2/9/2023

Welcome, everyone, to the latest debate. Microsoft this week announcing a new version of its Bing search engine powered by artificial intelligence software from OpenAI. Will the company behind ChatGPT help Microsoft dethrone Google search? Jon Fortt is here to weigh in.

JON:

“Yes, I think there's a good chance it will help Microsoft beat Google in search.

I flew out to Seattle this week, interviewed Microsoft CEO Satya Nadella about this, and I've gotten access to the Bing preview. It's good. The searches are uncovering information about things like company financial performance faster and in more detail than I've ever seen. What this means is, we're seeing the first serious assault on Google's core product and business model. For this to work, Microsoft doesn't have to steal all of Google's users overnight. It just has to peel away a couple of percentage points worth of search share. Every point of share is worth 2 billion profit dollars. What about Google's response? Google has AI, too. Can't they just catch up? Here's why that's not as easy as it sounds: To hear Nadella tell it, Microsoft has spent the past three years customizing Azure, its cloud platform, to run the kinds of AI jobs ChatGPT demands. Google needs to configure and test the cloud resources to do that, which requires that they get people using it and spend a bunch of money. And it's not just about building AI: Google has to get other companies building on top of it, too. Microsoft has a head start and a hugely profitable search business to attack.”

Google has more than 80% of the global search market. Microsoft's going to topple that all of a sudden?

JON:

“On the other hand no, there's almost zero chance Microsoft beats Google in search with AI.

It's just rare to see that kind of dramatic shift in a technology market unless the incumbent implodes. For example, Apple's iPhone was able to beat RIM and Nokia because they fundamentally misunderstood the potential of the multitouch smartphone. But even with its formidable design prowess, Apple and its Macs and iPad haven't displaced Windows PCs. Meanwhile today, Google probably won't have an easy time matching Microsoft in AI for search. But that doesn’t mean the masses will switch to Bing. Google has spent the last 15 years digging a moat around its search business. Apple devices default to Google for search. So does the popular Chrome browser. So do Android phones. This network of Google services and platforms are like a Star Wars tractor beam pulling users back into Google search. In other words, it's not enough for Microsoft to have a more competitive search product. Nadella and his team will have to build on-ramps to Bing from Microsoft's most popular services. That would take a while. At this point, a bet on Google losing significant search share is a bet that Google will blunder its way into the AI race for the next couple of years, both failing to improve its Bard competitor and losing the power of its tractor beams. Not gonna happen.”

What do you think? Which side do you find more convincing, and why? Watch how it played out on Squawk Box below: