Former CEO Eric Schmidt’s opinion about the cause of Google’s struggles didn’t help the situation:
“Google decided that work life balance and going home early and working from home was more important than winning. And the reason startups work is because the people work like hell.”
Google’s AI Overviews are the antithesis of the classic search model. Early referral traffic data from gen AI like ChatGPT, Gemini, and Perplexity shows a tiny amount of users clicking through to sites.
If that’s any indication of what we can expect from AI Overviews, Google is turning from a click distributor to an engagement platform.
Advertising
The big question for Google shareholders is how well the company can navigate advertising in the new LLM search world.
Ads can be complementary to search results. But, when users get the answer directly, sponsored results distract from the experience. The old ad format might not fit the new mold. Google has to figure this out but has not yet delivered an innovative approach.
AI transforms digital advertising across creative + copy, matching/targeting, and spend optimization.
However, with more AI Overviews answering questions in the search results, users might need fewer queries to solve problems overall, shrinking the ad market for Google.
Google is projected to hit an all-time low of less than 50% of available ad dollars next year. Strong challengers like Amazon and TikTok and long-term rivals like Meta are grabbing market share.
Google is projected to hit less than 50% ad revenue market share in 2025 (source) (Image Credit: Kevin Indig)
Google announced a new shopping experience with little to do with a classic search engine.
The reimagined ecommerce experience shows how hard Google wants to compete with Amazon, which faces more competition from TikTok.
As a result, TikTok is competing not only with Google in search but also with ecommerce.
The focus on ecommerce indicates the opportunity for Google to make money from high-intent searches when users don’t need to click through to sites anymore for answers.
But Google wasn’t able to ever kick Amazon off the throne, leaving it exposed for commercial queries.
We can only hope that Prabhakar’s departure leads to a better Google Search. Nick Fox, who will succeed Raghavan, might not be the change agent we seek.
In an email thread with then Head of Search Ben Gomes from 2019, Fox seems open to taking on revenue goals but also not an advocate for it.
To Ben Gomes’ concern:
“…I think we are getting too involved with ads for the good of the product and company…”
Fox responds:
“Given that (a) we’re responsible for Search, (b) Search is the revenue engine of the company, and (c) revenue is weak, it seems like this is our new reality of our jobs?”
However, I question how important Fox is for the future of search anyway. The more important person is Demis Hassabis, founder and CEO of Deep Mind.
Every leadership change brings with it an opportunity to move to a better formation.
With Raghavan’s “promotion” come two important shifts: Gemini moving under Deep Mind, and Assistant moving to the devices team.
Hassabis is the person we need to watch because he now runs Gemini and with it, the quality and volume of AIO answers.
On the talking track, Hassabis stresses the need for responsible use of AI.
How that manifests remains to be seen.
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