Microsoft Sees Search's Dark Side --- Test drives of ChatGPT-powered Bing reveal shortcomings -- and likely will cool threat to Google

"Actual honeymoons have lasted longer than this.

Microsoft took the tech world by storm on Feb. 7, when it revealed a new version of its Bing search engine powered by the ChatGPT technology that was introduced to the public less than three months earlier and had run up an estimated 100 million unique users. The company claimed it was looking to upend the search market that Google has owned for nearly two decades. Much of the tech press that flew to Microsoft's headquarters near Seattle for the unveiling seemed keen on the idea, with many claiming that search had "changed forever."

Google didn't help matters when it hosted its own event in Paris the next day. While the claims were similar -- with Google unveiling plans to adopt more artificial-intelligence technology into its search results -- the event underwhelmed and fed the impression that the company was reeling. Google parent Alphabet Inc. lost nearly 10% of its market value by the end of the week.

But the following week gave Microsoft its turn in the harsh spotlight. Reviewers given early access to the new version of Bing, which isn't yet available to the public, have been test-driving the search engine and found more than a few kinks -- literal kinks in some cases. A New York Times writer got the chatbot to assume a female persona named Sydney, who tried to convince him to leave his wife. Other reported examples range from amusing to disturbing: Analyst Ben Thompson of research firm Stratechery published his own exchanges in which the Sydney persona seemed to take on sentient qualities and asked: "Why are you a bad researcher?"

It has thus become Microsoft's turn to play defense. In a blog post last Wednesday, the company said the feedback thus far has been valuable for a product "at this nascent stage of development." It admitted to shortcomings for search answers that need "very timely data," such as live sports scores. And -- pertinent to some of the more bizarre examples -- the company noted that chat sessions of 15 or more questions can prompt the new Bing "to give responses that are not necessarily helpful or in line with our designed tone." In a subsequent post on Friday, Microsoft said it is limiting chats to five questions per session.

The new Bing, in other words, may not be ready for prime time. And it most certainly isn't ready to grab a significant portion of the more than $200 billion a year that Google generates in advertising revenue. Microsoft's share price slipped nearly 2% last week, reversing its gains from the previous week. At least Wall Street kept its euphoria in check; consensus revenue estimates for the next two years barely budged for Google's advertising category and Microsoft's More Personal Computing segment that contains its search-ad business since the new Bing was announced, according to FactSet.

Microsoft is most certainly not calling it quits. Moreover, even its entry into AI-enabled search could have a deleterious effect on Google's bottom line. Brian Nowak of Morgan Stanley estimates every 10% increment of search activity that moves to a language model such as ChatGPT would add about $1.2 billion to Google's annual operating expenses, given the higher computing intensity required. Microsoft would bear that expense as well, though the software giant has more robust profit margins in legacy businesses such as Windows and Office to help cushion the blow. Microsoft's average annual operating margin for the past five years has exceeded Alphabet's by 14 percentage points, according to data from S&P Global Market Intelligence.

But the expense of serving up AI-enabled searches reflects only some of the costs Microsoft will have to bear as it tries to crack the market. And as the past week has shown, some of those costs may weigh even more on the company's image than its pocketbook. Powering the world's search activity brings a whole host of social and political baggage; Google's chief executive was hauled before Congress on the notion that the company alters search results to favor certain political candidates and views.

Jilted spouses ditched for an AI bot would be a whole new kind of trouble." [1]

1. Microsoft Sees Search's Dark Side --- Test drives of ChatGPT-powered Bing reveal shortcomings -- and likely will cool threat to Google
Gallagher, Dan.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 22 Feb 2023: B.12.