Google has an iron grip on the global Search market with over 90%+ market share.
Can that ever change? In this version of Business Model Vision we look at some peripheral market and technological developments around the Search market that may change the horizon of the market over the next five years.
- Google’s Search Dominance
- Apple Launching Search Ads Business?
- TikTok is the ‘New Search?’ (or Instagram)
- Voice-based Search more prevalent by 2025+
- The Future of The Search Market
When you have a company that has captured as big and important a market as Search – and done so with such dominance – no cursory, surface-level analysis is going to cut it in order to try and determine where the market is going to go in the future.
We need a deep analysis, but we also need some Vision. With so many unknowns in both the regulatory environment and technological advancements, Search could (and probably will) look much different in the future than it does today.
So here are a few highlights to frame the analysis:
- Google is the undoubted King of Search, but faces regulatory scrutiny in an Antitrust Case with the DOJ
- Apple – arguably the last company anyone wants competing with them – has laid the groundwork to enter the Search business
- Young people are searching heavily on Video networks like TikTok, leading many to argue that “SEO is dead!“
- Voice-based search is on the rise, and this may change some of the Search power structure with Apple’s Siri
- Chat GPT is an AI (Artificial Intelligence) layer that is set to disrupt every thing about both search and digital communication
If you were to try and fully frame these 5 ‘Trends’ around Search into a cohesive analysis, it would take days. Below we try to do it in a few thousand words to give a better perspective on the Vision front what might happen over the next 5 years.
Google’s Search Dominance
The complexity of Google’s Ads business – with all the multiple platforms and business units – is much too much to break down here, but the top-line # stands out – $210B Revenue in 2021 from Ads. That amounted to 81% of Google’s total revenue.
Naturally, not all of this Ad Revenue comes from Search.
Based on an analysis of their Q1, 2022 Earnings, here are the #s and corresponding %s:
- Total Quarterly Ad Revenue of $54.7B
- Total Search Ad Revenue of $39.6B (72.4%)
- Total Network Ad Revenue of $8.2B (15%)
- Total YouTube Ad Revenue of $6.9B (12.6%)
So roughly 20 years from its inception, Google’s Search Engine generates approximately 70-75% of the company’s Ad revenues.
In terms of competition, there really is none (yet); Google has squashed the competition from Day 1.
And precisely for this reason, it is currently under an Antitrust Investigation by the US DOJ.
“The US Justice Department is preparing to sue Google … capping years of work to build a case that the Alphabet Inc. unit illegally dominates the digital advertising market.”Bloomberg (August, 2022)
It is not only Google that is in the crosshairs of Antitrust regulation – almost all Big Tech companies are under some form of investigation in either the US or EU. Nevertheless, the seeds are planted for other players to enter the market.
Apple Launching Search Ads Business?
The rumor mill is swirling, but there seems to be a decent chance that Apple will be launching its own version of a search engine in 2023.
What makes this significant is that Safari has captured roughly 20% of the global browser market. They currently have a deal with Google to act as the default search engine for Safari worth around $15 – $20B per year.
The logic of this move is linked to a closer inspection of the Apple revenue model.
As it currently stands, Apple is predominantly a Products company, with the iPhone generating the vast majority of their revenue, with an additional lineup of product broken down into the other 3 categories above (Mac, IPad, Wearables+). This is a hardware business line.
Their Services revenue stream is their fastest growing revenue stream and includes all of their subscription services like iCloud and the App Store, their media businesses like Apple Music and Apple TV, and a variety of others. These are all software services.
Software Services are inherently higher-margin products than hardware Products, and with the number of consumer-facing mobile properties Apple has built out over the last decade, it makes sense that Advertising is a new revenue stream. In fact, they already made about $4B in the last year from Ads delivered on the App Store and Apple News, such as those pictured below.
