16 February 2023 ARE WE ON THE VERGE OF GOOGLE’S KODAK MOMENT? - By Dr. Francois Stofberg, Managing Director: Efficient Private Clients
You have been tasked with a last-minute instruction: you have to deliver a speech to a group of investors on how South Africa will be able to weather the current loadshedding crisis. After burning the midnight oil, you have not even drafted an introduction. With only an hour left, you go to ChatGPT and ask it to write a short introduction for you. In less than 10 seconds it writes a sublime 50-word introduction. It is a hit with the audience! This is exactly what newly appointed Chancellor of the Exchequer, Jeremy Hunt did in a recent pro-innovation speech to the UK government.
A couple of years ago, few would have envisioned a world where anyone could write and debug code, lengthen or shorten documents, translate whole documents and, yes, even write music in a matter of seconds. But now, we have an artificial intelligence (AI), self-learning chatbot called the Chat Generative Pre-trained Transformer, or ChatGPT for short. Launched in November 2022 by its parent company, OpenAI, who count Elon Musk as one of its founders, it has already reached more than 100 million users – a milestone it hit faster than TikTok. ChatGPT has created a zeitgeist moment for its versatility and efficiency. And off course, its potential to dethrone Google as the king of search engines.
Alphabet-owned Google has dominated the search market for over two decades. It handled more than 92% of all search queries in 2022 alone compared to its closest rival, Microsoft’s Bing, which handled 3.4% of all search traffic. Google’s success largely hinges on its ability to pick up new sites faster than any other search engine, enabling users to search the latest news and other information sites. Generally, it also loads more sites than other search engines do. But what if users do not want to scroll through large swaths of information? What if they are in a hurry and want specific information now? In our fast-paced world, things like food and merchandise arrive at your door with the click of a button. We want the same when it comes to information. ChatGPT offers just that.
Satya Nadella, Microsoft’s Chief Executive Officer, certainly believes that the technology could be a potential Kodak moment for Google. It could have the same economic impact as electricity did more than a century ago. Nadella has certainly put his money where his mouth is. Microsoft recently made its third investment, estimated at $10 billion, in OpenAI, cementing it as one of the most valuable US startups ever. For Microsoft, the opportunities are endless. It could go so far as to incorporate ChatGPT into most of its widely successful applications such as its search engine, Bing, or its coding tool, Github, or even its more traditional Office and Windows products. For example, if it can capture just 2% of the search engine market share, it will generate an additional $4 billion in revenues. That is a massive gain! The onus is, therefore, on Alphabet to defend its own castle or risk losing billions of dollars in advertising revenues. Microsoft has already outperformed the search giant by more than 13% since November 2022. So, investors certainly think it can steal some of Google’s lunch.
It is always wise, however, to consider both sides of an argument. When you sign up for ChatGPT, you are reminded that the software sometimes writes answers that sound plausible but are, in fact, incorrect. For the past two decades, Google has forged its reputation as a reliable and steadfast search engine. This will not change overnight. And, apparently, ChatGPT is horrible at math. There is also competition from existing players. Google, for example, already invests significantly in AI. Over the past three years alone, it has spent a $100 billion on researching new products and a further $79 billion on rolling out products. One of these is an AI-based chatbot called Bard, which it plans to integrate with its own core search engine in the near future. That certainly is one way to fend off Bing.
Global leader in financial services, Morgan Stanley believes that technologies need to offer solutions that are ten times better than the next if they wish to drive significant (aka billions of people) behavioral change. This is a Herculean task for any corporation when Google is involved. But there is no question that technologies such as ChatGPT, which will take a little time to yield fruit, can change industries. As for Microsoft, their first mover advantage might be exactly what dethrones the king of search engines, or at the very least pierce its armour.