Change in the Use of Google Search Engine h2
Google’s search engine has been a go-to for internet searches for billions of people worldwide for as long as anyone can remember; emerging technologies appear to be shaking the paradigms that have long existed. An observer apple executive calls out a new trend showing a different shift in user behavior, which might result in weakness for the search behemoth.
Drop in Traffic Is Revealed by Apple Executive h2
During the ‘penalty phase’ of the Google antitrust trial, an unexpected confession was made in the course of testimony. On Wednesday, Apple’s head of services, Eddie Cue, shared that Google searches made through Apple’s Safari web browsing application had, in fact, reduced in the last couple of months. This decline cries a major alarm, something that Mr. Cue pointed out has not happened in 20 years, which emphasizes that the recent development is abnormal.
Changing Consumer Behavior Driven by AI
Mr. Cue believes that the ever-increasing use of generative AI services is the reason Safari’s search traffic is declining. He mentioned ChatGPT and Perplexity as examples of software that are taking the place of traditional search engines like Google. This implies that AI chatbots are beginning to implement functions that answer queries that used to stimulate search traffic.
Reverberation from market reaction proves costly.
The comment made by the Apple executive sparked immediate and expensive implications across the financial sector. After news of the comments on Wednesday, the stock price of Google-parent company Alphabet plummeted by over 7% on Wednesday. This swift drop resulted in a loss of around $250 billion for Alphabet’s market cap. This demonstrates how sensitive stakeholders are to any concerns regarding Google’s foundational search services.
Consequences on Apple’s Stocks and Collaboration
Apple’s stock is impacted as well, dropping off by more than 1% at the end of the trading session. This is a result of Apple’s highly profitable partnership with Google, in which traffic over Safari powers a deal that pays the iPhone maker over $20 billion annually. Any minor reduction in Google’s search queries on Safari could threaten this Apple revenue stream.
Increasing Google’s Woes
For Google, the comments from the Apple executive serve to intensify an already considerable cloud of uncertainty hanging over the company. This is in the aftermath of not one, but two separate federal antitrust losses within nine months. Each of these legal battles seeks to subject the company to some form of structural unbundling on the notion that Google dominates internet search and competes anti-competitively even against behemoths like Microsoft.
At the forefront of search engines, Google is still the uncontested leader in the global market. StatCounter data shows that last month, Google conducted an astounding 89.7% of all Internet searches. In the next place comes Microsoft’s Bing, but with a significant gap, as only 3.9% of searches went through it at the same time. Meanwhile, even this almost 90% dominance is starting to show some minor weakening.
A Clearly Noticeable Minor Shift
Currently, Google’s flagship figure stands around 89.7%, which marks a decrease from approximately 93% during the last quarter of 2022 following ChatGPT’s initial release. Although the “slip” seems minor, the fact that Google conducted less than 90% of searches for six consecutive months indicates a more fundamental shift. This is the first time such a period was recorded in a decade, hinting at long-term sustained structural shifts in the market.
The Development of Generative AI Users
Opportunities have emerged alongside the ChatGPT usage growth. OpenAI reported about 400 million active weekly ChatGPT users. This number reflects increasing user adoption driving attention away from conventional search engines.
How it can affect antitrust lawsuits
In Google’s case, newfound competition, especially in AI, would be helpful in defense against the breakup lawsuit. Similar to the Microsoft antitrust case, their changing technologies and blunders were more influential on their market standing than regulations.
Profitable Advertising Verticals Sustaining Search’s Dominance
Google remains the leader in search industry revenue despite traffic drops. MIOffettNathanson reports suggest that most queries to AI chatbots have no potential to generate revenue and users seek out information. Google relies on advertising to earn revenue on the server-side its customers pay.
Manifestation of Wall Street’s Doubt
Amidst these threats, Wall Street seems to be paying less credence to Michelin because of this paradox, explaining why the company’s stock is down almost 12% over the last year. On Wednesday, Alphabet’s stock dropped below $16 for the first time in 12 years, and it was trading at a projected 12x earnings on Wednesday, which FactSet corroborates.
Traded at a Slash
FactSet further states that Alphabet is the only megacap technology firm to trade at a discount compared to the rest of the S&P 500 index based on a multiple of forward earnings. Their valuation is remarkable given their $75 billion in annual free cash flow. This demonstrates guardedness by investors despite strong performance.
Having been disrupted instantly throws a red flag.
On top of the looming threat of AI-induced technological disruption lies the already existent risk brought on by the constantly ongoing antitrust lawsuits that could lead to a company breakup. This indicates that despite Google’s considerable financial strength and significant share of the advertising market, AI competition and regulatory consequences will greatly affect the potential of the stock, explaining the lowered valuation.
