The primary source of data used to target Google advertisers is Alphabet’s (NASDAQ: GOOG | GOOG Price Prediction) Chrome browser. Its desktop market share is 66%. Its mobile share is slightly higher. AI software market leader OpenAI plans to launch a browser of its own. If it gets enough adoption, it could cut into Google’s revenue sharply.
Although it is unclear what level of market share OpenAI would need to have to challenge Chrome, Reuters claims Open AI need to get 500 million users to be a force in the browser segment
For Google, Chrome is the product that gets many of its search features and other products like Gmail and its AI product Gemini onto desktops and wireless devices. Google’s advertising business is about two thirds of parent Alphabet’s revenue. The AI threat is among the reasons Alphabet’s stock is down 7% while the S&P 500 is up 7%.
However, Alphabet has a greater problem than AI competition today. The Justice Department is asking that it be broken into pieces. Its argument is that Chrome’s market share gives Google a monopolist’s position. Alphabet’s search market share at over 90%. According to The Wall Street Journal, “In the span of a year in the U.S., federal courts have judged Google a search-engine monopolist and an ad-software monopolist.”
What is unclear is what a lead in the AI business means in terms of dollars. OpenAI’s annual revenue run rate is $10 billion. No other competition comes close based on this yardstick. Alphabet’s revenue last year was $350 billion. A Bloomberg analysis shows OpenAI can’t be cash flow positive until its revenue reaches $125 billion.
The metrics for downloads and profit among AI software products is a mess. Development of products are still in early stages. Huge numbers of people use AI, but it could be years before it becomes clear that it is an essential part of most people’s lives and the profitability of large numbers of businesses.
Finally, Google has one advantage, and that is its brand equity. Many people who want to use the internet to get information will probably not break the Google habit for a long time
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