Oct 09 (News On Japan) - We will explore how 'AI search,' using artificial intelligence, could affect Google's overwhelming market share in internet search.
This special feature looks into the topic "Google’s dominance: Can AI change the game?" Our guest today is Kazuyuki Okudaira. Okudaira has extensive experience as Silicon Valley bureau chief, and we will hear his insights. First, let’s review just how influential Google is. Its parent company, Alphabet, has a market capitalization of around $2 trillion, or about 300 trillion yen in Japanese currency, making it one of the top five global companies.
Looking at Google's share of the search market in Japan and worldwide, Yahoo still has a presence in Japan, but Google holds 80% here and 90% globally, making it fair to call it a monopoly. In addition to its search services, Google also operates YouTube and runs the Android OS for smartphones. So, although Google generates revenue from areas beyond search, how crucial is search to its overall operations?
As previously mentioned, Google also owns services like YouTube, Android, and self-driving cars through group companies like Waymo. But when it comes to revenue, search-related advertising is its primary breadwinner, accounting for around three-quarters of total revenue. Of that three-quarters, search-related ads dominate. You’ve likely seen related text ads at the top of search results, which generate the bulk of Google's income. This financial success allows Google to provide many of its other services free to consumers. Search and search-related advertising are what make this possible.
With an 80-90% share, Google serves as the gateway to the internet. If your website doesn’t appear in Google search results, it’s almost as if it doesn’t exist online. That’s why Google plays such a dominant role in the internet ecosystem.
Why is it that no other company can seem to beat Google in this space? Google has held this position for nearly 20 years, and a big factor is the vast amount of money it invests in research and development—about 6 trillion yen annually. This constant investment keeps improving its services.
Another key reason is Google's strategic deals, such as paying Apple a substantial amount so that when you search on an iPhone, Google is the default search engine. This applies to Google’s Chrome browser and its Android OS as well. Google has solidified its dominance by controlling these key entry points to the internet.
However, recent developments suggest that Google’s dominance could be facing a turning point. This is why we invited Okudaira today. He has identified two key factors contributing to this shift: one is tighter regulations, such as antitrust measures, and the other is the rise of AI and its potential impact on search.
So, how does AI search differ from traditional Google search? With traditional search, you enter a few keywords, and Google provides links with brief descriptions. AI search, on the other hand, allows users to input full sentences, receiving detailed answers without needing to click through to websites. This is a significant change.
While this is convenient for users, it poses challenges for website operators, as fewer people may visit their sites. Even Google could suffer because its primary revenue source is search-related ads. If fewer people visit web pages via Google, advertisers may have less incentive to spend on ads, impacting Google's core business.
Thus, the AI revolution may indeed be a turning point for Google’s dominance. But smaller companies see this as an opportunity. How are these startups trying to take market share from Google with their AI search approaches?
Source: テレ東BIZ
