‘Code red’ at Google as Microsoft’s Bing is no longer the butt of the joke

Question: What is the most searched term on Bing? Answer: Google.

The long-running internet joke works because it is so believable. Microsoft’s search engine has been a punchline practically since its launch, always in the shadow of its wildly-popular and lucrative rival.

Despite persistent efforts to dethrone it, Google’s search engine has become one of the most profitable inventions in history.

The billions of queries logged each day on the service brought in $163bn (£135bn) for Google’s parent company last year. More than half of Alphabet’s sales came from the search engine despite a technology empire spanning smartphone software, YouTube and cloud computing.

However, alarm bells are now ringing at the company’s Mountain View headquarters after Microsoft’s Bing, the butt of the joke, signed a landmark deal to integrate artificial intelligence engine ChatGPT.

The announcement last week has triggered a “code red” at Google as its cash cow search engine comes under real threat, arguably for the first time in its history.

Yet the company’s flat-footed response has exposed the growing sluggish nature of a business once regarded as Silicon Valley’s premier innovator. Mounting bureaucracy and bloat has left insiders complaining that it is becoming harder to get things done at Google and challenge the status quo.

Bing rocketed to the top of the App Store download charts after its relaunch last week, threatening to consign Google to second place for the first time in its history.

The old joke about Microsoft's search engine doesn’t seem so funny anymore.

Google, which was launched on a Stanford university computer in 1996 and to the public two years later, has remained remarkably similar for two decades. A time travelling web user from 2000 would be baffled by Instagram, the iPhone and Alexa, but Google’s blue links would be instantly familiar. Largely, that is a function of its success.

However, last week may be remembered as a turning point. On Tuesday, Microsoft unveiled an overhaul of Bing powered by an upgraded version of ChatGPT, the wildly popular artificial intelligence chatbot from the California start-up OpenAI.

The revamped search service, first available as a preview before a wider release in the coming weeks, lets Bing users ask questions rather than just search. A simple, human-like answer is provided alongside the array of links.

Ask Bing for holiday recommendations that are less than three hours away and it will suggest, in plain English, why you might want to try Malaga or Florence. Ask what budget TV you should buy and it will outline the pros and cons of the most popular models.

Microsoft’s chief executive Satya Nadella said the launch marked a “new day for search”, and was unambiguous about his ambition for the product.

“This new Bing will make Google come out and dance, and I want people to know that we made them dance,” he told technology website The Verge.

Google is already scrambling. Sundar Pichai, Google’s chief executive, has told staff that the chatbot is a “code red” moment, and even the company's hermit-like founders, Larry Page and Sergey Brin, have re-emerged to push for a response.

The perception that Google is falling behind will be difficult to stomach at the company. After taking over from Brin and Page in 2015, Pichai sought to position Google as an “AI-first” organisation. The business pays handsomely to pluck the brightest engineers and researchers from university labs.

It even had a big hand in the development of ChatGPT: the “T” in the name stands for Transformer, a machine learning system introduced to the world by Google’s AI lab in 2017. That the company enjoyed such a vast lead and has failed to capitalise will be troubling.

Under the leadership of Pichai, a McKinsey consultant before joining Google, a company that was once a model of youthful capitalism has faced growing criticism that its size and success has turned it into a risk-averse bureaucracy.

Last month, employees circulated a memo comparing the company to “slime mould”. 

“Google is a place that prides itself on moving quickly to tackle world-scale problems,” the former employee behind the memo wrote. 

“But more recently it's started to feel way, way slower. Accomplishing even seemingly simple things seems to take forever.”

The note outlined how a millefeuille of managers and departments held up new ideas at the company. Others say that new features are created but then forgotten, following a pattern of “Launch, Promote, Abandon” that explains why much-hyped projects in areas like cloud gaming and virtual reality fail to take off.

Pichai acknowledged that the company had become bloated last month when he announced 12,000 job cuts, amounting to 6pc of parent company Alphabet's workforce.  

“We hired for a different economic reality than the one we face today,” Pichai said, adding that Google would “direct our talent and capital to our highest priorities.”

Dysfunction has been most apparent within Google’s AI department. In 2020, hundreds of employees revolted when a researcher claimed she was fired for raising concerns about bias in AI. Last year, an engineer was fired for claiming that Google’s AI chatbot had become sentient. Former Googlers have started a string of chatbot start-ups, claiming that the company’s approach stifled their ideas.

Insiders acknowledge that Google’s position means it is unable to launch products as rapidly as start-ups such as OpenAI. The company has been under immense political scrutiny over allegations it has broadcast misinformation and conspiracy theories about everything from elections to vaccines.

It must tread carefully to avoid any perception of political bias and US Republicans have already turned on ChatGPT for answering queries about Joe Biden more positively than those about Trump.

Microsoft’s tie-up with ChatGPT, the result of the Windows maker’s $10bn investment in OpenAI, has forced Google into action.

Last week, the company responded by announcing its own chatbot, named Bard, and confirming that its own search engine would feature chatbot-style results.

In comparison to Microsoft’s slick launch, observers were left underwhelmed. Google announced merely that its technology was in testing. An event showing off some of its capabilities revealed little.

Worse, a promotional image showed Bard delivering a wrong answer to a question about a Nasa telescope. The error only added to the impression that Google was struggling to play catch up. On the same day, shares fell by almost 8pc, wiping more than $100bn off the company’s value.

Analysts brushed off last week’s early mishaps as mere ripples. “Google has been preparing for AI for years [and] we think [it] likely has superior technology for search,” said analysts at Bank of America.

The company also has a significant head start, given millions of people around the world reach for Google as their default.

“[Google’s web browser] Chrome is a moat for search, Android [Google's mobile operating system and smartphones] is a moat for search,” says Colin Hayhurst, the chief executive of British search engine Mojeek. 

“They’ve got agreements with the phone manufacturers, particularly Apple.”

Google pays Apple an estimated $15bn a year to be the default search engine on the iPhone. While consumers can switch, few do.

Even if Google emerges victorious, it could come at a great cost. Processing chatbot-style answers requires a vast amount of computing power, which comes at great expense. Analysts at Morgan Stanley estimate that each natural language answer could cost Google up to 2 cents, five times more than the current cost of dealing with search queries. Answering half of searches with a chatbot could cost the company $6bn a year, equivalent to 10pc of 2022’s profit.

Nor is it clear how advertising might work with chatbots. While drawing eyeballs to sponsored search results has made Google rich, inserting ads into human-sounding language is more tricky. Neither Microsoft nor Google are yet to outline exactly how they plan to incorporate adverts, although both are expected to do so.

Google turns 25 this year, middle aged by Silicon Valley standards and older than many of its staff. With its search engine still largely unchanged, perhaps it's time for the product to grow up.