Microsoft, Google’s AI race points to shifting search power balance

February 09, 2023

Google and Microsoft, two of the world’s most powerful technology firms, are expanding their artificial intelligence (AI) capabilities in search, a sign that the tech is quickly emerging as a key innovation battleground in 2023.

Industry stalwarts are touting AI as a way to make advertising more efficient as demand remains weak in a downturn. Google reported revenue for its advertising segment, which includes search and YouTube, dropped 3.6% year-on-year in the fourth quarter. Agencies similarly are hoping that advancements in the tech can help cut out some of the more mundane processes from their work. Search is one area where the implications could be significant for advertisers, broadly.

Hovering in the background of these developments are questions of ethics and accuracy, as exemplified by a snag with Google’s new Bard solution this week, though those are unlikely to stem the long-term bullishness and impact AI could have on the balance of power in search.

“The bigger question is whether Google will continue to be the leader in search, as the search page evolves to make AI a new focus for how we answer people’s questions,” said Matt Naeger, chief strategy and marketing officer at Merkle, in an email. “This is the first time in 15 years that there was a real challenge to Google in that space, and I think it is the first time that they have actually been a step behind from a quality of offering perspective since their founding.”

Actionable opportunities

As Google and Microsoft iron out the kinks of introducing more automation, including dealing with a lack of precision, marketers will need to keep tabs on how consumers react and even change their habits based on a different user experience.

Microsoft on Tuesday announced new AI integrations for its Bing search engine and Edge browser, aiming to improve the sophistication of searches and implement an interactive chat that can help consumers navigate complex decision-making, like researching a new TV. Currently in limited previews, the AI-enhanced Bing is supported by a large language model from OpenAI that purports to be even more powerful than the startup’s ChatGPT. Microsoft last month invested $10 billion in OpenAI, an existing partner, following buzz that’s surrounded ChatGPT since its November launch.

In a blog post addressing the implications for advertisers, Microsoft Advertising lead Rob Wilk said that AI could deliver “smarter and more actionable opportunities” in search. Microsoft’s search and news advertising revenue segment that includes Bing grew 10% year-on-year last quarter, below expectations.“

With deeply personalized experiences we expect to be able to deliver even more relevant messages to consumers, with the goal of improved ROI for advertisers,” said Wilk in the blog post. “And as usage expands, we expect to see greater volume leading to more opportunities for advertisers to reach their desired customers.”

Meanwhile, Google, the dominant search engine and largest player in digital advertising, is chasing similar goals. Earlier in the week, the Alphabet-owned company revealed Bard, widely viewed as its answer to ChatGPT. The solution works off a Language Model for Dialogue Applications system introduced two years ago and is initially available in a “lightweight” version that demands less computing power.  

“Silicon Valley behemoths like Google and Meta are rightly concerned about the rise of ChatGPT,” said Manish Sinha, CMO at fiber optics manufacturer STL, over email. “[Eighty percent] of Alphabet’s overall revenue in 2021 was thanks to Google ads, and as ChatGPT’s popularity grows exponentially — it could hit Google’s bottom line.”

Like the Bing upgrade, Bard aims to help users work through high-consideration purchases and multi-layered queries, such as weighing the pros and cons of buying an electric vehicle, per an example shared during a Google livestreamed presentation Wednesday. But in a sign that AI is still very much an experimental bet, a tweet promoting the service included inaccurate information related to satellite photography, Reuters first reported.

The AI hiccup — not uncommon to the space — combined with a showcase that underwhelmed some investors sent Google shares tumbling later in the afternoon.   

“I think the issue here is more of a blip than a crater so to speak,” said Naeger.

Renewed interest

AI isn’t new to any of these companies, and the hype around consumer-facing applications like chatbots has waxed and waned for years, with a lot of undelivered promise. But ChatGPT, combined with the emergence of better image-generating technology, has successfully captured the public interest and set off wider discussions around the implications AI could have on businesses. Visits to OpenAI’s website have soared since ChatGPT’s launch, driving about 672 million visits in January, according to an analysis of SimilarWeb data shared with Marketing Dive.

Microsoft and OpenAI together are committed to AI principles that pledge to combat issues such as “misinformation and disinformation, content blocking, data safety and preventing the promotion of harmful or discriminatory content.” Google upholds similar commitments and first published its own set of AI principles in 2018. 

“While I’m pretty open-eyed about the current state, AI will evolve and [someday] will be a force to be reckoned with,” said James Brooks, CEO and founder of GlassView, over email. “Should brands be cautious about jumping on AI in search? Not necessarily, early brand interest will fuel its development. But just be realistic with your expectations as it relates to current state applications.”