Search Is Dead
Google built its empire on search ads, but its own AI is now undercutting that golden business model. Whether Alphabet can replace that revenue before it erodes is the question keeping analysts up at night.
Have a look at Alphabet’s (NASDAQ: GOOG | GOOG Price Prediction) results. Maybe adding AI wasn’t such a good idea. When Google launched AI in its search function, its engineers wrote, “We’re bringing our advanced model capabilities to Search with new AI features, enabling you to use agents just by asking a question.” Chief Business Officer Philipp Schindler acknowledged that the rapid adoption of AI Mode and AI Overviews (which drove a 5-year high in overall query growth) weighed on quarterly results because AI-generated search queries currently feature ‘lower monetization’ than traditional ad-supported search links. (Gemini generated this summary of his comments as a test.)
For some time, the theory has been that people would use AI apps to replace search. Experts said this approach was stupid. AI had been built to handle much more complicated tasks. Using it as a search engine created bad habits. People who use it this way will never understand AI’s power.
Google has driven Alphabet’s growth since it launched in 1998. In the most recent quarter, “Google Search & other” was up 11% to $63.4 billion. Total revenue rose 24% to $127.6 billion. Thomas Monteiro, senior analyst at Investing.com, looked at the results and worried things would continue to go south: “Until Google shows it can charge for AI the way it once charged for search ads.” Given Google’s amazing run making money on search, the worry is reasonable.
Google’s share of the search market worldwide outside of China and Russia is 89%. Several companies have tried to take a piece of that, including Microsoft’s Bing. One theory is that people are so used to using Google that the brand, just as much as the accuracy of the results, makes Google so successful. That will be debated for a long time.
But here is the crux of the matter: Companies like Ford (and every other legacy car company in the world) thought that EVs were the wave of the future. Granted, they all sold some EVs. Granted, it may have dented their gas-powered car sales. But their old business is what made them profitable. As search dies, Alphabet has not been able to prove it has found a replacement. Google=profit. AI not so much
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
