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Google Search and Generative AI
Navigating the Paradigm Shift

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Google is considering a major change to its search business, as reported by the Financial Times. The tech giant is exploring the introduction of paid premium features driven by generative AI to Google Search. With generative AI set to revolutionise traditional setups, search engines are on the verge of a significant transformation.

While the timing and availability of this premium version to the public remain undecided, if implemented, it would mark the first instance of Google placing any of its core products behind a paywall. Nevertheless, the traditional search engine is expected to remain free.

In the past, Google successfully integrated AI into its search engine with Lens, an image recognition technology that now supports 12 billion visual searches monthly — a four-fold increase in just two years. With the addition of New generative AI capabilities, Google aims to streamline the search process, helping users understand topics faster, uncover new perspectives and insights, and complete tasks more efficiently. Beta testing of the “Search Generative Experience” (SGE) has already begun in Search Labs. A study by BrightEdge reveals that 84% of Google search queries now yield results powered by SGE.

If Google proceeds with this significant shift, it will transform the search landscape, leveraging the power of generative AI to enhance user experience and redefine how we interact with search engines.

Since the launch of ChatGPT in November 2022, Google has faced mounting pressure to enhance its models to remain competitive, as chatbots threaten to disrupt the traditional search engine model, which relies on a list of links and lucrative ads. Over a year ago, Microsoft, in collaboration with OpenAI, introduced an upgraded GPT-powered search and chatbot, now known as Copilot, in its Bing search. Additionally, numerous startups have entered the market, recognizing the immense growth potential in this space. For example, New York-based Arc Browser integrates Perplexity and uses models like GPT-4, Claude 2.1, and Gemini Pro for its search engine.

Despite the intensifying competition, Google maintains a commanding lead, holding 91.37% of the market share according to Global Stats. While its dominance appears secure for now, the rapid pace of AI adoption and innovation has prompted Google to take precautions and hedge its bets to stay ahead in the evolving landscape.

However, making this AI-powered version the default option presents a significant risk to Google’s existing business model, which heavily relies on advertising revenue. In 2023, Google’s search and advertising business generated $175 billion, accounting for more than half of its total sales. This model could be disrupted if the search engine starts providing comprehensive AI-generated answers, reducing the need for users to click through to advertisers’ websites.

This shift has broader implications for websites across the internet. Many online publishers who depend on Google for traffic are worried that fewer users will visit their sites if Google’s AI extracts information directly from their web pages and presents it to users without requiring them to click through. Forbes refers to this phenomenon as the “zero-click world,” with experts predicting a potential decline in web traffic by 15% to 25%.

Another significant challenge to this model’s sustainability is the unit cost. AI-powered search results are more expensive for Google to provide than traditional responses due to the substantial computing resources generative AI consumes. This cost is a key reason for considering a paid model, allowing Google to pass on these expenses to consumers. OpenAI, for example, has achieved an annualised revenue of $2 billion through consumer subscriptions, suggesting that Alphabet could experience a similar financial boost.

Additionally, Google must balance integrating AI into search while not alienating its user base. Since its inception, Google Search has been free for all users, a feature that people have come to expect. Contemplating a paywall for certain features would fundamentally alter the user experience. To ensure a smooth and sustainable transition, Google must explore alternative operating and business models.

However, a survey by Search Engine Journal revealed that 29% of adults would consider switching to AI-powered search, and 25% of users expressed trust in AI-generated search results. As trust in these systems grows, a shift to this new model of search seems inevitable. AI has the potential to significantly enhance the search experience, but Google and its competitors must embrace this technology while also finding new business models to sustain their primary profit drivers.

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