Monopoly Preservation, Risk Aversion Hurt Google AI Development, Says Gmail Creator

When ChatGPT burst onto the tech scene in November 2022, many in the tech community were left wondering how Google, previously a titan in artificial intelligence, could have been taken by surprise in the race to popularize generative AI.
Paul Buchheit, the mind behind Gmail, offered insights into this during a Y Combinator Startup podcast. Having parted ways with Google in 2006, Buchheit posited that the company's shift in priorities following the reduced involvement of founders Larry Page and Sergey Brin led to a focus on safeguarding their search engine dominance rather than pushing the boundaries of AI.
This perspective was echoed by Rob Enderle, president and principal analyst at the Enderle Group, who noted that Google's AI innovation took a backseat as the company redirected its efforts towards maintaining its search monopoly, thereby relinquishing its lead in AI development.

Google's AI innovation took a backseat as the company redirected its efforts towards maintaining its search monopoly, thereby relinquishing its lead in AI development

Tech Companies Surprised

Ross Rubin from Reticle Research highlighted that while many tech giants were taken aback by ChatGPT's reception, Google had the most at stake due to its reliance on search and ad revenue. "For Google, where a significant portion of its income comes from search ads, it's critical they adapt generative AI to safeguard or grow their search sector."
He contrasted this with other tech giants, noting, "For instance, Amazon's Alexa hasn't been a primary revenue source; it's more about brand presence. Amazon's main earnings come from AWS and retail."
Similarly, he pointed out that for Microsoft, "Azure and Windows licensing far surpass search in terms of revenue generation."
Paul Buchheit emphasized Google's concern over AI's potential to undermine its search revenue model. He noted that AI's nature to provide definitive answers could reduce the need for users to click through multiple ad-filled pages, a dynamic Google has been aware of since its inception in 1998. "There's always been an allure to degrade search results slightly to boost ad clicks," Buchheit remarked, "and AI could really shake up this balance."

Perils of Good Search Results

"Google is undeniably at the forefront of AI technology; however, their emphasis on financial gains might be stifling their innovation, pushing their AI teams towards commercialization over exploration," noted Greg Sterling from Near Media, a platform for news and in-depth analysis.
In a July report by Search Engine Land, referencing data from BrightEdge, there was a noted decrease in the appearance of AI overviews in Google searches, dropping from 11% to 7% over the month.
"Google's concentration on enhancing search might have delayed its progress in AI relative to competitors like OpenAI and Microsoft, who have been more aggressive in exploring AI's limits," commented Mark N. Vena, head of SmartTech Research.
"This shift in strategy could have given competitors an opportunity to close the gap or even take the lead in AI innovation, particularly in areas like generative AI, possibly eroding Google's dominant position in AI technology," Vena added.

AI Ad Impact Exaggerated?

Although there's a concern that overly effective search results might decrease ad interactions, this worry might be overstated. "I believe the impact of generative AI on advertising revenue is minimal," stated Michael Hodel, who leads equity research in media and telecom at Morningstar Research Services.
He explained to TechNewsWorld that ads thrive on searches without definitive answers, where advertisers can sway user decisions, such as, "What trendy shoes should I check out?" Hodel pondered, "How will advertisements integrate within a generative AI framework?"
Alphabet CEO Sundar Pichai addressed this during their Q2 earnings call, noting, "We've observed that ads positioned around AI overviews still effectively engage users, offering them actionable choices and business connections."

Moreover, concerns extend beyond just revenue. Paul Buchheit highlighted Google's apprehension regarding regulatory scrutiny due to AI's potential to make controversial statements. "They were quite fearful of that possibility," he remarked, suggesting Google's approach was marked by significant caution.

Slow Start but Formidable Player

If Larry Page and Sergey Brin were still at the helm, their boldness might have trumped the company's cautious stance, Buchheit suggested. "It requires someone with their stature to really stake the company's future on a risky venture," he explained.
He further argued, "If it were up to them, Google might never have ventured into AI. They only did so because OpenAI released ChatGPT, pushing Google into action."
"This actually benefited Google," he added, "as OpenAI faced the brunt of backlash for AI's inappropriate outputs."
Despite a hesitant beginning, Mark N. Vena emphasized Google's recent advancements in AI. "Utilizing its extensive data sets and proficiency in machine learning, Google has crafted robust AI solutions like Bard/Gemini and enhanced language models like PaLM," he noted.

Wrapping Up

"While OpenAI and Microsoft initially captured the spotlight," Vena went on, "Google has intensified its AI efforts, embedding AI more comprehensively into its suite of products from search to cloud computing and consumer tools. This intensified commitment, alongside strategic acquisitions and ongoing research, firmly establishes Google as a key contender in the AI arena."