|A NOTE FROM OUR EDITOR-IN-CHIEF ALYSON SHONTELL
We’ve just closed the August/September issue of Fortune, and the cover story zeroes in on Alphabet, which is facing a classic innovator’s dilemma.
For the first time since the early 2000s, the search giant’s $160 billion core business is being challenged, thanks to generative A.I.
Fortune senior writer Jeremy Kahn dug into how CEO Sundar Pichai is preparing his troops to battle for the future of search. Here’s Jeremy on the situation, below:
The November debut of ChatGPT caught Google off guard, setting off a frantic six months in which it scrambled to match the generative A.I. offerings being rolled out by ChatGPT creator OpenAI and its partner and backer, Microsoft.
Satya Nadella, Microsoft’s CEO, famously quipped that he wanted to be known for having made Google “come out and dance.” Some doubted Alphabet could: The narrative was that the Google parent company had grown bloated and sclerotic. ChatGPT would be a “Google killer.”
Well, the past six months have shown that elements of that storyline were premature at best. At Google’s huge annual I/O developer conference in May, Pichai showcased Google’s generative A.I. prowess.
But Pichai made only the briefest mention of how generative A.I. might impact the company’s first and still foremost product, Search. Search is Alphabet’s primary engine, driving $160 billion in revenue last year—60% of Alphabet’s total.
If Pichai is tentative about the company’s plans for Search, it is because he has yet to demonstrate he has an answer for the fundamental challenge generative A.I. poses to Alphabet’s business: If A.I. chatbots can deliver information from across the internet, not as a list of links but in conversational prose, what happens to Google’s storied advertising-based profit machine?
That question is at the heart of Google’s innovator’s dilemma, as Pichai and his team race to figure out how to produce meaningful revenue from this paradigm-shifting technology. The outcome could scramble the ranks of America’s largest technology companies and help redefine how we all access information.