Seems like two things 1) Google is losing at AI and Sundar wants to mask this 2) AI is going to destroy their ad business and they want to get while the getting is good.
Now their product strategy however…
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.
If metrics measured what most people need from an LLM, it's competitive, IMO, and with their TPU chips, it's probably economically competitive.
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.
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.
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).
[couldn't resist the snark, I don't exactly feel sorry for them here!]
They'll probably be less annoying than ads in Google Search results, because people ask LLMs more detailed, context-laden questions.
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.
[1] https://readwise-assets.s3.amazonaws.com/media/wisereads/art...
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.
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.
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".
If you use it for even 15 minutes you will see this is not true. At all.
My experience confirms this: many years ago I had a website banned from serving Google Ads. They said my pages didn't have enough content.
Then a competitor started showing ads on the exact same type of pages where I had previously been able to serve them. So I tried getting my website approved again and -- surprise -- now I can serve ads again.
What is not okay is them pushing a huge amount of ads into website, constantly asking you to enable auto-ads and vignette ads and what-not.
Firstly, try to imagine stuffing as many ads as there are on a SERP into a chatbot conversation. Good way to lose users.
Secondly, Google spent decades hyper-optimizing their ad business monopoly for maximum profit, including going to extents that were recently found unlawful. People should really look into the findings of the last two Antitrust cases against Google, both of which it lost but for which it suffered only slaps on wrists. The details are eye-opening, including the bits about how Google, leveraging its prime position as the middle-man playing all sides against each other, manipulated ad auctions to make itself more money at the expense of its customers.
Even Microsoft was dinged for screwing over just their competitors, not their customers.
But now because of the paradigm shift in how people discover information, very little of the Google ad monoploy advantage transfers over. I think their AI business will keep growing, even if they don't have the best models, and it will be an exceptional source of revenue.
But it will still be no match to their ad business -- a cash cow of incomprehensible proportions -- and that is the fundamental problem they face today.
AI probably would help their display ad business overall -- they finally just launched a "have Gemini create your ad!" feature, and I imagine having to hire a designer was a common blocker for SMBs.
That's good. I hate ads. I will fight them down until they are gone.
But I don't think this is the case here. Ads are still pushed down onto the people willy-nilly style.
But I wouldn't write off ads yet. It seems plausible to me that LLMs will be able to slightly alter their output to casually mention paying brands and to profile users better than we could before.
There's zero chance that AI destroys their ad business. I get served ads from Amazon in podcast RSS feeds that were directly derived from things I said in Gemini chats. It's definitely not destroying ads lol
I'm surprised by the weird levels of incompetence on this website, use your brain or have you already hawked that off to your favorite AI lab.