In this article, I will explain my thoughts on Google and why I recently sold it. My concerns have recently grown stronger due to the emergence of LLMs. The developments in the industry have given me the realization that as a shareholder of Google, I would rather stay on the sidelines for now, deploy my capital elsewhere, and observe Google's progress from the sidelines. As you will see through this article, I believe Google is facing a real Innovator's Dilemma.
Very comprehensive article. Thanks for writing it. I still don't understand why can't LLMs based products have ads from the get go. What's the main challenge there?
Normally, businesses aim to grow their user base and improve retention / decrease churn before starting to monetize from Ads. META is a great example of this with their huge platforms which until they reach a huge user base, they don't start monetizing. And that's something which even Zuck highlighted. Cause Ads at the start before users get attached to the service, would hurt retention.
Also, LLMs Search is somewhat more comprehensive without specifically outlining options like the 10-blue links Google Search page, which might be easier to place Ads with. But this remains to be seen cause as also META has shown with short form videos (Reels), they managed to monetize Reels quite good in a relatively short period of time, eventhough they faced a ton of challenges.. just my ideas!
I would just add to what was already said by Luke.
Yes, the problem is with any new surface, the ad load at the start is much lower. Google Search is a decade-old product that is optimized to perfection when it comes to the ad load, and it will take a long time for LLM search to come close to it, if at all. Even with Meta still today, Feed has a better ad load than Stories (and Stories have been around for years).
But an additional concern of mine is that LLM type of search can develop more into a format that is for example voice driven (think Siri, or Meta Smart Glasses etc.). I can't image voice search being filled with ads as it severely hinders the user experience.
Adding to this thought. Even though LLM Search might not do very well with simply embedding ad links in the search result, there are likely two very viable paths to monetize search by:
1. Charging companies to "skew" LLM answers to "monetizable" questions in favor of companies that pay for it.
2. Placing ads on the side of the query results. Even today, we have something similar with things like "suggested" prompts following an initial query. One an LMM search platform gains enough users, I don't see why companies cannot start integrating "recommendations" into their search results UI that they can start charging for.
Outstanding article.
Thx Shane!
Excellent write up! Lots to ponder and consider in terms of the long term investing thesis in GOOG vs META vs MSFT vs AMZN. Cheers!
thanks!
Very comprehensive article. Thanks for writing it. I still don't understand why can't LLMs based products have ads from the get go. What's the main challenge there?
Normally, businesses aim to grow their user base and improve retention / decrease churn before starting to monetize from Ads. META is a great example of this with their huge platforms which until they reach a huge user base, they don't start monetizing. And that's something which even Zuck highlighted. Cause Ads at the start before users get attached to the service, would hurt retention.
Also, LLMs Search is somewhat more comprehensive without specifically outlining options like the 10-blue links Google Search page, which might be easier to place Ads with. But this remains to be seen cause as also META has shown with short form videos (Reels), they managed to monetize Reels quite good in a relatively short period of time, eventhough they faced a ton of challenges.. just my ideas!
I would just add to what was already said by Luke.
Yes, the problem is with any new surface, the ad load at the start is much lower. Google Search is a decade-old product that is optimized to perfection when it comes to the ad load, and it will take a long time for LLM search to come close to it, if at all. Even with Meta still today, Feed has a better ad load than Stories (and Stories have been around for years).
But an additional concern of mine is that LLM type of search can develop more into a format that is for example voice driven (think Siri, or Meta Smart Glasses etc.). I can't image voice search being filled with ads as it severely hinders the user experience.
Thank you for the response. It makes sense to me.
Adding to this thought. Even though LLM Search might not do very well with simply embedding ad links in the search result, there are likely two very viable paths to monetize search by:
1. Charging companies to "skew" LLM answers to "monetizable" questions in favor of companies that pay for it.
2. Placing ads on the side of the query results. Even today, we have something similar with things like "suggested" prompts following an initial query. One an LMM search platform gains enough users, I don't see why companies cannot start integrating "recommendations" into their search results UI that they can start charging for.