VALUE: After Hours (S07 E20): The AI Disruption: Google, OpenAI, and the New Web

During their recent episode, Taylor, Carlisle, and John Huber discussed The AI Disruption: Google, OpenAI, and the New Web. Here’s an excerpt from the episode:

Tobias: A couple of interesting data points that I saw. I was watching a GaryVee video, because I watch some GaryVee every now and again. He said that, “The click through rate for social had gone from Google would–“ In the original,” I don’t know how long this is now, 10 years ago, “Google would go to your web page twice to deliver you one click. If you’re earning your money through advertising, then that’s a pretty good rate.” And now, it’s six times for one click.

OpenAI does 1,500 visits for every single click. So, the monetization of web pages is going to be much, much lower than it was in the past according to him. The solution is rather than building a big social following, because it’s not social anymore. It’s purely virality. You have to go viral, you have to say something outrageous and become it on Twitter for a day, which that doesn’t appeal to me at all.

Jake: Oh, boy.

John: Yeah, there’s some ramifications there that might not be– There’s pros and cons. [chuckles]

Tobias: I can see the cons. Tell me what the pros are.

John: Yeah. Yeah, I don’t know how good that would be.

Jake: Was that the step that wasn’t explained in the movie, Idiocracy, where it was like, [chuckles] you had to have selection for stupidly outrageous viral content.

John: Yeah. I don’t know. There was an article I think in the Journal that I glanced at this morning that talked about that, Toby, where I think news organizations, I think they cited the Atlantic as, “All hands-on deck, we need to change the game plan here, because we’re not getting the pass-through volume from Google.” And so, it’s–

Jake: Yeah. Organic search, right? It’s been–

John: Yeah, organic search is going to look totally different. Somebody said, “Google’s essentially now answer engine. It’s not a search engine anymore, it’s answer engine.” And so, that’s going to be interesting both from how that affects everybody else and then also how Google tries to monetize that and how other AI platforms try to monetize what they’re doing, how does ChatGPT make money and all that’s very interesting–

Jake: Banner ads. Chat– [laughs]

Tobias: Yeah.

John: I think Ben Thompson was– He said like– Yeah, I think he was joking, but it’s like “We’re coming full circle back to banner ads, back to internet 1999.”

Jake: Oh, gosh.

Tobias: That was Google’s promise originally. It was just a more if a better search and a clean web page. And now, if you go to ChatGPT, it’s a pretty clean web page and a better search. Google’s great risk, is that it gets– The ChatGPT, whatever page you engage in your search with, it’s not Google. Dinosaurs like me, I still type the question into the search bar and then I take [crosstalk] AI answer.

John: Yeah. I still use Google a lot. I would be interested to look at my usage of it to see how it has changed, because I’m using it differently. But I’m on Google every day. Obviously, Google has all kinds of different products that I use every day. I’m using maps and all kinds of things. Obviously, Gmail. But the way I’m engaging with it for me is totally different. I’m using it really as and– If I need a quick answer to something, if I want to check, “Give me the NBA game.” Like, “I want the score of that game” or just something quick, I type it into the search bar and it just answers my question right away.

And then, for ChatGPT, I’m using that– And of course, you could use Gemini or some other AI solution, but I use ChatGPT. That has definitely replaced a lot of my Google– I guess the use case of going down rabbit holes and reading articles and clicking on all kinds of links, ChatGPT has replaced a lot of that for me. I use it all the time for research. It obviously serves up links too that you can click through. I do that, but I find it more of an effective tool for research. So, from an investing standpoint, that has definitely replaced a lot of the Google.

But in terms of Google’s core monetization, you’re still probably using it to search for car insurance quotes, for travel, certain things like that. They’re in a great position to potentially, eventually win the game. It’s uncertain to me that ChatGPT is going to be the winner even in the very narrow use case that I’m describing.

Jake: What if they’re Netscape, basically?

John: Yeah, who knows, right? I don’t really know the economics of that company. They’re getting subsidized by Microsoft. So, how long can they afford to do that? If Microsoft makes them pay a fair market rate for their compute, then maybe they’re at a disadvantage to Google, what they probably would be. So, it’s going to be very interesting to see how it plays out.

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