Google's on-device dominance in question as AI race heats up

Reports suggest that Google’s position in the digital ad market is under threat, but even if the rumours are true, the landscape of search – the company’s key moneymaker – is more complicated than it has been in decades. 

In response, new features could be coming to Google as soon as next month.

Why it matters

It’s important to remember that in terms of ad revenue, Google is way ahead with $42 billion in ad revenue in Q4 2022 versus Microsoft’s $3.2bn across search and news. After all, Microsoft faces a verb-sized obstacle to shifting consumer behaviour. But if Google’s hold on device defaults begins to slip, this could trigger a far more competitive situation in the coming years.

What’s going on

Samsung is reportedly considering a change to a deal – currently worth $3bn in annual revenue – that sees Google as the default search engine on the South Korean manufacturer’s devices, according to a report in the New York Times. More worryingly, Google’s deal with Apple – worth around $20bn annually – is also up for renewal this year.

With Microsoft’s Bing newly in the headlines, and an exciting new AI to promote, Google’s on-device advantage is now in a more precarious position than at any time in the last 25 years.

• The Times reports that upgrades to Google search, largely under the aegis of artificial intelligence, are now in train as part of a project named “Magi”, and would seek effectively to further personalise the search experience. The NYT’s report only draws from Google sources (Samsung declined to comment on the piece), but it appears that rear-guard action is well under way.
• According to internal documents seen by the Times, over 160 people are working on the project, which will also likely aim to reconcile the currently ad-free Bard chatbot with the vital advertising space of the search result page.
• In a comment to the Times, a Google spokesperson downplays the project, noting that not all product ideas end up as consumer-facing reality. Yet the source material also appears to suggest that some of the new features will ship to the public next month, before further rollouts later in the year, initially just to US-based users.

It comes as Microsoft pushes hard into Google’s advertising territory, not only with its integration of OpenAI’s ChatGPT into its Bing chat, but with the ensuing hype around these aggressive moves. The company has been testing ads since February, but recently began talking publicly about what an ad-inflected search/chatbot might look like.

Sourced from the New York Times, WARC