A $10 billion investment is a lot of money to spend playing catch-up.
As reported earlier this week, Microsoft is investing billions in an OpenAI deal that multiple media outlets say will be worth $10 billion over 10 years. The investment expands the relationship between the two companies, which stretches back to 2019.
And that may not be enough to reverse the pressure facing Microsoft’s Bing search engine, which is perhaps the most direct place to deepen artificial intelligence (AI) in the tech giant’s offerings.
OpenAI makes ChatGPT, a chatbot that launched just over a year ago. Generally speaking, a bot uses natural language processing to respond to user queries and produce responses that are conversational, closely resembling the natural flow of human verbal interaction. And for search, in addition to the traditional processes of entering search queries and getting page links, the idea would be that the answers could be in paragraph form, richly detailed, eliminating the scrolling and searching required by the user.
There is no shortage of ethical debate about how information is collected, analyzed and distributed to users of AI-powered search. Critics charge that the use of powerful technologies to parse massive amounts of data online, from books to chat rooms to just about everything else, can be a harmful bias in search results. We note that this is a debate that will last for years and may never be resolved.
Strategy development
In terms of overall corporate strategy, a blog post this week announcing the expanded relationship between Microsoft and OpenAI said the goal is to “deploy our technology through our APIs and Azure OpenAI service, enabling enterprise and developers to use GPT, DALL· E and Codex. In the latest earnings conference call with analysts this week, CEO Satya Nadella said that “the way our investors can see it is our belief that the next big platform wave … is going to be AI.”
For Microsoft, this strategy seems to be reloading Bing immediately. The company is reportedly preparing to launch a new version of Bing that would use ChatGPT.
Microsoft has an incentive to transform Bing. The search engine, which was renamed Bing in 2009, has only about 9% of the market, compared to Google’s whopping 84% market share, according to sites like Statista. According to these statistics, Bing has not been able to break into double-digit market share.
The company does not specifically break down Bing’s financial contribution. But in Microsoft’s earnings and earnings report on Tuesday, Jan. 24, management noted that search and advertising revenue rose 10%, a relative bright spot in the More Personal Computing segment, which was down 19% as it Windows-related and Xbox-related revenue declined by double digits. Management also noted on a conference call with analysts that, according to CFO Amy Hood, “ad spending was down slightly more than expected, which impacted search and news advertising and LinkedIn’s marketing solutions.” It seems like some search torque would be welcome, but it means gaining search share — to actually lure users away from the 800-pound Google gorilla.
There are some gaps that need to be ironed out, especially since Microsoft wants to create a super app centered around search, connecting everything from navigation to payments.
OpenAI’s website states that ChatGPT “sometimes writes believable but incorrect or nonsensical responses” and that the model “is often excessively verbose and overuses certain phrases, such as repeating that it is an OpenAI-trained language model”, adding that “While we have made every effort to have the model reject inappropriate requests, it will occasionally respond to harmful instructions or exhibit biased behavior.
Microsoft AI may be the answer to search to improve search… but fine-tuning and timing will make all the difference.
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