Google is reportedly considering charging for premium AI-powered Internet searches as the company fears that AI chatbots are undercutting its search engine.
Advertising-Funded
Google, up until now, has relied mainly on an advertising-funded business model (Google Ads) as a way to collect data and monetise its market-leading search. However, it seems that fears around users asking queries via generative AI chatbots (e.g. Microsoft-backed OpenAI’s ChatGPT) which they would normally use Google search for, could cut Google out of the equation. This threat of missing out on user data and revenue, plus damage to the value of its ad service have apparently prompted Google to look at other monetising alternatives. Google, like other AI companies (with its Gemini family of models) is also likely to be looking for some return on its considerable AI investment thus far.
The Big Idea
Google’s big idea, therefore, appears to be:
– Making its AI search become part of its premium subscription services (putting it behind a paywall), e.g. along with its Gemini AI assistant (offered as Gemini Advanced).
– Keeping its existing Google search engine as a free service, enhanced with AI-generated “overviews” for search queries, i.e. AI-generated concise summaries / abstracts to give users quick insights.
– Keeping the ad-based model for search.
Ad-Revenue Still Vital
When you consider that Google’s revenue from search and related advertising constituted at least half of its sales in 2023 (£138bn), and with the rapid growth of AI competitors such as ChatGPT, it’s possible to see why Google needs to adapt. Getting the monetisation of its AI up to speed while protecting and maximising its ad revenue as part of a new balance in a new environment, therefore, looks like a plausible path to follow for Google, in the near future.
As reported by Reuters, a Google spokesperson summarised the change in Google’s tactics, saying: “We’re not working on or considering an ad-free search experience. As we’ve done many times before, we’ll continue to build new premium capabilities and services to enhance our subscription offerings across Google”.
AI Troubles
Although a big AI-player, Google perhaps hasn’t enjoyed the best start to its AI journey and publicity. For example, after arriving late to the game with Bard (being beaten to it by its Microsoft rival-backed OpenAI’s ChatGPT), its revamped/rebranded Gemini generative AI model recently made the news for the wrong reasons. It was widely reported, for example, that what appears to be an overly ‘woke’ Gemini produced inaccurate images of German WW2 soldiers featuring a black man and Asian woman, and an image of the US Founding Fathers which included a black man.
What Does This Mean For Your Business?
With Google heavily financially reliant upon its ad-based model for search, yet with generative AI (mostly from its competitor) acting as a substitute for Google’s search and eating into its revenue, it’s clear to see why Google is looking at monetising its AI and using it to ‘enhance’ its premium subscription offerings. With a market leading and such a well-established and vital cash cow ad service, it’s not surprising that Google is clear that it has no plans to change ad-free search at the moment. However, the environment is changing as generative AI has altered the landscape and the dynamics. Thus, Google is having to adapt and evolve in what will potentially become a pretty significant tactical change.
For businesses, this move by Google may mean the need to evaluate the cost-benefit of subscribing to premium services for advanced AI insights versus sticking with the enhanced (but free) AI-generated overviews in search results. This shift could mean a reallocation of digital marketing budgets to accommodate subscription costs for those who choose the premium service.
For Google’s competitors, however, Google’s move may be an opportunity to capitalise on any dissatisfaction from the introduction of a paid model. If, for example, users or businesses are reluctant to pay for Google’s premium services, they might turn to alternatives. However, it may also add pressure on these competitors to innovate and perhaps consider how they can monetise their own AI advancements without alienating their users.