Is ChatGPT Taking Market Share From Google Search? Alphabet ...
Alphabet's stock may look cheap, but investors may want to think twice about buying it. Alphabet (GOOG 1.92%) (GOOGL 1.90%) has built its business around two high-prized assets over the years: YouTube and Google Search. The latter, however, is facing some significant headwinds right now. Regulators have been taking a hard look at its dominance and recently found that it acted as a monopoly.
Rise of AI Chatbots
With a rise in artificial intelligence (AI) chatbots, there may be less of a reason for people to rely on search engines at all. While the transition may not be instantaneous, there could already be a sign that Alphabet's business may be in trouble.
According to a recent survey conducted by investment banking firm Evercore that involved 1,300 Americans, 8% said they are using ChatGPT as their go-to search engine. That's up from just 1% a few months earlier. Google Search remains the leader with 74% of surveyed users relying on its results, but that is down from 80% in the earlier survey.
There's not necessarily a cause for alarm as Google firmly remains the top choice for many users. And an uptick in interest in ChatGPT may still not be a concerning trend for the business. ChatGPT has been around since November 2022, and if its share of search was around just 1% recently, that suggests it hasn't been taking a whole lot of traffic from Google despite its soaring popularity.
Potential Threat to Google's Dominance
While the recent increase in people opting to use the chatbot rather than Google Search is not a good sign for Alphabet, it may not necessarily be indicative of a problematic and long-term trend -- at least not yet. However, the risk is real. Chatbots like ChatGPT can potentially divert traffic away from Google Search. If people can get answers through a chatbot, Google's search engine may not be nearly as valuable as it once was.
Whether it's ChatGPT or another chatbot, the danger for Google is that it may finally have some real competition to worry about now. Its position in search has been so strong that a U.S. judge ruled last month that the company had a monopoly on it. According to data from statcounter, Google accounts for 90% of the search engine market share, and Microsoft's Bing comes in at a very distant second place with just a 4% share of global searches.
Impact on Alphabet's Growth Prospects
If Google's search dominance is in doubt, that could drastically impact Alphabet's long-run growth prospects because of how dependent it is on searches. Revenue from Google Search and related properties totaled more than $48.5 billion in Alphabet's most recent quarter (which ended on June 30), accounting for 57% of its top line. If there's a noticeable decline in that figure, that could spell trouble for the tech stock.
Conclusion
Although it may seem like a bargain buy, Alphabet's stock is trading at a discount for good reason -- there's a fair amount of risk with the business in both the short term and the long run. Unless you're a contrarian investor and have at least a moderate risk tolerance, you may be better off pursuing other growth stocks instead.
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