Alphabet is doing very well. Alongside its strong first-quarter earnings report, the company announced its first ever shareholder dividend, as well as a $70 billion stock buyback. It is now a $2 trillion-dollar company — worth more at the moment than Amazon, Meta, and Saudi Aramco.
It’s a gigantic firm with a core product that dominates its sector. Google won search more than a decade ago, and its parent company has been reaping the benefits ever since. Rather suddenly, though, Google is facing threats — real, mounting, and still mostly unrealized — that could set it, and its parent company, on a different trajectory, and soon. One comes from the government. The other comes from competitors. And the last one comes from itself.
A Monopoly at Risk
Last week, Department of Justice lawyers made their closing arguments in one of two active antitrust cases against the company. This one, which has focused on the dominance of Google Search, zeroed in on a particular arrangement, the details of which were long kept secret, per Bloomberg:
Alphabet Inc. paid Apple Inc. $20 billion in 2022 for Google to be the default search engine in the Safari browser, according to newly unsealed court documents in the Justice Department’s antitrust lawsuit against Google. The deal between the two tech giants is at the heart of the landmark case, in which antitrust enforcers allege Google has illegally monopolized the market for online search and related advertising. The Justice Department and Google will offer closing arguments in the case Thursday and Friday, with a decision expected later this year.
The primary goal of this arrangement has already been achieved. Android, the most widely used smartphone OS in the world, is a Google product, and iOS feeds users into Google by default. By holding onto iPhone users as smartphones became ubiquitous, Google managed to become the default portal to the web for a large majority of smartphone owners. What it’s paying for now is maintenance, which Google clearly believes to be valuable. The judge overseeing the case has signaled that Google’s defense sounds sort of weak. From the Verge:
[Apple lawyer] Schmidtlein said Apple had evaluated Bing’s quality against Google’s and ultimately chose Google. But why then, asked [Judge] Mehta, sign such an expensive agreement with Apple? Schmidtlein said that Apple’s ability to leave the agreement every time it expires is “sufficient to keep Google on its toes and keep Google competing.”
An order preventing Google from paying Apple wouldn’t necessarily prevent other, smaller firms from entering into similar revenue-sharing schemes, although it might chill such arrangements for firms that are otherwise paranoid about antitrust action. At best, for Google, this would mean losing an insurance policy on its search dominance — again, something that the company believes is worth massive amounts of money, and which it is vigorously defending in court. It could also crack open the door for competitors, of which there are, rather suddenly, and for the first time in a while, quite a few.
The AI Search Dilemma
Google is still figuring out how to incorporate AI-generated content into its search results, primarily in the form of Search Generative Experience, which drops short, cited responses at the top of search pages. It’s been in semi-public testing for a year and recently started rolling out to users who didn’t sign up to test it.
It’s getting better as a product, although I’ve noticed in myself a growing tendency to skim and scroll past it. It’s more impressive as a demonstration than an actual tool, at least in my experience. By the standards of generative AI tools, it’s fairly cautious and, in recent months, has displayed linked citations prominently. It has become, in other words, something like a search page within a search page — similar links, presented and excerpted, or rather paraphrased, in a slightly different format.
It’s also converging a bit with projects like Perplexity that brand themselves as AI-powered alternatives to search and are likewise trying to figure out what, exactly, it means to fuse technology that generates approximations of the truth with tools at least nominally intended to help you retrieve solid information. The general trend in AI search, such as it is, is toward, well, search — away from verbose generated chatbot answers and toward conspicuous citation and summary. ChatGPT in 2024 is much more obviously connected to the outside web, and to outside data sources, than when most users tried it for the first time. Other chatbot products are starting to feel more like search engines, too: When Meta rolled out AI features on Facebook and Instagram, it put them in the search bar. Using them is a bit like chatting, but a lot like searching — in Meta’s case, blurring things even further, the chatbot will summarize and cite results from Google and Bing. Google can expect a lot more of this: In attempts to build a wide range of products, AI start-ups (and larger tech firms) are suddenly doing an awful lot of web crawling. In the course of doing other business, in other words, they’re acquiring many of the valuable resources necessary to build something like a search engine.
As for whether this suggests a whole new relationship with the internet or a lengthy detour to the same destination, we’ll see. For Google, the more pressing matter is that none of these new search concepts have much, or any, advertising. Competing chatbots, and search engines like Perplexity, have mostly monetized with subscriptions. Meta’s AI responses are very much like search results but contain no ads. Google’s cautious approach to SGE might be explained by this tension: It’s building an alternative style of “search” “result” that — should it catch on, and should users find it better — has no obvious place to the level of advertising that Google displays in its current search pages, which is the productive open-pit mine at the center of its $2 trillion-dollar operation.
This might be a manageable problem for a company whose search dominance is exceptionally well protected, and which has time to experiment. It’s more worrying for a company in a protracted battle with the government — or whose core product is starting to show its age.
Search Is a Nightmare Now
Whether or not Google Search itself is a worse product than it used to be is an open and complicated question, to which the company itself says no, actually, it’s better. Taking a long view of the products, it’s certainly much busier than it was when it was a minimalist upstart — there are ads, widgets, tabs, sidebars, snippets, and now clumps of synthetic text. Questions about overall search quality are difficult to define, much less rigorously test, perhaps to Google’s benefit — that’s one of the many perks of building a company around a black-box algorithm.
One thing that’s easier to observe is that the web on which Google depends — and which depends in various ways on Google — is in pretty bad shape. Websites producing reliable, human content for Google to turn into desirable results are running out of ways to make money. Closed platforms have absorbed much of the person-to-person written communication that Google was previously able to harvest and serve. AI companies are scraping the web, and their users are pumping garbage back into it. Is Google somewhat responsible for destroying the business model of other much smaller businesses? Maybe. Did its dominance establish a set of business incentives that centralized and distorted the sprawling web? Could be! However it happened, it’s also a problem for Google, now, as its search engine tries to produce results from ever-larger amounts of ever-worse material. Google’s longtime dominance means that much of the web sees it as an entity to be gamed, manipulated, appeased, or tricked. It’s a frequently toxic dynamic, and its effects are accumulating.
This creates a different challenge for Google, unique to its status as an incumbent leader: Its competitors no longer have to be great to sometimes feel better, or at least comparable, to Google. Maybe they just have fewer ads. Maybe they’re just more convenient, right there in the chat box. It’s an environment in which iPhone users, if asked to actually choose a default search engine from a list, might actually take a look at something else and stick with it for a while.
This post has been updated.
