There's never been a faster-growing consumer application than social media sensation ChatGPT, according to research from UBS. As reported by Reuters, artificial intelligence (AI) tool ChatGPT took only two months to reach 100 million users. And this rise to prominence has sparked an absolute AI frenzy.
Some believe that ChatGPT poses an existential threat to traditional internet search companies like Google, which is owned by Alphabet (GOOG +0.01%)(GOOGL 0.09%). But Alphabet isn't going to cede its territory without pushing back. On Feb. 6, Alphabet announced its answer to ChatGPT: AI software of its own called Bard.
NASDAQ: GOOG
Key Data Points
What's the big deal with ChatGPT anyway?
When people traditionally use Google or other search engines to get information, they ask specific questions with specific answers. For example, "What is the capital city of Djibouti?" (The answer, of course, is Djibouti.) To answer this objective question, Google would search the internet and present users with a list of authoritative websites they could go to.
Nowadays, people are increasingly asking more subjective questions like, "What are five things I can do in Djibouti?" This is where a conversational AI tool like ChatGPT comes in. Rather than present users with an authoritative website, it synthesizes information from various websites into one answer. And this different approach to internet search has some wondering if Google is quickly being disrupted by ChatGPT.
The questions grew louder after tech giant Microsoft (MSFT 3.90%) announced a $10 billion investment and partnership with ChatGPT. Not only does this give OpenAI -- ChatGPT's parent company -- serious fuel for growth, but it also suggests that Microsoft is looking for a way to encroach on Alphabet's lucrative search business. Consider that of Alphabet's $283 billion in revenue in 2022, $162 billion (more than half) came from Google search.
According to Statista, Google had over 84% market share when it comes to internet search, as of December. By comparison, Microsoft's Bing had just 9% share -- something management undoubtedly hopes will improve, perhaps by partnering with ChatGPT.
NASDAQ: MSFT
Key Data Points
Alphabet is checking the rearview mirror
In an official blog post from the company, CEO Sundar Pichai repeatedly referenced Alphabet's years of work in the AI space. And building on this long-standing work, the company is releasing Bard to the public.
Bard appears to work in much the same way as ChatGPT. Users can ask it a complex question and get a simplified answer. And apparently, the company isn't stopping with Bard. Perhaps the even bigger news from Alphabet is when Pichai wrote, "These new AI features will begin rolling out on Google Search soon." In other words, it sounds like Google search is going to look a lot more like ChatGPT in the not-so-distant future.
For those eager to test Bard today, you'll have to wait: Alphabet is only testing it with select users for now, making sure it works correctly and that its answers are meeting the company's quality standards before it's rolled out to the public.
This brings up an important point: Alphabet seems to be releasing Bard sooner than it would have liked.
According to CNBC, Alphabet had a company meeting in December, during which management was asked by employees about ChatGPT. Specifically, they wanted to know how a pioneer in the AI space like Alphabet could let a start-up like ChatGPT steal the spotlight. To this question, one of Google's managers said the company was moving slowly, worried about risking its reputation if its AI products didn't work properly.
It seems Alphabet's management is speeding up its AI development pipeline with Bard. And I can't help but think that ChatGPT's 100 million users has something to do with it.
What does this mean for Alphabet?
For those who think ChatGPT can disrupt Alphabet, its move to release Bard is a good reminder. The company has years of experience and a lot of technology. Moreover, it has over $100 billion in cash, cash equivalents, and marketable securities to throw at any problem threatening its business model. In short, Alphabet will be extremely hard to unseat from its current position.
That said, it's fair to wonder if Alphabet is being more reactive than proactive right now when it comes to AI. And if that's the case, it could be possible for competition to slowly chip away at what it's built.
