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Google Search Is Getting an AI Overhaul
Google, Themes
At Google’s annual developer conference, the company gave long awaited details on their plans to make AI the backbone of their products. The most significant announcement is the company will overhaul the search results page, making it an important consumer AI starting point. While investors will have concerns about the upcoming decline in Google's advertising blue links, I believe the opportunity for Google to increase their reach into our lives through AI outweighs the near-term (2 years) ad revenue risks.

Key Takeaways

Google’s search interface will be overhauled in the coming months that will make it easier to find both what you’re looking for and inspiration.
While the frequency of the Google advertising blue links will decline, the probability the company will grow faster for longer should increase.
The other AI announcements included adding generative AI to developer tools, Gmail, Docs, Slides, Maps, and Photos.

Google's upcoming search paradigm

The big question going into Google IO was how will search change with AI. At the event, Google showed off an upcoming new search interface that they referred to as Search Supercharged or SGE (search generative experience). This means you’ll go to Google search to interact with Google’s generative AI. Spoiler alert: the search experience you know well is going to meaningful change over the next year. SGE will be available in Google Labs in a few weeks by invitation, which means it may be months before we start to see it in our daily search results.

Both Google and Microsoft are making search a launch point of generative AI because searching is a daily touchpoint for over 2.5B people. That’s a starting point for Google and Microsoft to increase time spent with AI, and eventually increase revenue per user.

The new search results paradigm will have a greater distinction between types of search queries.  Information queries (who is Abraham Lincoln) will look the most different with a tiles-based approach. Commerce queries will be a mix between tiles and some buy links. Navigation queries will have the least amount of change.

At the bottom of the results will be buttons to go deeper on a topic or activity with the goal of keeping you in search.


The Facebook case study

When I think about the upcoming change to Google’s search results from links to tiles, I think about Facebook’s shift from desktop to mobile. In 2012, shortly after the company went public they informed investors that usage on Facebook was quickly moving to mobile. Management highlighted the shift would have a near-term negative impact on revenue as they experimented with how to sell ads in a news feed format.  Within three months shares of FB declined by 50% as investors reduced their revenue growth outlook. It took 15 months for the stock to return to its IPO price, a sign that investors were comfortable that the mobile opportunity was on par with the desktop. Over the next five years, shares of FB inked a steady upward trend, gaining almost 450% over the IPO price.

The lesson I learned was business model transitions are scary for investors. They will sell first, and wait to see evidence of stabilization. As soon as that’s reached, they rush back in. I expect shares of GOOG will endure a decline in the coming year when investors see firsthand the new search results page. While it’s hard to predict the depth and duration of that decline, I believe it will be short-lived because those 2.5B daily users will be spending more time on SGE than on the previous version. More time spent means more opportunities to make money from the users, and Google has proved over the past 19 years they know what they’re doing when it comes to monetization.


The toy department

In what I would deem news from the toy department, Google announced it will be adding generative AI to developer tools, Gmail, Docs, Slides, Maps, and Photos. While some of these products have more than 1B daily active users, the impact on Google’s revenue will be muted given they tend to be light on monetization. Here’s what AI will mean for each of the products:

  • New developer tools auto-generate code similar to Microsoft GitHub Co-Pilot.
  • Gmail will add generative AI with the “Help Me Write” feature. If you like the sentence suggestions in Gmail today you’re going to love Help Me Write because it will generate text informed by the internet and your email history.
  • Docs will also get the Help Me Write feature and note the source of information so you know that it’s not made up.
  • Slides will auto-create speaker notes.
  • Generate new images like DALL·E 2 with a Google Bard plugging into Adobe Firefly.
  • Maps will add an “Immersive View” which gives route flyovers. It’s basically Street View on steroids.
  • Photos will add magic like editing tools with “Magic Editor.” You don’t have to be a graphic designer to make big edits to your photos. 


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