#6 Why AI chatbots are a threat for Google

But an opportunity for Microsoft Bing

Today, Microsoft announced the launch of AI-powered Bing with an integration of OpenAI’s GPT-3.5, which is even more powerful than ChatGPT. While AI chatbots like ChatGPT are an opportunity for Bing, they pose a big threat for Google. Let me explain.

Google's main revenue driver is search ads. In 2022, search ads made up 58% ($162 billion) of Google's revenue while Youtube ads and Network ads drove additional 22%. When people search for something, Google shows ads as top search results. Google doesn't provide answers, it provides links to answers and some of those links are ads. Chat interfaces pose a problem to this business model - people expect answers, not links. And when you provide answers, there is a little room for the type of advertising that Google does. Even when Google launches a ChatGPT competitor, the business model problem stays the same.

What about Bing? Bing is also a search engine and it also generates revenue through search ads. The difference with Bing is that it's a much smaller player. Bing holds less than 3% market share in search, and drives less than 4% of Microsoft's total revenue. If an integration with ChatGPT means giving up revenue to capture a bigger market share from Google, then it's a bet worth while making.

AI chatbots pose a business model threat for search engine providers. While it's a big disruptor for Google, it's an opportunity for Bing to capture a bigger market share.

Learn more here.

If you found this essay helpful, please forward it to 1 person who might enjoy essays like these.