The $GOOGL bear case is pretty loud right now (Search monopoly facing first real threat from GenAI).

Predicting the future here is tough but worth at least exploring a strawman for a more constructive outcome in search for $Alphabet-A(GOOGL.US)$ .

Some thoughts and search comparisons:

#1 : Search queries are growing. Some have stated this is not the case but pay attention to footnotes in these exhibits ("does not represent any specific data" ?). Last week, $GOOGL Chief Business Officer stated "Search query growth has been consistent across all major markets over the past 12 months". This is during ChatGPT's meteoric rise...

#2: GenAI searches are neither 100% cannibalistic nor 100% new so question is how additive they might be. GOOG blog post from 8/2023 suggests they are finding GenAI searches useful for complex questions they wouldn't typically think to search. See image.

#3: Impact of GenAI on monetization remains unclear - certainly could be negative, but also might be positive. Bears state 7 blue links goes to 0-2 in GenAI and that's that. Sure, but those 7 links were presented to provide the consumer with sufficient choice to better meet their need. Now, the search provider has a more detailed search request and can narrow the result further - and offer the advertisers a more qualified search. So if the 7 links previously paid $1.00 in aggregate to reach a prospect at a certain point in the buying journey, why wouldn't 2 links pay the same aggregate amount to reach the same, but more qualified individual (Nike will pay X for "shoe" but a higher price for "running shoe for trail-running", and against only one other option)? Also, GenAI searches tend to be iterative. So maybe 2 links over 3 iterations results in 6 ad slots overall, all of which might be worth more than 7 generic ad slots given the increased targeting [Again, I don't know the answer - just trying to highlight it's not that simple].

#4. $GOOGL has a pretty notable advantage in currently being the default search status across Android, Apple, Chrome, etc. Users don't change their behavior unless an alternative offers a meaningfully superior proposition. $GOOGL has an advantage in that it is a directory (get me to Nike's website), it is a concierge (tons of info for various searches on the first page like weather, math, Football schedule, etc.), it can get you to resources you need quickly, and now provides GenAI results on the first page as well. So a positive view would be that, so long as GOOG GenAI results are at least reasonably competitive with others, users will just default to $GOOGL. It's just all there for you. Will be interesting to see ChatGPT user / query growth going forward to see if their answers are sufficiently different / better than $GOOGL to keep their momentum going.

#5. $GOOGL has advantaged data which provides better search results. Local data, real-time data, user data (gmail, search history, maps, Android) are all real advantages. Data suppliers also tend to update $GOOGL first given its omnipresence (restaurant updating hours for holiday, etc.).

#6. Commercial searches are some small percent of total. The most expensive keywords include insurance, loans, mortgage, attorney, credit, lawyer, etc. (see image). A table from the EU anti-trust trial indicates the largest revenue generators include iphone 8, auto insurance, car insurance, online colleges, etc. As the exercise below will indicate, GenAI today can help users conceptually think about how to shop in a given category but is pretty far from helping users research a specific vendor, interact with the vendor, buy the thing. Again, I would expect GenAI to develop that functionality over time but worth noting $GOOGL has that today, and also will be working on enabling GenAI to assist.

#7. Desktop vs Mobile. $TRIP always had issues because users would research a trip on mobile, and then just go directly to $GOOG on desktop to actually make the reservation. Feels like today a similar dynamic may exist. GenAI can provide some suggestions today, but then you have to go to $GOOG to see the restaurant's current menu and book a table.

Ok, let's go through some examples. I'm using the most current version of ChatGPT and Perplexity.