Alphabet CEO Sundar Pichai Hardik Chhabra/India Today Group (via Getty Images)
Google Search Bears Spoken Out Concerned About Near-Term Looting By Generative AI.
Google’s parent company, Alphabet, received a one-two punch downgrade from Wall Street analysts this week. Both UBS AG and Bernstein warned of the near-term threat that generative AI poses to Google’s profitable search advertising business.
In a lengthy 39-page report on Monday, UBS said the emergence of AI-based search by rivals such as Microsoft and OpenAI’s ChatGPT, as well as Google’s own Bard product, has changed the way consumers find information on the web. He said the method would change significantly. This is to help businesses reach their customers with search ads.
“Someone may come up with a creative solution to include sponsored links in their responses, but the click-through rate would be significantly lower than what occurred with the previous 10 blue link ad model,” he said. A UBS report said: Analysts quoted an anonymous former Google Ads and Commerce senior vice president who spoke to them.
“Over time, Google will understand this monetization,” UBS analysts opined, noting that the move to AI search is similar to Google’s successful transition from desktop PCs to smartphones a decade ago. He said he didn’t see it as uncomfortable as the transition. But UBS says the result so far is a disruption of the “abundant search monetization machine” and pressure on Google’s profit margins due to increased spending on AI.
UBS cut Alphabet’s rating to ‘neutral’ in a memo on Monday, and analysts at Bernstein followed suit on Tuesday, cutting its own rating from ‘market outperforming’ to ‘market performing’. rice field.
Google shares fell more than 3% this week, but the broader market rose slightly.
Alphabet’s image took a further hit late Tuesday when the Wall Street Journal reported that it had serious problems with Google’s business of serving video ads on third-party websites. A study by brand marketing analytics firm Adaritics found that 80% of ads served by Google violated the company’s standards, including for website quality within its ad network. A Google spokesperson told the WSJ that “many claims are inaccurate” in the study.
Bernstein analyst Marc Shumlik said amid Tuesday’s downgrade of Alphabet’s stock that the company “has a short-term impact on search ad pricing due to its aggressive push to integrate generative AI into core search results.” potential air pockets,” he warned.
Shumlik advised investors, noting that Alphabet has moved from “too slow to too fast in AI.”
The comments underscore Alphabet’s difficult balance of trying to keep up with the search competition from Microsoft and OpenAI without rocking the landscape to the point of causing problems for the search advertising business.
Alphabet CEO Sundar Pichai even said the company is ready for the pending inflection point, telling Bloomberg that Google is more ready to transition to AI than mobile. Told. Also at the Google I/O developer conference, the company received positive feedback for the introduction of new AI tools, and the Motley Fool reported that the event “re-established the company as a top AI company.” .
A recent Bank of America study found that ChatGPT is already used by more than half of US internet users, but four in 10 people surveyed now use search chatbots from Google and Microsoft every week. I have answered that I have used it several times.
The study, based on a BofA report, also said Google could benefit from a wave of generative AI. Analysts at Bank of America, who have a Buy rating on Google, said they believe LLM usage could increase toward core search.
