I think the 3.8 Flash release shows they are doing just fine at AI. Unlike OpenAI and Anthropomorphic, Google doesn’t have to release new models to capture VC sentiment every three months. They have the hardware, data and money. And when they release a model it’s very good.
They can be doing fine at AI models but not so well with AI revenue.
Although I am curious if they are not worried and playing the long game confident that their distribution will eventually help them catch up (and worst case they own some of Anthropic). But obviously Anthropic and OpenAI have their own distribution now too.
Nobody is doing well enough with AI revenue ATM (https://isaiprofitable.com/). At the moment it is probably more about market share of users, that is where the investment capital will need to be clawed back from when it starts to be called back (or replacement money will need to come from if the investment cycle simply stops giving generously).
While true, Google is particularly vulnerable to AI disrupting the traditional internet ad model. They have to figure out how to make AI profitable or Google will suffer catastrophic revenue, profit, and stock price declines in short order.
Can they not just do what they expected sites to do when their search results started including key extracts from sites, significantly reducing click-throughs to news pages and such?
[couldn't resist the snark, I don't exactly feel sorry for them here!]
I think this is their obvious strategy. What's not so obvious is that they'll succeed. Their share of consumer LLM users is around 27%. Their share of search engine users is above 91%. If current growth trajectory holds (which is admittedly unpredictable), Google will command far less of the global internet ad market.
I expect aggregate ad revenue to climb, so this might sting less, but much of Google's stock price imputes their dominant market position (and implied moat). A large proportion of users don't first navigate to Google anymore. They ask ChatGPT. Commoditised LLMs (or worse, a dominant provider which isn't Google) is a very bad scenario for Google.
I think they're going to have to diversify. Cloud compute revenue keeps climbing. Their deal with Apple for "small" LLMs suggests they might have opportunities to specialise models for specific tasks. They still command a massive lead in things like Maps and Gmail, and they can lean on those.
I do wonder if the more they goose their ad business the faster it eventually falls. I know I am more and more reluctant to view many normal Web page ads at all and usually immediately click away the second a site gets annoying
I block ads because I don’t want my family exposed to scams, clickbait, and offensive content. If ads weren’t so annoying, I wouldn’t put too much effort into blocking them.
Also: Creepy surveillance, and a delivery mechanism for malware/viruses.
Online advertising has completely broken from anything resembling the traditional social-contract of magazine ads, billboard, signs, etc. They're preying on your safety and privacy, not just your attention.
The other companies are stealing people's work for headlines and sabotaging each other. Google is offering a whole bunch of Gemini APIs that do real shit, with the same terms and contracts and the existing products for most of them.
A large chunk of the population don't use Google to search anymore. They go straight for the GenAIs. That's got to be scaring a lot of managerial folks at Google.
Slide 65 of this (very nice) set of slides [1] broke down search vs genAI use to get information. "Mostly genAI was not breaking 25% in all age brackets... Curious to see how that will evolve
The Gen AIs are doing the search for people. So hopefully this forces google to switch their business model from manipulative ads against human users to just charging for API access for Gen AI models.
No, Google will just do "product placement" in the AI output.
P.S. Google's real problem is that their web search is absolutely atrocious and completely broken. Even Qwen is better at searching the web than Google's AI search box.
I think Google's big bet (and Microsoft's before them) is in centralization of AI services, hosted using their model, and that AI at the edge will always be a bit player.
But what I see and hear from technical consumers, businesses, and govts is that they would prefer their data stay local, and like the idea of edge compute being used for AI.
Claude/OpenAI's direction with their Apps enabling deeper integration is a good direction, but the trust with data is still a growing concern. OpenAI's math actions on the NS problem degrades their reputation a lot.
Google’s cash cow is ads. I think the writing on the wall is ChatGPT and other AI search engines will dominate. It is to be seen how Google will respond. But in the end, their monopoly on web search is coming to an end.
Generated via ChatGPT, as google-ing it would have taken too much time:
Rank Cloud Approx. annual revenue Growth My assessment
1 AWS ~$129B ~20% Clear leader
2 Microsoft Azure ~$90B ~40%+ Strong #2, rapidly closing
3 Google Cloud ~$59B 36% Fastest-growing historically, but smaller
which is to say that Google is still way behind AWS and Azure. Also, lots and lots of people have switched to using AI-interfaces now, I'm not hearing "I've googled that and that's what I found" anymore, it's all "I've chatgpt-ed and this is what it told me".
It's not about releasing models. Consumer market share of chatgpt is still >60%, if not more. Their search engine was hit and as soon as product search starts declining on Google this will be a code red. They're in an extreme nicle and dime mode.
How are they going to generate revenue if their old model is Ads on search and the new model is yet to show how revenue can be generated. ChatGPT (on free) is showing ads now but they are not targeted and I highly doubt they are worth anything.
very HN take. Reality is 3.8 flash is good at what it does (being fast + cheap)... but that market is becoming very saturated and google is not competing at all at the frontier where major spend lies.
It's ridiculously fast, and generally very good with real-world knowledge. It's my go-to for anything non-coding, and for quick fixes/questions/prototypes.
If metrics measured what most people need from an LLM, it's competitive, IMO, and with their TPU chips, it's probably economically competitive.
Today search results are a page full of ads. They can't get away with that unless they completely corner down the LLM market.
I forget the name but I see one LLM chatbox that looked like one of those old world news media websites plastered from top to bottom with jumpy obnoxious ads. It did offer some good models for free. I honestly might even consider using it if I could remember what it was called.
If they turned Gemini into that today I think people would just laugh, shake their head and close the app.
Openrouter isn't even 00.01% of tokens used on a daily basis. China alone uses 500 Trillion tokens a day and they're only 1/8th of the world. Much of the world has a google account, use your brain.
Now their product strategy however…