Equities

Google explores AI integration in search, considering premium features for subscription services

Google explores AI-enhanced search with potential premium features, amid rising costs and competitive pressures from ChatGPT.

By Alex P. Chase

4/3, 18:38 EDT
Alphabet Inc.
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Key Takeaway

  • Google plans to integrate AI into its search services, potentially adding premium features behind a paywall.
  • The move is a response to competitive pressures from OpenAI's ChatGPT and the high costs of generative AI technology.
  • Despite exploring paid AI search features, Google aims to boost subscription sales without harming its core ad revenue.

AI Integration in Search

Google is exploring the integration of artificial intelligence (AI) into its search services, considering the introduction of "premium" features that may be placed behind a paywall. This marks a significant shift for the tech giant, which has traditionally offered its core products for free, supported by advertising revenue. The Financial Times reported that Google is contemplating adding certain AI search features to its premium subscription services, although the company's search engine will remain free, and ads will continue to appear alongside search results for subscribers. A Google spokesperson stated, "We’re continuing to rapidly improve the product to serve new user needs," emphasizing that the company is not working on an ad-free search experience but is focused on enhancing its subscription offerings with new premium capabilities and services.

Competitive Landscape and Costs

The rise of OpenAI's ChatGPT has put Google on the defensive, prompting a reevaluation of its traditional search model. Google has been testing its own AI-powered search service, which provides personalized, detailed narratives alongside traditional links and ads. However, incorporating these features into the main search engine has been slow, partly due to the high costs associated with generative AI technology. A former Google employee described using generative AI for search queries as "eye-wateringly" expensive, highlighting the financial challenges of deploying such technology on a large scale. Google has responded to the competitive threat by reorienting its search teams and launching a new paid tier for its consumer subscription service, offering access to its latest AI model, Gemini.

Subscription Models and Market Response

Google's consideration of charging for AI-powered search features reflects an effort to generate additional revenue without undermining its core search ad business. Bloomberg Intelligence analyst Mandeep Singh suggested that Alphabet could see a boost to its subscription sales, similar to OpenAI's success with consumer subscriptions. Meanwhile, the market for alternative search engines remains challenging, as illustrated by the experiences of startups like Neeva Inc., which struggled to compete against Google's dominance despite offering an ad-free, AI-enhanced search experience. The legal and competitive landscape underscores the difficulties new entrants face in carving out a presence in the search market.

Street Views

  • Mandeep Singh, Bloomberg Intelligence (Neutral on Google):

    "Given OpenAI has reached a subscription run-rate of $2 billion with consumer subscriptions, we believe Alphabet could see a similar boost to its $15 billion subscription sales."