thx Peter, .. I searched for it
from the AI thread
Is Google facing its own Kodak moment with the rise of AI?
A new age of search is dawning on us, but the sharemarket can’t work out if the dominant player can maintain its status as the internet’s front door.
Jonathan Shapiro
The Google search engine has become such a ubiquitous part of life that it’s difficult to imagine the possibility that one day it could just vanish. Yet, that is what financial markets are doing – pondering an artificial intelligence-powered future of search in which Google is left behind.
Sure, the search engine’s parent Alphabet has a market capitalisation that, at $US2 trillion ($3.3 trillion), exceeds the entire Australian sharemarket. But the value of Google could and would be larger were it not for growing anxiety that AI is going to totally upend the way we find things on the internet, and how businesses pay platforms like Google for customers.
In April, the company reported a decline in searches for the first time in its history. That moment combined with the violent sell-off on Wall Street and global sharemarkets wiped off a quarter of Google’s market value. While it has recovered somewhat, the current $US2 trillion market capitalisation is about 15-times the $US138 billion of annualised profit based on its last quarterly numbers. That is a relatively modest valuation for one of the most dominant businesses of all time. In fact, the value of its core businesses – search, YouTube and network – is just 11-times future earnings.
While no one knows exactly how search will change, the broad thesis is that while in the past we would find something by typing a query into a Google search bar, we will increasingly ask an AI agent via an application, which will have its own way of coming up with the answer.
The businesses that have paid Google to direct traffic to them via a blue search link will be totally circumvented, upending its commission model. The half-a-trillion-dollar question is whether the sharemarket is being overly imaginative in how AI will disrupt Google’s core business and too downbeat on the search engine operator’s ability to adapt.
[A fundie] gave its clients three main reasons why it had sold out of Google after years of owning it, in a video posted on YouTube. The rise of AI was the main concern, as even a small migration toward other ways of searching the internet would dent its revenues. The advent of ChatGPT has already taken a chunk out of Google’s share of search, which has fallen from 98 per cent early last year to 92 per cent.
The second reason was regulation and the potential for Google to be removed as the default search function on the Apple mobile phone browser. And the third was that AI was more expensive, requiring more computing power. Even if Google can maintain relevance, profit margins will be under threat.
