ChatGPT, the chatbot, is exploding, and everyone is looking for an angle of entry. Google is having its hands full with a combo from Microsoft + OpenAI.
Microsoft recently announced that it will embed ChatGPT-like technology into the Bing search engine and its own Edge browser. Because the display form may be subverted, it has become a consensus that the search industry will usher in an intergenerational change.
Thinking about how Nokia was confused back then, Google immediately sounded the “red alert” and quickly launched the competing product Bard. Unexpectedly, Bard made a mistake in the question and answer at the press conference, which caused the stock price of parent company Alphabet to look ugly, and the event ended with a little embarrassment.
Regarding Google’s lagging behind in product launches this time, Alphabet Chairman John Hennessy said that although Google already has relevant technologies, it is not yet mature enough, so it is hesitant to productize. Other executives at the company have also mentioned considerations in terms of reputation, ethics and safety.
Preemptive OpenAI CEO Sam Altman derided Google the other day as a “sleepy search giant.” But Google can be so “faint”, there is a reason.
“Google it” these days can be said to be pulling results from the ad pile, and the obvious answer may not be the same thing as what you want to ask. For example, if you search for “T-shirt” on Google, most of the homepages are advertisements and product recommendations.
Helplessly, the position of the search boss is too stable. Even if revenue is extremely dependent on advertising, Google is still the leader in its own track, with a market share of 84% in the global PC search market. The second place is Bing, accounting for less than 9%.
Market share of major search engines on the global PC side Source: Statista
The search industry is in turmoil, and Google is naturally the most anxious. It is necessary to be careful when OpenAI becomes a hit, but the big benefactor behind it is Microsoft, which cannot be avoided. Google can only face the difficulties.
Why exactly Microsoft?
In early 2016, Microsoft made its first public foray into the consumer AI market with the launch of the chatbot “Tay.” But a few hours after posting, Tay had to be removed urgently because of the controversy caused by inappropriate remarks.
Not long before the launch of Tay, Google DeepMind launched AlphaGo to defeat Go champion Lee Sedol. Subsequently, Google began to integrate AI technologies such as machine learning into the Google family bucket.
In the same year, the savior of Microsoft AI appeared. Microsoft acquired LinkedIn, a professional social networking site, and Kevin Scott, who was in charge of LinkedIn’s engineering operations at the time, was also included. He rose to Microsoft’s chief technology officer in 2017.
As CTO, Scott wanted to make achievements in AI since 2018, and discussed cooperation with OpenAI CEO Sam Altman, whom he had known for a long time.
OpenAI had just released a large language model and a research paper that combined two existing ideas in the AI field (transformers neural networks and unsupervised pre-training) and then there were generative pre-trained transformation models (Generative Pre-trained Transformer, or GPT).
ChatGPT is driven by the third-generation model GPT-3, and the new Bing search engine released by Microsoft uses a new version of GPT-3.
In 2018, OpenAI’s GPT model was also running on Google Cloud. In 2019, Microsoft invested $1 billion in OpenAI and obtained the exclusive license of GPT. OpenAI agreed to switch from Google Cloud to Microsoft Cloud.
According to people familiar with the matter, the main goals of Microsoft’s cooperation with OpenAI at the time were to enhance search capabilities and provide language translation in Microsoft Office. It is reported that the relationship between the two has “exceeded Microsoft’s initial expectations.”
In early 2020, Harry Shum, head of Microsoft’s AI business, left, and Scott began to be publicly responsible for Microsoft’s AI strategy.
The OpenAI deal lays the groundwork for Microsoft to challenge Google this time around. ChatGPT is so popular that it only took more than 2 months for its monthly activity to exceed 100 million, which is even more exaggerated than TikTok’s 9 months. And these all run on an ever-expanding network of Microsoft servers and data centers. It’s essentially a gigantic supercomputer that helps OpenAI’s models handle all interactions and learn from them.
Such a large-scale consumer interaction can collect massive user data, promote the improvement of technical products, and may bring more benefits. Google Search has long mastered this positive feedback loop, where every time a user asks a question and clicks on a result, the search engine learns from it.
Today, Microsoft has the opportunity to replicate this positive feedback loop with software like Bing and Office. Microsoft recently invested another $10 billion in OpenAI, and Microsoft Cloud Services is the exclusive cloud provider for ChatGPT.
A venture capitalist in the AI field said: “Google has been the monopoly king in the search industry for too long, and this time it must fight for market share. Overnight, many friends who do not want to use Windows computers want to try Bing gone.”
Next, Microsoft and OpenAI may launch new platforms that provide generative AI tools to outside developers, startups, and some larger companies.
