Why the new internet search wars will be different

The new internet search wars that broke out this week between Google and Microsoft will not be anything like the last. The basis of competition is shifting, and not just because Microsoft has a shiny new technology at its disposal in the shape of OpenAI’s impressive language artificial intelligence.

Google won the last search wars for a very simple reason. Rivals — including Microsoft’s Bing — couldn’t come up with anything new or distinctive enough to counter Google’s powerful brand and distribution advantages. Even the chat-based AI behind the latest Bing upgrade probably won’t break that pattern. Google has been caught embarrassingly flat-footed but it should still be able to match Microsoft within weeks. If this was a rerun of the old search wars, Google would win hands down.

This time, however, Microsoft has four main weapons at its disposal that make the outcome more uncertain.

The first is economic. The high cost of “reading” web pages using natural language processing makes search engines that provide full-text answers to queries expensive to run. Speaking to the Financial Times this week, Microsoft chief executive Satya Nadella made it clear he was ready to drive down profits in search advertising, taking an axe to the main pillar of Google’s business.

Microsoft’s second weapon is a familiar one: its ubiquity on PCs. The battle this week has been cast as a rerun of the long-running — and one-sided — Google vs Bing rivalry. But Microsoft’s real advantage is more likely to be its Edge browser, which has received plaudits in tech circles. This week it showed off its new text-generation and search technologies embedded in the browser. Imagine hitting a button and having Edge distil the long document on your screen into five bullet points, instantly.

Speaking to the FT, Nadella said he would target Windows users first in the battle with Google. Edge has an 11 per cent share of the desktop browser market — small, but certainly better than Bing’s 3 per cent share of the search business and a beachhead into the all-important life of the millions of information workers for whom Microsoft is a fixture.

A third Microsoft weapon is the head start it has been able to get in using generative AI. The launch of OpenAI’s ChatGPT late last year brought the technology to popular attention. In reality, though, the starting gun to this race was fired more than three years ago, when Microsoft took its first, $1bn stake in OpenAI. That was when it began work both on building the computing infrastructure to support OpenAI’s demanding large language models and devising ways to embed the technology in its services. 

Google has plenty of experience in AI. But Microsoft’s advantage in applying the latest large language systems has at least given it a chance to establish a benchmark in terms of quality and cost.

The fourth Microsoft weapon is that it is deeply entrenched with many business customers. Along with crawling the web, that means it can draw on its customers’ own data to work with its large language models, tailoring the output for individual businesses. Microsoft’s wider presence in business software also means it can embed generative AI in other applications: Eventually, no matter what application you’re working in, the software could start to draw in useful information and make suggestions about what you should do next.

This highlights an important point about the new internet search wars: They are set to change conceptions about internet search. Success will increasingly come from helping people find and apply information in the most effective ways, whatever they are doing.

Old habits die hard, and many people will still turn to a search box for years to come. But as new and more convenient ways of finding and manipulating information creep into their lives, those visits are likely to become less and less frequent.

That is one reason Nadella and other Microsoft executives sought to reframe the internet search business this week. They described it as the world’s biggest software market — a business worth more than $200bn a year in which Microsoft barely plays, yet which is central to the lives of its users.

Google’s grip on internet search will not be easy to loosen. But the tremor that ran through its stock price this week suggested that the disruptive potential of generative AI is starting to sink in on Wall Street. None of the incumbents — including Microsoft, if it fails to harness the technology to its own advantage — are truly safe.

richard.waters@ft.com