Originally published on Searchblog

Recently, I raised the question of whether Google was facing difficulties, and many of you have reached out to inquire about possible solutions for the company. While it's straightforward to assert that Google has become overly large, stagnant, and reliant on its primary revenue sources, providing actionable advice is more complex. One of you shared a sentiment that resonates: "No significant corporation can sidestep the innovator’s dilemma."

Yet, wouldn’t it be exciting to attempt to overcome this? Over the last few weeks, I've spoken with several individuals at Google while working on a piece about the ideal presentation for ads related to ChatGPT and AI-enhanced search (and I promise, it will be available soon). Although the Google team has been courteous and responsive, they have largely maintained a stance of "no comment," indicating that it's premature to define the business model for conversational search. Essentially, they're observing the market's evolution before making any definitive public statements or committing to the latest technological trend.

This cautious approach makes sense if you're in a defensive posture—protecting existing revenue streams and safeguarding market share. However, I can't help but ponder what it would look like if Google decided to adopt a more proactive approach.

The mood was notably defensive during Google's recent Q4 2022 earnings report presented to Wall Street earlier this month. Following that, they also "unveiled" Google Bard at a search event in Paris a week later. The company had faced significant negative news recently—OpenAI launched ChatGPT and partnered deeply with Microsoft, Google laid off 12,000 employees—the largest reduction in its history—and Q4 advertising revenues plummeted. Those were certainly challenging headlines, especially with Microsoft unveiling Bing Chat just a week later.

Consequently, it was no surprise that the tone during the earnings call was defensive. CEO Sundar Pichai opened with, “The macroeconomic environment has become increasingly difficult," followed by an anecdote that did little to alleviate concerns. “We maintain an extraordinary business and deliver invaluable services to our users and partners. For instance, during the World Cup Final on December 18, Google Search experienced its highest-ever query-per-second volume.”

But the pressing question remained: What actions are being taken regarding Microsoft and OpenAI? Pichai and his colleagues danced around that inquiry, never addressing it directly. AI was a focal point of the earnings call—Google has established credibility in this domain—but the company exhibited extreme caution regarding any specific product commitments or revenue forecasts. "Very soon," Pichai assured, "users will interact directly with our most advanced language models as a companion to Search in experimental and innovative manners. Stay tuned."

Stay tuned? It's been nearly four weeks since that declaration. Additionally, it's been three weeks since Google hastily released a rudimentary version of Bard—an offering that the press quickly criticized. At that time, I defended Google, suggesting that given the issues with Microsoft’s initial rollout, it was reasonable for Google to adopt a wait-and-see approach.

“Wait and see” was indeed the theme of Google's earnings call. Pichai responded to inquiries about integrating AI into their offerings by saying, “We’ll proceed cautiously. We’ll be launching more as Labs products in select cases, beta features in certain instances, and gradually scaling from there... I view this as still very early days...”

Such prudent and measured language is expected from a company hesitant to jeopardize its market dominance. In stark contrast, Microsoft CEO Satya Nadella, during his earnings call the week prior, boldly proclaimed that Microsoft was transforming "the world’s most advanced AI models into a new computing platform." In the weeks that followed, Microsoft has been vocal about AI’s transformative potential. "It’s a new day in search," Nadella announced at a search event on February 7th, effectively capturing the narrative of the next significant technological evolution while leaving Google—pioneers of modern search—looking like a follower.

Meanwhile, Google has remained largely silent—perhaps hoping that Bing Chat will prove to be a fleeting trend, and that Wall Street's enthusiasm for Microsoft will wane similarly. For the last couple of weeks, I agreed with this strategy. However, I’ve reconsidered. I believe it's time for Google to accelerate its efforts—regardless of Wall Street's reactions.

Here's my rationale: I view chat-based search as the precursor to a substantial shift in how we engage with the digital landscape, and the entity that leads this transition stands to gain immensely. This is not the moment for hesitation; it's a time to assert leadership, experiment, learn, fail fast, and iterate. In essence, it’s time for Google to act as every developer utilizing OpenAI’s API is currently doing, and to start gleaning insights like every engineer and product manager at Bing Chat is already learning. It’s time to launch products, proclaim leadership in this emerging market, and articulate a vision for the future of computing.

Although this vision remains somewhat nebulous, it is on the horizon. The user experience with ChatGPT, Google Bard, or Bing Chat fundamentally diverges from traditional search methodologies. Conventional search prioritizes swiftly converting the user—directing them to the correct site, advertisement, or link to click. The underlying objective is to generate revenue as quickly as possible for Google—this has led to the development of models like the One Box or vertical search categories like Flights or Maps. Any obstacle to achieving these aims threatens the very foundation of search's business model. There's a reason that search engines do not pop up prompts like “Wait, did you mean...?” Approximately 50% of search users abandon queries if they do not receive the correct result after just one attempt. For 25 years, Google has been optimized for one purpose: to provide rapid answers while generating revenue.

Conversely, the interface for ChatGPT-like services is nearly the polar opposite. Users engage with the service in a conversational manner, refining queries and exploring ideas through informal dialogue. The primary aim is not to take immediate action but to gather information. While subsequent actions can certainly be taken (and there are financial opportunities there, which I will address in a future post), the critical shift lies in the fact that we are conversing with the computer, which is providing coherent responses. This transformation alters not only the nature of our queries but also our expectations when interacting with the service. Although Microsoft is already advertising blue paid links to agencies, there's no feasible way to apply current monetization strategies in the context of this type of service.

When viewed through this lens, it's evident that Google is racing to spearhead an entirely new consumer behavior poised for massive scale. This represents a significant market redefinition, one that Google is well-positioned to dominate. The company has already trained millions of users to communicate with their devices via voice search. While Google Home and Google Assistant have not gained traction, this is largely because the company has not provided compelling reasons for users to adjust their expectations regarding computing capabilities. Chat-based interfaces will transform this dynamic. Can Google truly afford to fall behind when this wave begins to crest?

However, a more cautious perspective might argue that Google must prioritize safety. What could possibly go awry? Google cannot risk its reputation on uncertainties (though Rob Reid has insights on this). Furthermore, Google's core search business faces fundamental threats from chat-based search—it cannot afford to cultivate a new generation of users with a product lacking a clear monetization strategy.

To these concerns, I respond with skepticism. Google must embrace risks—it cannot allow startups and competitors like Microsoft, who have less to lose, to seize the leadership position. This is the time for audacity. Regarding reputation, it’s not as if Google will discontinue its legacy search service upon launching something like Bard—users (and the media) can differentiate between "beta" and a trusted, long-standing service.

What about the monetization concern? Disregard it. During an Industry Standard conference in 1999, early Google investor and renowned venture capitalist John Doerr was asked how Google would generate revenue. I vividly recall him looking at the questioner in disbelief. He highlighted the rapid ascendance of search within the computing landscape, how swiftly Google had established its dominance, and quipped, "with all that traffic, we’ll figure it out." Eighteen months later, Google introduced AdWords. Imagine if they had waited to determine a monetization strategy before launching Google Search?

I am confident that monetization will follow—however, the priority should be to refine the product. To accomplish this, you must actively participate in the market, leading with both vision and action. Google’s original cash cow is not going anywhere; it has provided the company with billions in cash reserves and a trusted brand utilized by billions. It’s time to allocate some of that capital—and once more, figure out the future in real-time.

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