Scott recently said: “We are building a platform that consists of powerful computing power and AI models that can be used by many people to build businesses. At present, the platform is still in the early stages of development.”
Google rushes to fight, who loses and who wins?
At a briefing in early February, Bard was asked to explain Webb’s findings to a nine-year-old. Bard mentions that the Webb telescope was the first to image a planet outside our solar system, but astronomers are quick to point out that this was actually first achieved by Europe’s Very Large Telescope (VLT) in 2004. There is a factual error in Bard’s answer.
Alphabet’s stock price plummeted for two consecutive days after that, wiping $163 billion off its market value. And of course, a member of the trillion club.
Some experts also said that Bard made a mistake, and Microsoft will not be alone. After all, ChatGPT is a newly launched product, and even the founder has repeatedly emphasized that the experience of ChatGPT is still very bad. Users still often encounter inaccuracies when experiencing it.
Indeed, Microsoft also made a factual error when it demonstrated the functionality of Bing Chat: multiple data errors occurred in the interpretation of the financial report. In this regard, Microsoft CEO Satya Nadella said that he had expected it, and said: “Because of this, feedback is crucial, which can help us learn and improve the model.”
Experts point out that large language models are the basis of Bard and ChatGPT. Due to the limitations of how the model is constructed, the results are prone to errors. These models contain data sets consisting of billions of words that are used to train the AI to generate plausible answers. Chatbots work in a similar way to predictive text, where a model is built to predict the most likely answer a user would like to see based on the text they enter.
Dr Andrew Rogoyski, from the Institute of Artificial Intelligence at the University of Surrey in the UK, said: “ChatGPT is actually a predictor. The system has memorized a billion books and can answer questions based on that. Everything it answers is essentially repetitive. Something someone said before.”
Google said that the wrong answer at the press conference meant that Bard had to undergo “more rigorous testing” before it could be rolled out on a larger scale.
Microsoft is aggressive with new products this time, whether it can stir up the search industry is still unknown. After all, the number of users is not at the same level, and Google quickly made a strategic defense. If there is no major reshuffle, Microsoft theoretically only has a “window period”, and it can take advantage of the chaos to carve up some shares.
According to Microsoft, every 1 percentage point increase in search market share brings the company an additional $2 billion in revenue. The popularity of chatbots this time has allowed Microsoft to see an opportunity. Microsoft said that with the blessing of AI, Bing can understand user questions more deeply and give smarter answers. Advertisers will also be attracted by this new situation.
It will not be easy for Microsoft to catch up with Google on this track. Microsoft’s search and news ad revenue was $3.2 billion, while Google’s search ad revenue was $42.6 billion, according to the companies’ latest quarterly reports. Chatbots require huge computing power, so using AI to seize or maintain market share will cost a lot.
“I don’t think the new version of Bing, which uses a large language model, will pose a serious threat to Google Search,” said Mark Riedl, a professor at the Georgia Institute of Technology. “Google’s technical reserves in this area should be able to compete with Microsoft and OpenAI.”
But he also said: “But it’s quite a feat for Microsoft to bring competition back to search overnight. It’s going to be a very interesting competition.”
“It’s a new day in search, and rapid innovation is coming,” Nadella said in posting the Bing chat. “Today, a race is really on.”
The search offensive and defensive battle has just begun
The leader is caught off guard, which has been a favorite scene since ancient times. Nokia, which stuck to the old system back then, was changed by the Android phone, which became a classic scene in the replacement of the consumer electronics industry. Coincidentally, Microsoft and Nokia once developed Windows Phone, which is now an out-of-print product, and the Android system belongs to Google.
It’s just that it was caught off guard this time. Google didn’t take it lightly like Nokia did back then, but immediately moved out of Bard to fight, even if it was hasty, it also expressed its position.
Google has been forced to adjust its pace this time, and the search results interface that has lasted for so many years may change its face, and now the search ad display format will change as well. The whole industry is facing challenges, advertising accounts for 80% of revenue Google is the first to bear the brunt.
Microsoft, which is relatively diversified in revenue, seems to be calm and collected. Microsoft CTO said: “I think we will figure out what is the ad unit, will find the right business model, Microsoft has the strength.”
No matter who wins or loses, Microsoft has made Google nervous. Google CEO Sundar Pichai also asked all employees to participate in the Bard test.
The search engine, a long-standing “grievance” track, is always a good thing for consumers, and OpenAI is credited with firing the first shot in the search war with ChatGPT.
At its Q4 2022 earnings meeting, Google announced that it will disclose the financials of its AI business separately in the next quarter. Pichai also said, “Our AI journey has just begun, and the best view is yet to come.”
I believe that a serious Google, an aggressive Microsoft and other players will present a new and vibrant search ecosystem to consumers.