Microsoft Takes Chance In Challenging Google

"Microsoft may or may not ultimately win the artificial intelligence war, but it sure is winning the news cycles.

The software giant said Tuesday that it is incorporating the latest ChatGPT technology into its Bing search engine and Edge web browser. The move brings the conversational AI tool directly into the search experience and furthers Microsoft's efforts to capitalize on the public hype that has grown up around the chatbot since its surprise release to the public less than three months ago.

ChatGPT has already surpassed 100 million users, according to UBS estimates. Analyst Lloyd Walmsley notes that it took TikTok three times as long to reach such a scale -- while Instagram took about 10 times as long.

Tuesday's announcement counts as the most direct challenge Microsoft has made to archrival Google on the latter's home territory, and it wasn't subtle: "We want to have a lot of fun innovating in search, because it's high time," Microsoft Chief Executive Officer Satya Nadella said at a splashy media gathering at the company's headquarters near Seattle on Tuesday. Google responded with its own event Wednesday morning, announcing plans to add more AI functions to its own search tool. That came just a couple of days after the company unveiled its own conversational AI service called Bard.

Both companies have been investing in artificial intelligence for years. But the recent flow of events has made Google look like a boxing champion knocked back on its heels and trying to regain footing. The immediate popularity of ChatGPT reportedly compelled the company owned by Alphabet Inc. to declare a "code red" among managers internally in December, and even Bard looks like a scramble; CNBC reported Monday that Google CEO Sundar Pichai sent an all-hands memo to the company's employees seeking their help in testing the service before its release to the public.

Google is right to worry. Even compared with other tech behemoths, Microsoft is uniquely positioned to challenge Google's search dominance. Operating the world's second-largest cloud computing service gives Microsoft the network infrastructure to match Google's own. Microsoft also is the only other tech giant outside of Apple to exceed Google's annual free cash flow generation of $60 billion. Microsoft also already has a long tenure in the search business, having launched Bing in 2009.

But the history of the search market before and since also shows why Google will be hard to dislodge. Bing has never managed market share of more than 4%, while Google's share has slipped slightly under 90% on only a handful of occasions since 2009, according to data from Statcounter. Google was even added as a verb to Merriam-Webster's Dictionary in 2006.

There is also Google's long-entrenched relationship with those who really foot the bill for search; Jefferies analyst Brent Thill says Microsoft "will need a crowbar to pry away advertisers from Google."

Success might also bring Microsoft a host of new problems. The company is no longer flying under the radar of regulators looking to crack down on big tech. Its proposed acquisition of videogame publisher Activision Blizzard is drawing opposition on both sides of the Atlantic.

The U.K.'s Competition and Markets Authority said Wednesday that the proposed deal would hurt gamers unless concessions are made, while the FTC already has sued to try to block the deal. The uproar is basically centered on the fear that future PlayStation gamers might not have full access to "Call of Duty."

By contrast, taking even a sizable chunk of Google's share of the search business would extend Microsoft's already considerable influence across several key technology markets -- not to mention the additional financial heft that would come from eating into an advertising business now generating more than $200 billion a year in revenue and expected to top $300 billion by 2027. Before Microsoft gets to counting its search dollars, it may need the new Bing to help it find a lot more lawyers." [1]

1. Microsoft Takes Chance In Challenging Google
Gallagher, Dan.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 09 Feb 2023: B.12