Background: ChatGPT, an OpenAI (backed by MSFT) chatbot, was released in November 2022, and quickly gained popularity for its human-like answering capabilities across many domains of knowledge. Consequently, OpenAI was reportedly valued at $29 billion post the release of ChatGPT. Internet is now replete with ChatGPT’s comparisons to Google search and how it could break Google’s monopoly in search. TikTok and Instagram have also been discussed as Google’s competition. In this article we will discuss the frequently mentioned Google search competitors, some of them obvious, others not so much.
TikTok & Instagram: Google’sPrabhakar Raghavan, who runs Google Search, Maps, Ads, Payments, and Google Assistant (these businesses account for the majority of Google’s revenues), started this discussion about TikTok & Instagram competing with Google Search. He’s the second most senior person at Google after his boss, Sundar Pichai. In a discussion about Google search and the future of Google’s products at Fortune’s Brainstorm Tech conference (in July 22), he offhandedly mentioned that younger users were often turning to social apps such as TikTok and Instagram instead of Google Search or Maps. He said, “In our studies, something like almost 40% of young people, when they’re looking for a place for lunch, they don’t go to Google Maps or Search, they go to TikTok or Instagram.” This, obviously, when coming from a senior leader at Google created a media frenzy and has been a major topic of discussion since that day. It does sound like a genuine concern about competitive threats to Google; we think this was a scripted and well-thought-out comment to include these large social media companies as competitors to help ward off the antitrust lawsuits against Google. It’s a narrative Google is carefully crafting to help them in antitrust lawsuits; in reality, TikTok & Instagram are unlikely to compete with Google Search in any meaningful way. TikTok is a short-form video entertainment platform and pretty much a flavor of YouTube. YouTube has been around for two decades and search has never gained momentum as a major use case for YouTube. In fact, YouTube’s stand-alone search product has been deprecated.
Amazon: Industry reports suggest 55-60% of product searches now begin on Amazon. Amazon’s ad business is on track to generate $38B of revenues in CY22 while Google’s ad business is expected to generate $228B in CY22. Amazon is a serious competitor to Google search since Amazon has a higher market share of product-related searches than Google. Moreover, both Amazon and Google are text-based search options. Finally, since Amazon can track a user’s purchases, it offers a complete closed-loop solution to advertisers with an accuracy of attribution nobody else can match. Consequently, RoAS (Return on Advertising Spend) on Amazon ads is about 1-2x higher than Google.
ChatGPT: ChatGPT is built on Transformer, a neural network architecture that Google Research invented and open-sourced in 2017. Google also has its own language model LaMDA (ChatGPT equivalent) built on the same Transformer architecture with capabilities similar to ChatGPT. Finally, all these language models rely on training the model with a vast amount of data from the web. As long as it’s a non-commercial venture, content provider sites such as say WSJ or Reddit may be fine with it but once these models are used for commercial purposes a revenue share has to be worked out with thousands of content providers (websites) that provide the data to train ChatGPT like models. Once such commercial issues have been ironed out, Google could also provide a similar language model option with its search results.
Conclusion: None of the options mentioned above are likely to pose a serious threat to Google’s search dominance. It’s only a drastic change in consumer behavior that could lead to a decline in Google’s clout on search. Baidu (Google equivalent in China) has lost market share over the last decade. Baidu had a 25% market share in the Chinese advertising market which has now collapsed to 5%. China is mostly a mobile-only search market where super-apps have gained domain-specific search market share. Alibaba for shopping, Ctrip for travel, WeChat for communications, and so on. Consumers’ need for a search engine has declined significantly; generic queries like health-related, weather, etc. are on Baidu but monetization from such queries (RoAS) is quite low. Hence, a major threat to Google’s business model is not from ChatGPT or TikTok but from a fundamental change in user behavior and the rise of domain-specific search apps. The question is how fast can Google dominate domain-specific apps before those apps dominate search.
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