Microsoft’s big move in AI does not mean it will challenge Google in search

Microsoft Corp. and Alphabet Inc. have been rivals for decades in search, cloud and other services, but Microsoft wants to take that rivalry to a higher level of computing.

Microsoft
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announced Monday morning a long-expected new investment into OpenAI, the startup behind ChatGPT, as well as plans to deploy the startup’s AI technology widely through its myriad services. While Microsoft’s unsigned corporate blog post did not call out specific consumer services that would receive an upgrade, such as its Bing search engine, it did say “Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology.”

The main focus of the blog post was Azure, the cloud-computing product that has excited investors with huge growth in years past, but has shown some slowdown in revenue growth in recent months that has dinged Microsoft stock. Azure competes with Amazon.com Inc.’s
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Amazon Web Services, which is believed to have the largest market share, along with Alphabet’s
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Google Cloud.

“In this next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models and toolchain with Azure to build and run their applications,” Microsoft Chief Executive Satya Nadella said in a statement.

Many have seen Microsoft’s work with OpenAI as a serious threat to Google’s dominance in search, believing that ChatGPT’s ability to answer questions in greater depth than Google’s search results could be a game-changer.

“While Bing holds a small share of the search-engine market, Microsoft still seeks to gain share vs. Google’s dominant search engine by offering more advanced search capabilities and language models that could take market share away from Google over time,” Wedbush analyst Daniel Ives wrote Monday morning in reaction to the OpenAI news from Microsoft.

Read more: Microsoft will benefit from ChatGPT, OpenAI in multiple ways — potentially at Google’s expense, analyst says

The belief that Microsoft is now poised to jump leagues ahead of Google in search and cloud because it can incorporate OpenAI ignores a very important fact, though: Google acquired its own version of OpenAI almost exactly nine years ago. DeepMind has been operating within Alphabet since, and is already being incorporated into Google services, including Google Cloud, as the company detailed in a blog post late last year.

So, after nearly a decade with DeepMind, why isn’t Google so far ahead that Microsoft could never hope to catch up by rolling out OpenAI now? Because the company has learned that AI has issues that have not been worked out yet, and which can make the technology inherently dangerous.

“When it comes to very powerful technologies — and obviously AI is going to be one of the most powerful ever — we need to be careful,” DeepMind CEO and founder Demis Hassabis, who still runs the company within Google, said in an interview with Time recently, during which he admitted he chose Google over Facebook
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as an acquirer because he had more trust about Google’s use of the technology. “Not everybody is thinking about those things. It’s like experimentalists, many of whom don’t realize they’re holding dangerous material.”

OpenAI’s leaders have sounded similar cautions, as ChatGPT has disappointed with certain questions. OpenAI CEO Sam Altman has publicly said that “it’s a mistake to be relying on [ChatGPT] for anything important right now.”

Microsoft executives may have to learn this lesson for themselves, though they may also find ways to incorporate AI in smaller ways. Google certainly has, as Bernstein analyst Mark Shmulik wrote in a fascinating Jan. 12 research note that broke down the many ways that Google has been able to safely incorporate AI into its search results.

“Ask Google about the weather, a person, or for a definition like ‘what is ChatGPT’ — what I’m calling structured searches with a correct answer — and you’ll notice that Google already leverages AI by showing a snippet at the top of your search results page,” he wrote. “These snippets are usually pretty good, and if they’re not you still get the normal page listings.”

ChatGPT, though, does not offer the raw links for users to doublecheck its work — It provides an answer with little ability for the questioner to validate. Shmulik’s analogy is one that many consumers will understand: Smart speakers were also supposed to replace text-based searches and offer fully formed answers to questions, but expectations that voice queries would overtake text searches and become just as trusted have not come to pass. In fact, he writes that TikTok is likely the biggest threat to Google’s search dominance in the near term.

“it is ultimately too early to tell how ChatGPT and others will impact the search landscape, and how Google will respond. Generative AI has a place in our internet future and I suspect we’ll see the technology underpin entirely new end markets that will ultimately be accretive to the current ad-supported search universe,” Shmulik concluded. “I suspect that while some of us may see the ‘outline of search’s peak,’ we’ll get closer only to discover larger peaks in the background all ruled over by the king of search, Google.”

That is not to say that Microsoft will not benefit from incorporating AI, just as Google has. The company could find more of a leg-up in Azure, since its cloud-computing product is more popular than Google Cloud, as well as other software products in which Microsoft has its own lead on Google, like its Office suite.

But whatever progress Microsoft makes will likely be slow, and not altogether apparent immediately or without a deep knowledge of technology. And it is unlikely to lead to a huge upheaval in the current tech landscape, or Microsoft’s valuation and financial performance, at least in the near term.

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