Voice search has created a huge vulnerability at the heart of Google’s business – Business Insider

CEO Sundar Pichai


When the world shifted from desktop to smartphones, one thing
didn’t change: the existence of a screen on both devices.

The screen shrunk, but it remained the medium through which we
interact with computers.

For Google, that meant its core online advertising business —
visible search ads on a webpage — remained intact and lucrative.

Today, Google may be at the beginning of a new shift — one toward
artificially intelligent virtual assistants, in which we use our
voice to interact with technology instead of our eyes.

The problem with voice assistants is they don’t have a screen on
which to display ads.

And analysts have noticed. On the last earnings
call for Alphabet
, Google’s parent company, analysts
repeatedly asked Google CEO Sundar Pichai whether voice searches
would be harder for the company to monetize with ads. Pichai
didn’ have a specific answer, although he reassured investors
that he believed the new medium would expand Google’s business.

Virtual assistants, which are basically voice-activated mini
computers, are becoming increasingly intelligent and accessible.
A spokesperson for Google told Business Insider that its mobile
voice searches tripled between 2014 and 2015.

Amazon’s Alexa, Apple’s Siri, Microsoft’s Cortana, and Google’s
Assistant are
competing to become
the most intelligent digital helpers in
the virtual assistant race.

The hardware surrounding this technology is expanding, too —
Amazon and Google have each released a mini Wi-Fi speaker for the
home. You can tell the
Amazon Echo or Google Home
to play music, look up recipe
ideas, find local restaurants, and do a variety of other tasks.

The side effect of all of this is that in the short term, the
available real estate for ads will shrink. You could insert
sponsored suggestions into a voice assistant’s answers, but it
would never offer as many ads as a Google search results page.

It’s a side effect that analysts want to know more about.

Brian Nowak, Morgan Stanley’s internet analyst, asked Pichai on
the earnings call to talk about what the company might need to
put in place to “monetize search in a voice world as well as you
do in a phone or desktop world.”

Pichai responded without directly answering the question, saying
“we are in very early days,” that one team “talked about” ways to
integrate third parties, and that he thinks “we will evolve it a
lot in the coming years.”

Peter Stabler, a senior research analyst at Wells Fargo, asked
Pichai if voice queries are “much more skewed to less commercial

Pichai said that instead of replacing search on desktop and
mobile, voice search provides an additional way for people to
interact with Google. “The sum total of all of this: It expanded
the pie,” he said.

Google Home


While voice search might indeed expand the pie, history shows
that legacy media businesses are often vulnerable to new media

The newspaper business has struggled to adapt to the internet.
Many newspapers have closed, and entirely new digital news
organizations have flourished in a business once dominated by
paper products. Similarly, the television business is fighting
fiercely against video-on-demand over the internet.

From that perspective, screen-based search starts to look like a
legacy media business, and voice-based search like a vast, open
arena with no dominant players. That is exactly the kind of
market that new tech startups seek to disrupt.

Google, of course, has a track record of solving complex problems
and monetizing products. Four years ago, there were worries it
stumble on the transition
from desktop search to mobile
search. In 2012, the company actually warned that
mobile was hurting revenue growth
. Since then, Google has
gone from strength to strength, and it remains the dominant
search engine on mobile screens.

Google is no doubt thinking about these issues already and
developing plans to enhance its dominance. But until those plans
are unveiled, these are the three questions analysts would really
like Pichai to answer:

  • How big a slice of consumers’ internet time will voice search
  • Will that slice be big enough to significantly reduce the
    number of searches done on mobile and desktop screens?
  • How easy is it to generate revenue from voice assistants?

Disclosure: This author used to be a Google employee and
currently owns Alphabet stock.


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