Google at a Crossroads in AI-Driven Future: Is It the New Yahoo?
In 1998, a startup called Google was born, challenging the reigning search giant, Yahoo.
By the end of 1999, Google had grabbed a 60% market share. Today, Google still dominates in search with an 80% share, according to Statista. Yahoo has 3%.
However, the search landscape is changing. Artificial intelligence chatbots are getting a bigger share of search. As such, Google finds itself in a market position similar to what Yahoo faced in the dot-com era.
Despite being in existence just shy of three years, OpenAI’s ChatGPT commands an 80.1% share of the generative AI market as of May while Google is third at 5.6%, according to digital analytics company Similarweb.
As generative AI reshapes how people search, Google finds itself at the center of rising opportunity and heightened risks.
The big question: Can Google reinvent itself to stay on top? Or will it go the way of Yahoo?
This month, BofA Global Research said it hosted a bulls and bears debate attended by over 200 investors to discuss Google’s prospects.
“Overall sentiment on the stock was mixed with concerns ranging from share loss and monetization challenges to Apple’s reaction to the DOJ trial outcome, but we found that there is strong share of bulls on the stock,” according to a research report shared with PYMNTS.
The bulls’ rationale included the following:
- Google has superior first-person data (through Gmail, Maps, Android and others) that gives it an edge, especially as foundation AI models commoditize, becoming similar to each other.
- Google knows how to interpret what users are likely to buy or act on based on search queries. Paired with its deep relationships with advertisers and content publishers, this lets it more effectively monetize user interactions. In contrast, AI startups often must scrape the web for data. They don’t have Google’s quality data and ad network to generate similar revenue.
- Most consumers are still used to doing traditional Google searches.
- Google’s non-search businesses such as Cloud, YouTube and Waymo are underappreciated.
The bears countered with these arguments:
- Users are spending more time with AI rivals like ChatGPT, which could reduce how often people use Google. This could result in fewer clicks on Google search results.
- Google’s AI Overviews give information directly in search results instead of a list of clickable links. This may generate less ad revenue especially for shopping links advertisers pay more for.
- If Apple switches to an AI rival like ChatGPT to power Safari search, as part of the DOJ settlement, Google could lose valuable search traffic and ad revenue from iPhone users.
Despite these concerns, BofA analysts said Google’s future is not yet set.
“Google is far from exhausting all its competitive options and could get more aggressive post-DOJ search case decision,” the report said.
But generative AI is changing the landscape, and Google will have to adapt. According to BofA, “ad models will evolve where the quality of the outcome matters more than the quantity of traffic.” This shift away from measuring paid clicks may signal the need for updated performance metrics such as average revenue per user (ARPU).
Read also: Google Could Face New Search Oversight From UK Watchdog
How Search Will Change
Adam Behrens, CEO of retail AI tech startup New Generation, told PYMNTS that in five years, “Google won’t be a list of links. It’ll be a service where you get answers, then actions, which changes how people shop and what they expect. The traditional ad model starts to break down because there’s less screen space and fewer choices; you either show up ready to be picked, or you’re invisible.”
“For brands, it means they can’t just live behind a website anymore,” Behrens said. “They need to show up across the entire AI ecosystem so they’re shoppable, searchable and ready for whatever agent your customer is using.”
The stakes are getting higher. The average AI search visitor is 4.4 times more valuable than the average visit from traditional search based on conversion rates, according to data from Semrush.
BofA said Google is making changes to pivot. Search is becoming a “multimodal intelligent assistant,” and the new Smart Bidding Exploration lets advertisers bid not just on keywords but contextual search queries, from “mortgage,” for example, to “how to buy a home.”
Google has also introduced paid AI subscriptions, including Google AI Pro and Google AI Ultra. It is introducing ads into free tiers of AI services such as AI Overviews, AI Mode, Gemini’s responses and the light version of Workspace (Gmail, Docs, Sheets and others). And it has embedded Gemini into paid Workspace subscriptions and raised prices.
Google Cloud’s Vertex AI platform serves enterprise AI needs, where businesses pay per use for model training, fine-tuning and inference.
Still, there are challenges ahead.
“AI responses may generate lower revenues for high-value commercial queries,” BofA said, while data showed that “zero-click searches” have risen to 27.2% of queries in the United States, up from 24.4% a year earlier.
ChatGPT’s monthly web visits top 7% of Google traffic as of May, according to Similarweb. That’s up from 2% in January 2024. In mobile, ChatGPT has 600 million monthly active users compared with 1.57 billion for Google apps, excluding Chrome and Safari mobile users. Gemini has 22 million active users per month.
OpenAI is also planning to introduce ads in ChatGPT as early as next year, according to BofA. These ads could take the form of sponsored content, product recommendations and affiliate links, for example. The hiring of Instacart CEO Fidji Simo as CEO of applications bolsters OpenAI’s ad prowess since Simo scaled the ad businesses of Meta and Instacart.
Other rivals are also nipping at Google’s heels. Meta’s AI assistant, called Meta AI, already has 1 billion monthly users. Amazon has upgraded its Alexa AI capabilities and integrated its Rufus assistant in the Amazon shopping app. It also seems to be aiming to become the “agentic starting point for all shopping” with its Project Nile Agent, BofA said.
Looking ahead, BofA said Google’s future may depend not only on the capabilities of its technology but also on its ability to shift strategy, maintain its ecosystem advantages, and execute at scale in a fragmented and fast-changing AI landscape.
“AI will cause significant changes to Google over the next five years and most are positive,” Baruch Labunski, founder of Rank Secure, told PYMNTS. “Small- to medium-sized businesses will be the most affected, and how well they survive depends on their willingness to learn how to use and embrace it.”
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