One reason Alphabet’s equity valuation has been muted recently, compared to some other “Magnificent 7” firms, is the overhang from potential antitrust action. The other problem is the concern that the search business model could be disrupted by language model chatbots.
We might not know much about the antitrust remedies for some months. But we might already be seeing signs that Alphabet’s innovations around integrating chatbot functionality with search are paying off.
“We know how popular AI Overviews are because they are now driving over 10 percent more queries globally for the types of queries that show them, and this growth continues to increase over time,” said Sundar Pichai, Alphabet CEO.
The point is that we still do not know the longer-term changes in either search or chatbot business models, especially since agent capabilities are coming. That will blur the functions of “learning, research or finding” with “taking action.
Both chatbots and search engines will be able to retrieve information and act on it. The perhaps classic example is trip planning, which blends task-oriented activities and research.
But add agent capabilities and the “search” platform becomes the “take action” platform. For a firm such as Alphabet, that means the value of Google search as an advertising revenue generator is augmented by e-commerce revenue, something Google already does to an extent with product searches.
The point is that Google search has a plausible path to surviving and perhaps even outshining chabots also outfitted with agent capabilities.
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