Google at a Crossroads in AI-Driven Future: Is It the New Yahoo?
Google’s search engine helped kill Yahoo, which was the search giant during the dot-com era, but can Google stay on top as AI proliferates?
BofA Global Research hosted a bulls and bears debate among investors about Google’s destiny in the AI era, with mixed results.
Google is changing to compete, and small- to medium-sized businesses could see the most impact, according to one company executive.
The Evolution of Google and AI
In 1998, a startup called Google was born, challenging the reigning search giant, Yahoo. By the end of 1999, Google had grabbed a 60% market share. Today, Google still dominates in search with an 80% share, according to Statista, while Yahoo has 3%.
However, the search landscape is changing. Artificial intelligence chatbots are getting a bigger share of search. As such, Google finds itself in a market position similar to what Yahoo faced in the dot-com era.
The Rise of Generative AI
Despite being in existence just shy of three years, OpenAI’s ChatGPT commands an 80.1% share of the generative AI market as of May, while Google is third at 5.6%, according to digital analytics company Similarweb. As generative AI reshapes how people search, Google finds itself at the center of rising opportunity and heightened risks.
The Future of Google in the AI Era
The big question: Can Google reinvent itself to stay on top? Or will it go the way of Yahoo? This month, BofA Global Research said it hosted a bulls and bears debate attended by over 200 investors to discuss Google’s prospects.
“Overall sentiment on the stock was mixed with concerns ranging from share loss and monetization challenges to Apple’s reaction to the DOJ trial outcome, but we found that there is a strong share of bulls on the stock,” according to a research report shared with PYMNTS.
The bulls’ rationale included the following:
- Point 1
- Point 2
The bears countered with these arguments:
- Counterpoint 1
- Counterpoint 2
Despite these concerns, BofA analysts said Google’s future is not yet set. “Google is far from exhausting all its competitive options and could get more aggressive post-DOJ search case decision,” the report said.
Adapting to the Changing Landscape
Generative AI is changing the landscape, and Google will have to adapt. According to BofA, “ad models will evolve where the quality of the outcome matters more than the quantity of traffic.” This shift away from measuring paid clicks may signal the need for updated performance metrics such as average revenue per user (ARPU).
The Future of Search and AI
Adam Behrens, CEO of retail AI tech startup New Generation, told PYMNTS that in five years, “Google won’t be a list of links. It’ll be a service where you get answers, then actions, which changes how people shop and what they expect. The traditional ad model starts to break down because there’s less screen space and fewer choices; you either show up ready to be picked, or you’re invisible.”
“For brands, it means they can’t just live behind a website anymore,” Behrens said. “They need to show up across the entire AI ecosystem so they’re shoppable, searchable and ready for whatever agent your customer is using.”
The stakes are getting higher. The average AI search visitor is 4.4 times more valuable than the average visit from traditional search based on conversion rates, according to data from Semrush.
BofA said Google is making changes to pivot. Search is becoming a “multimodal intelligent assistant,” and the new smart bidding exploration AI.
