- Microsoft put $1 billion in OpenAI, which built ChatGPT, and plans to integrate ChatGPT into Bing.
- Bing has not come close to touching Google's search dominance since it was launched in 2009.
ChatGPT, the generative AI app which went mega-viral at the tail end of 2022, has been touted as the savior — or destroyer — of everything ranging from academic rigor to the entire marketing profession..
Also on that list: search engines. While Google has been the undisputed leader in internet search, many were quick to say ChatGPT could disrupt its reign. While there's been valid skepticism that ChatGPT is an immediate threat to Google, that could change soon.
The Information reported Microsoft and ChatGPT creator OpenAI are working on integrating the technology into Microsoft's perpetually overlooked search site Bing. Microsoft invested $1 billion in OpenAI in 2019, and it seems like that investment is paying dividends.
Bing has lost to Google search for over a decade, but with the integration of ChatGPT, Bing may offer the first compelling reason why people might want to switch from Google. The big questions are: How much can ChatGPT improve Bing? And will it force Google to change its own search engine in response?
Microsoft gets a shot in the arm
News that Bing is looking to integrate ChatGPT prompted investment bank D.A. Davidson to initiate coverage on Microsoft, with a price target of 17% higher than the current price of $222.34.
"We believe incorporating ChatGPT capabilities into Bing may provide Microsoft with a once-a-decade opportunity to unseat Google's Search dominance," said analyst Gil Luria.
Luria added that while Bing is a distant second to Google, incorporating ChatGPT's capabilities allows Bing to grow at much higher rates for both the search and advertising business. While Luria takes into account Google's own forays into generative AI, he believes these projects have not made the same strides as ChatGPT.
Beyond using ChatGPT's advancements to improve Bing, Microsoft also wins because OpenAI runs on its Azure cloud.
"In the short term, we believe the unprecedented activity on OpenAI's ChatGPT is translating into incremental volumes into Azure," Luria said. "We expect those levels to increase significantly with the introduction of GPT 4.0 later this year and the many product offshoots that will link to OpenAI via APIs."
D.A. Davidson estimates OpenAI has annual expenses of $250 million to $1 billion, with the majority spent on Azure.
As ChatGPT gained popularity, some Google executives told Insider's Tom Dotan that the underlying technology powering ChatGPT — large language models — has inherent limitations, often presents wrong answers, and is expensive to run.
However, reporting from the New York Times said the company declared a "code red" around ChatGPT and management had meetings hoping to push for more generative AI-type products.
Can ChatGPT deliver? And will Google be forced to improve?
Google's search product has come under scrutiny for the past few years. The Atlantic decried Google Search "is not what it used to be," Fast Company said it's getting worse, and former Yahoo CEO and Google employee Marissa Mayer said Google Search's quality is directly related to a drop in the quality of websites it has to look at, per Search Engine Journal. In August, TechCrunch reported Google rolled out ways to improve the ranking of high-quality websites.
But ChatGPT has a ways to go before fully upending a legacy product, though some users said using ChatGPT has come out with "scarily impressive" results. ChatGPT's integration with Bing could even flounder. As Morgan Stanley said in an analyst note, to truly disrupt something, a competitor has to offer solutions ten times better than the second-best option. The new ChatGPT-powered Bing has extremely big shoes to fill.
But if Bing's integration with ChatGPT does take off with web users, it could spur Google to respond and roll out its own natural language search functionality.
Google is no stranger to language models that ChatGPT uses. The exact model ChatGPT runs on was built by former Googlers. The internet giant has its own language model called LaMDA, short for Language Model for Dialogue Applications. The model briefly went viral after a Google engineer claimed it was sentient. (It was not.)
But Google also has to think about the impact integrating natural language models would have on its overall business. Google relies on advertising and frequently inserts sponsored links into search results. The jury is still out if a natural language model supports that.
Still, for the first time since it was launched in 2009, Bing, the perpetual second-choice search engine that once offered to pay people just to use it, might finally have a chance.
And thanks to an investment in OpenAI and a bet on the buzzy generative AI sector, Microsoft may finally force Google to compete if it wants to maintain market dominance.