People closely monitoring developments concerning artificial intelligence will be aware of the frequent releases by various companies. The recent introduction of Bing Chat by Microsoft, GPT-4 by OpenAI, and Google Bard AI has resulted in a flurry of activity. Notably, Microsoft’s alterations to its Bing search engine, utilizing artificial intelligence technology, have captured the attention of Google. Although it remains uncertain whether Microsoft will dethrone Google’s dominant market position in the near future, the modifications may require Google to expend considerable resources to maintain its position alongside Apple.
Barclays analyst, Ross Sandler, states that should Microsoft be engaged in negotiations to become the default search option for Apple’s mobile operating systems, the most probable outcome would be that Google ends up paying a higher amount than it currently does for the same position. “Every five points of TAC rate increase (vs. gross iOS search revenue in the TAC zone) would weigh on Google’s [operating income] by 3%,” he said, as reported by Seeking Alpha.
Sandler’s analysis suggests that a significant portion, approximately $46 billion out of Google’s $78 billion operating profit, is generated from iOS through various sources such as Safari and organic iOS channels. Sandler, however, deems it improbable that Bing would replace Google as Apple’s default search option. Nevertheless, if such an event were to occur, it could cause a noteworthy negative impact on Google’s operating income, estimated to be as much as 11%.
The potential impact of Microsoft’s Bing supplanting Google as the default search option in Europe, the Middle East, and Asia, could result in a 7% decrease in Google’s operating income. The impact would be considerably lower in the U.K. and Latin America, at 1%, provided that lost queries are not recaptured. According to Sandler, while introducing Bing into the equation doesn’t necessarily resolve the regulatory challenges, it would make the search landscape much more competitive.
Via Seeking Alpha
