should be asking, if they’re not already, their trusted stakeholders, smart people, on what they think their next steps should be.
Daniel Newman is the Chief Analyst of Futurum Research and the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio