The Deepwater Frontier Tech Index aims to provide investors with exposure to themes that we will be talking about in 3-5 years. Go deeper.
This is a series of monthly posts providing an update on performance and sharing what’s on our mind in frontier technology.
What is On Our Mind?
How will Google and Bing monetize chat?
Investors have pondered this question since ChatGPT roared into existence late last year. One answer is starting to become clear and probably isn’t that surprising: Ads.
Product ads in AI chat like this feel like display ads on Facebook in 2008.
If ads are ultimately part of AI chat monetization, we should assume they feel more like News Feed ads than poorly targeted, legacy product ads.
As a proof of concept though, a plug for a company to help you with whatever your query was about seems like an obvious and useful way to integrate ads into AI chat responses.
Given Google’s DNA as a company that makes free products available to as many users possible, and Bing’s direct competition with Google, it seems inevitable that ads will be a part of the AI chat experience of the future. Maybe there are more creative ways to insert promotions into chat responses, or maybe Google and Microsoft need to reconsider ads as the basis of monetization for AI products.
The Bigger Monetization Picture
The major bear case on Google has been that AI chat is going to cannibalize search queries; however, there are key differences in AI chat use cases that may determine different maximal paths to monetization.
We use a simple mental model to frame search vs. AI chat use cases:
Search has two core use cases. People use it to look up facts and find things to buy. Both use cases are things that AI chat can also do, although it’s debatable whether AI does it any better than Google. At least for now.
How Can I Invest in the Index?
Deepwater partners with Innovator ETFs to offer the NYSE-listed Innovator Deepwater Frontier Tech ETF. The ticker is LOUP.
To learn more about how to invest, visit the Innovator website.