For the last two decades, the improvements of Google have been quite linear, meaning the company had to figure out how to scale its technology to expand its index to the billion of pages of the web while making sure its ranking stayed relevant.
And yet, with the advent of ChatGPT, the risk is the mass of web pages on the web might grow exponentially, and this AI-generated wave is posing a real threat to Google’s ability to keep up.
I’ll explore this threat in the podcast episode at the end of the newsletter.
On the other hand, though, there is a positive side to ChatGPT.
The AI tool has shown such incredible capabilities that we know for sure that it might be able to supplant Google!
Back in June 2007, Steve Jobs announced the iPhone.
From the combination of the iPhone (hardware), iOS (operating system), and App Store (marketplace), we got the birth of a businessplatform that today is worth many trillion dollars!
The businessplatform is one of the hardest types of businesses to build, and yet the most valuable, as it looks much more like an ecosystem than a company.
A businessplatform combines elements of closed/controlled touchpoints and open/distributed ones.
For years we’ve been looking at the next business platform, and yet that is come from an unexpected place: Artificial Intelligence!
Indeed, in the last five years, we’ve been looking at various major technologies that could shift the current paradigm. From voice search, blockchain, AR, and VR.
And yet, the business world is quite unpredictable.
2022 made one thing clear; it might turn out to be the year where AI becomes the next business platform. The way OpenAI released its latest products also shows us how things might evolve. Indeed, we might see the rise of three AI layers:
The foundational layer: might be comprised of general-purpose engines like GPT-3, DALL-E, StableDiffusion, and so on.
A middle layer: might be comprised of vertical engines (imagine here you find your AI lawyer, accountant, or HR assistant).
And the apps layer: which might see the rise of a plethora of smaller and much more specialized applications built on top of the middle layer.
For years neural networks got stuck!
Until 2012, Imagenet proved that they could work.
However, even there, pessimism around what neural networks could really achieve was dominant.
In 2018, OpenAI finally released GPT.
That was a turning point.
So much so that only a year later, OpenAI turned from a research lab into a for-profit organization, which partnered up with Microsoft.
Just a couple of weeks back, as OpenAI released ChatGPT, it left us speechless about its capabilities.
Google is a platform, and a tech media company running an attention-based businessmodel. As of 2021, Alphabet’s Google generated over $257 billion in revenues. Over $209 billion (over 81% of the total revenues) came from Google Advertising products (Google Search, YouTube Ads, and Network Members sites). They were followed by over $28 billion in other revenues (comprising Google Play, Pixel phones, and YouTube Premium), and by Google Cloud, which generated over $19 billion in 2021.
Google is an attention merchant that – in 2022 – generated over $224 billion (almost 80% of revenues) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $29 billion segment), and Google Cloud ($26.2 billion).
Of Google’s (Alphabet) over $282 billion revenue for 2022, Google also generated over a billion dollars from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $6 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries. Of Google’s (Alphabet) over $282 billion revenue for 2022, Google also generated over a billion dollars from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $6 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries.
Google is an attention merchant that – in 2022 – generated $224 billion (almost 80% of its total revenues) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $29 billion segment), and Google Cloud ($26.3 billion).
The traffic acquisition cost represents the expenses incurred by an internet company, like Google, to gain qualified traffic – on its pages – for monetization. Over the years, Google has been able to reduce its traffic acquisition costs and, in any case, to keep it stable. In 2022 Google spent 21.75% of its total advertising revenues (over $48 billion) to guarantee its traffic on several desktop and mobile devices across the web.
Alphabet generated over $282B from Google search and others, $32.78 billion from the Network members (Adsense and AdMob), $29.2 billion from YouTube Ads, $26.28B from the Cloud, and $29 billion from other sources (Google Play, Hardware devices, and other services).
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it reported more than $29B in revenues by 2022. YouTube also makes money with its paid memberships and premium content.
OpenAI has built the foundational layer of the AI industry. With large generative models like GPT-3 and DALL-E, OpenAI offers API access to businesses that want to develop applications on top of its foundational models while being able to plug these models into their products and customize these models with proprietary data and additional AI features. On the other hand, OpenAI also released ChatGPT, developing around a freemium model. Microsoft also commercializes opener products through its commercial partnership.
OpenAI and Microsoft partnered up from a commercial standpoint. The history of the partnership started in 2016 and consolidated in 2019, with Microsoft investing a billion dollars into the partnership. It’s now taking a leap forward, with Microsoft in talks to put $10 billion into this partnership. Microsoft, through OpenAI, is developing its Azure AI Supercomputer while enhancing its Azure Enterprise Platform and integrating OpenAI’s models into its business and consumer products (GitHub, Office, Bing).
Stability AI is the entity behind Stable Diffusion. Stability makes money from our AI products and from providing AI consulting services to businesses. Stability AI monetizes Stable Diffusion via DreamStudio’s APIs. While it also releases it open-source for anyone to download and use. Stability AI also makes money via enterprise services, where its core development team offers the chance to enterprise customers to service, scale, and customize Stable Diffusion or other large generative models to their needs.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
