Analysis by Brian Fung | CNN
For the better part of 15 years, Google has seemed like an unstoppable force, powered by the strength of its online search engine and digital advertising business. But both now look increasingly vulnerable.
This week, the Justice Department accused Google of running an illegal monopoly in its online advertising business and called for parts of it to be broken up. The case comes a couple of years after the Trump administration filed a similar suit going after the tech giant’s dominance in search.
Google said the Justice Department is “doubling down on a flawed argument” and that the latest suit “attempts to pick winners and losers in the highly competitive advertising technology sector.” If successful, however, both blockbuster cases could upend a business model that’s made Google the most powerful advertising company on the internet. It would be the most consequential antitrust victory against a tech giant since the US government took on Microsoft more than 20 years ago.
But even though the lawsuits drive at the heart of Google’s revenue machine, they could take years to play out. In the meantime, two other thorny issues are poised to determine Google’s future on a potentially shorter timeframe: The rise of generative artificial intelligence and what appears to be an accelerating decline in Google’s online ad marketshare.
Just days before the DOJ suit, Google announced plans to cut 12,000 employees amid a dramatic slowdown in its revenue growth, and as it works to refocus its efforts partly around AI.
A new threat to search
Google has long been synonymous with online searches; it was one of the first modern tech companies whose name would become a verb. But a new threat emerged late last year when OpenAI, an artificial intelligence research company, publicly released a viral new AI chatbot tool called ChatGPT.
Users of ChatGPT have showcased the bot’s ability to create poetry, draft legal documents, write code and explain complex ideas, with little more than a simple prompt. Trained on a vast amount of online data, ChatGPT can generate lengthy responses to open-ended questions, though it’s prone to some errors, or answer simple questions — “Who was the 25th president of the United States?” — which one might have previously had to scroll through search results on Google to find.
ChatGPT is trained on vast amounts of data and uses this to generate responses to user prompts. While ChatGPT’s underlying technology has existed for some time, the fact that anyone can create an account and experiment with the tool has led to loads of hype for generative AI and made the technology’s potential instantly understandable to millions in a way that was only abstract before. It has also reportedly prompted Google’s management to declare a “code red” situation for its search business.
“Google may be only a year or two away from total disruption. AI will eliminate the Search Engine Result Page, which is where they make most of their money,” Paul Buchheit, one of the creators of Gmail, tweeted last year. “Even if they catch up on AI, they can’t fully deploy it without destroying the most valuable part of their business!”
If more users begin to rely on AI for their information needs, the argument goes, it could undercut Google’s search advertising, which is part of a $149 billion business segment at the company. Media coverage of ChatGPT has doubled down on this notion, with some outlets pitting ChatGPT against Google in head-to-head tests.
Not necessarily a nightmare scenario
There are some reasons to doubt this nightmare scenario might play out for Google.
For one thing, Google operates at a vastly different scale. In November, Google’s website received more than 86 billion visits, compared to less than 300 million for ChatGPT, according to the traffic analysis website SimilarWeb. (ChatGPT was released publicly in late November.) For another, even in a world where Google provides specific, AI-generated responses to user queries, it could still analyze the queries to provide search advertising, just as it does today.
Google has its own investments in highly sophisticated artificial intelligence. One of its AI-driven chat programs, LaMDA, even became a flashpoint last year after an engineer at the company claimed it had achieved sentience. (Google has disputed the claim and fired the engineer for breaches of company policy.)
Google CEO Sundar Pichai has reportedly told employees that even though Google has similar capabilities to ChatGPT, the company has yet to commit to giving out AI-generated search responses because of the risk of providing inaccurate information, which could be detrimental to Google in the long run.
Google’s stance highlights both its incredible influence, as the most trusted search engine on earth, and one of the core problems of generative AI: Due to the technology’s black-box design, it’s virtually impossible to find out how the technology arrived at a specific result. For many people, and for many years to come, being able to evaluate different sources of information for themselves may trump the convenience of receiving a single answer.
An ad sales machine under pressure
All this has taken place against the backdrop of what seems to be an extended, multi-year decline in Google’s online advertising marketshare. Google’s position in digital advertising peaked in 2017 with 34.7% of the US market, according to third-party industry estimates, and is on pace to account for 28.8% this year.
Google isn’t the only advertising giant to experience this trend. One-off factors like the pandemic and the war in Ukraine, as well as fears of a looming recession, have broadly affected the online advertising industry. Others, like Facebook-parent Meta, have been particularly susceptible to systemic changes such as Apple’s app privacy updates restricting the amount of information marketers can access about iOS users.
But the decline also comes as Google faces new competition in the market. Rivals including Amazon, TikTok and even Apple have been attracting an increasing share of the digital advertising pie.
Whatever the cause, Google’s advertising business, which is still massive, seems to face growing headwinds. And those headwinds could be exacerbated if some of the predictions about generative AI come to pass, or if the Justice Department’s lawsuits ultimately weaken Google’s grip on digital advertising.
As part of the case, the US government has asked a federal court to unwind two acquisitions that allegedly helped cement a Google monopoly in advertising. Dismantling Google’s tightly integrated ads machine will restore competition and make it harder for Google to extract monopoly profits, according to the US government.
This and other antitrust suits — though threatening in their own right — simply add pressure to the broader dilemma facing Google as it stares down a new era of potentially tumultuous technological change.
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