What’s going on?

Google considered charging for its AI-powered search engine, signaling the end of cost-free internet surfing.

What does this mean?

• Google has only kept its search engine free because it can earn through advertising (i.e: $175bn aka more than 50% of Google’s search revenue came from advertising in 2023).
• But as it’ll cost more to power search results with AI, Google is considering charging for the service, for the first time ever.

Why should I care?

The bigger picture: The side effects

• Rivals like Microsoft’s Bing and emerging startups will be racing to perfect AI-powered search first. But Google needs to be careful: if AI produces perfect answers, surfers might not click through to websites for more information, which demotivates payers for a spot at the top of the page.
• On top of that, Google’s been accused of anti-competitive behavior by the Department of Justice, and its Gemini chatbot has been criticized for showing false “historical” images.

Zooming out: The change is gradual

• Chatbots including OpenAI’s ChatGPT and Microsoft’s Copilot have already competed for their spots in users’ phones and bookmark bars. Meanwhile, users don’t seem to have seen them as a replacement for search engines just yet, with Google still owning 91% of the search market in 2023 (barely decreasing from the 5-year average 92%).
• Seem to be believing that will change over time as we start trusting bots, investors have factored that into the share price by sending GOOG down to the cheapest valuation of the Magnificent Seven stocks (NVDA, META, AMZN, MSFT, GGLE, AAPL and TSLA).

Content source: 
1. Finimize (2024) Surf’s Up. https://www.go.finimize.com/wp/news/surfs-up/ [Accessed on Apr 7, 2024]