$4B is a drop in the bucket compared to what the other competitors make (2021 #s)
- Google made $210B from Advertising
- Facebook made $115B from Advertising
- Amazon made $31B from Advertising
10X is a minimum target from here ($40B+), and while Apple does have other properties (ie. Apple Music, Apple TV) where it can serve Ads, it doesn’t want to be ‘that company’ that saturates customers with Ads. Doing that would run the risk of cannibalizing their Products business. Apple’s own search engine would provide a natural interface to rapidly expand their Ads business line without hurting their core Product’s brand.
Current Competition in the Digital Ad Spend Market
For context, in the U.S. market, the Big 3 account for about 65% of Total Digital Ad Spend (2021 #s):
- Google Ads – 28.6%
- Google Ads – 23.8%
- Amazon Ads – 11.6%
That leaves roughly a 35% opportunity for ’emerging players’ like Apple. Apple – as shown above – is currently generating ~$4B in Ad revenue from Display Ads. As a category, Display Ads are growing while Search Ad revenue remains fairly stable. There is always an oscillating ‘trend’ among marketers between preferred Ad types; yet Search is still where a lot of intent-based queries originate (ie. looking to buy something).
Remember as well that Apple iOS 14.5 privacy update was seen as a win for user privacy, and has caused big Ad losses for Google and Facebook in particular in 2022. YTD (Year-to-Date) losses in the equity prices of Google/Alphabet (Ticker: GOOG) and Facebook /Meta (Ticker: META) are 31% and 64% respectively, while Apple (Ticker: AAPL) is down 20%.
As they say, when blood is in the water, the sharks swarm, and that is exactly what is happening in the Digital Ads business. With Facebook down so much, and Apple holding up relatively well, each company has incentives to try and take on the King (Google) at this moment in history.
Thus, when you add up the incentives and the Key Resource of the Safari browser market share, launching a search engine with Search Ads makes a lot of strategic sense for Apple.
The fact that a large % of search traffic is expected to be Voice (ie. using Siri) in the next 3 – 5 years is also a potential tailwind for Apple’s entry into Search Ads.
TikTok is the ‘New Search?’ (or Instagram)
Before even going into this analysis, it is worth saying that there are ongoing rumors that TikTok will be banned at any moment in the U.S. That may mean someone reading this in the future will find this section obsolete.; nevertheless, the points below are more about the online behaviors of Gen Z in the digital world.
If it is not TikTok for Search, will it be some other video-enabled social network?
Following the action on Twitter, there have been some ‘memes’ of a certain sort that are to the tune of ‘SEO is dead, long live TikTok.”
Gen Zers aren’t Googling anything nearly as much as older generations. New data shows almost 40% of people between the ages of 18 and 24 are reaching for TikTok or Instagram when they need to search for something online.Tech.co
Facebook certainly wouldn’t mind if the Gen Z ‘Search on Social‘ trend continues, as they can cash in via Instagram. As for the other major search engines, it is hard to quantify how this ‘trend’ will affect the market long-term.
All we really know at this point is that Gen Z has different search behavior relative to other generations. But they still use search engines as their primary mechanism of Search.
Their type of online behavior – broadly – can best be described as more social. That’s why we see so much made about social commerce or social selling relative to this generation of youth.
Voice-based Search more prevalent by 2025+
Not to be outdone in the analysis is the emergence of ‘Voice’ as a preferred way to Search.
The emergence of Voice-as-a-primary-medium-for-search has multiple possible permutations on the market, a lot of which can be seen relative to:
- who the leaders are in Voice technology
- how Voice impacts search results
- what % of Search queries will be voice-based in the future
The obvious leaders in Voice technology are Siri (Apple) and Alexa (Amazon). Google’s emergence into the category is driven by many of its Google Home technology, where people search while in their home, while Siri is obviously more geared towards mobile Search.
Voice has a tremendous effect on Search results:
Roughly 75% of voice search results will rank in the top 3 positions for a particular question on a desktop search.DBS
That’s because Voice tends to be more Q&A based, where the search query is more framed as a question to be answered rather than a specific set of terms:
- ‘how to …’ or ‘what’s the …’ framed as a question + the subject matter ‘… make my own bread’ or ‘… best restaurant(s) in town.’
This means that the underlying technology behind Voice > Voice to Search > Search results (NLP + machine learning) will dictate a lot of what surfaces where. Companies that dominate the hardware side of voice – offering clear voice to text translation – can build an advantage on the front-end of the Search experience. But that advantage pales in comparison to the back-end advantage of delivering much more in-depth results (see Chat GPT below).
Much of the context right now around Voice Search is related to local/hyperlocal search.
Within the past year, 58% of consumers have found local businesses using voice search.DBS
That means people are likely using it while driving or on the run on their mobile phones. This use case makes sense, meaning that if we extrapolate, a growing % of Search queries will be voice-based in the future
The drumroll for this entire post is ‘Chat GPT,’ a term that has been gaining so much prominence that it was trending on Twitter this week.
First off, Chat GPT is a product of OpenAI, which was founded by Elon Musk. It is an AI-based conversational chat bot that can produce in-depth responses to questions across an array of subjects. It is like a search engine-conversation partner hybrid.
Why are people so hyped on Chat GPT?
Simple. If you compare the depth of an answer query generated from Chat GPT versus Google Search results, the difference in depth is staggering.
ChatGPT query example – marketing
‘Explain the relative importance between brand marketing and performance marketing’
ChatGPT query example – philosophy
‘Explain why understanding art can help with understanding commerce’
As you can see, the depth and strength of these answers is very strong. On more complex subjects such as mathematics or physics, the difference is even bigger. It also can help with more creative endeavors.
The most immediate ChatGPT application is assisting human creativity. Its technology builds on recent AI breakthroughs — OpenAI’s GPT-3 is a leader in large language model applications — but its conversational interface makes workshopping speeches and blog posts much easier.Big Technology Substack
Relatively speaking, however, Chat GPT is more of a conversational chat bot. It is not formatted into anything resembling a search engine at this point in history. Could it be in the future?
The answer is yes. It could radically upend the Search market, but it currently has multiple flaws, challenges to overcome, and ultimately will depend on implementation.
The Future of The Search Market
If one thing has become apparent over the course of this post, it is that despite Google’s absolute dominance in the market, they are unlikely to be able to hold onto it in its entirety long-term (ie. they will have less than 90% market share in the future).
There are regulatory threats, competitive threats, generational shifts in behavior, new technological shifts, and of course, AI.
Like many innovations in the past, it will probably be something unforeseen that drives the future of the Search market, maybe something that is not even listed above.
The fact that Chat GPT is available for free with an OpenAI account, means that it is technically an ‘open-source’ innovation. Historically, open-source innovations create some of the greatest impacts.
Yet to turn that into a search engine capable of doing what Google does now is probably a long way in the future, if it happens. The sophistication of not just Google’s Search technology, but also the underlying Ads platform(s) is hard to compete with.
Digital Ads on Search via auction (based on keyword search volumes) is a good business model for Search if the underlying algorithm is honest (another conversation) because it incentivizes good indexation of content. The better content is indexed, the more people are likely to read, the more they will search, and so on.
If another company comes up and uses something like Chat GPT as the backbone for a new search engine, they will need a business model. Otherwise, they won’t be able to compete with the other industry giants. The market has turned against this type of ‘surveillance advertising’ and regulators are also moving in to protect personal user data. But what other business model would you create around a search engine?
Ultimately, Search originates principally in the browser, so unless a company also wants to create a web browser to compete against Apple and Google, it is hard to see how a new company emerges in Search any time in the upcoming few years. Longer term, yes, it seems possible to unseat Google as the dominant search engine as all these underlying Future Trends are weaved together. In the short to medium term, it seems unlikely.
Overall, c’est compliqué (it’s complicated) is the best way to think about the Future of Search (Engines). With some Vision around current trends, we can come up with some guesses. Ultimately though, after many, many years as the dominant search engine, it appears that at least some of Google’s dominance will be eroded in the years ahead; from there it may be a new game.