Google parent to make 'meaningful' investments to double down on its AI efforts, says CEO Sundar Pichai

Sundar Pichai said he sees the latest AI advances as an opportunity to evolve Search and Assistant over the next decade

Google parent Alphabet will continue to make “meaningful” investments to support its artificial intelligence (AI) efforts, CEO Sundar Pichai said, as the company aims to strengthen its position as a prominent player in the AI arms race with tech giants, such as Microsoft, Meta, and upstarts such as OpenAI.

"We see AI as a foundational platform shift and are excited about the opportunities across our business," Pichai said during the company's earnings conference call on October 24.

Alphabet's capital expenditure grew to over $8 billion in the third quarter of 2023, driven "overwhelmingly" by investments in AI compute and other technical infrastructure.

Chief Financial Officer Ruth Porat said on the call that the company expects investments to increase in the fourth quarter of 2023 and continue to grow in 2024.

Over the years, Alphabet has made significant investments in researching and building foundational AI technologies and large language models, such as PaLM 2.

The tech giant also combined its AI research units, DeepMind and Google Brain, into a single division led by DeepMind CEO Demis Hassabis in April this year. The division is currently working on the firm's next-generation foundation model, Gemini, which is expected to be multimodal in nature.

During the call, Pichai said they are "excited at the progress" they are witnessing as the company works towards getting the model ready.

"We are laying the foundation of what I think of as the next generation series of models we will be launching throughout 2024. The pace of innovation is extraordinarily impressive to see. We are creating it from the ground-up to be multimodal, highly efficient at tool and API integrations and more importantly, laying the platform to enable future innovations as well," Pichai said.

Gemini is expected to be available in various sizes and capabilities, and Pichai said that Google will use it immediately across all of its products internally and release it to developers and cloud customers through Google Cloud’s machine learning platform Vertex.

New ad formats for AI searches

Pichai said the company will also experiment with new ad formats native to its AI-powered search experiment, Search Generative Experience (SGE), which will use generative AI to create relevant, high-quality ads customised to every step of the user's search journey.

Google unveiled SGE at its annual developer conference Google I/O in May, with the goal of bringing generative AI capabilities to its search engine to make it more natural and intuitive for users. The search experience is currently available to users on an opt-in basis in select markets, including India.

As Google rolls out SGE to more users, "we are making sure the product works well, and we are generating value for our ecosystem and that ads transition well (to the AI experience)," Pichai said.

For Google, whose primary source of revenue is its search business, this move will play a vital role in the company's strategy as it looks to roll out the AI search experience more broadly in the future.

Search business reported a revenue of $44 billion for the quarter ended September 30, 2023, a 11.3 percent jump year-on-year. The segment accounted for about 57.4 percent of Alphabet's overall revenues of $76.7 billion for the quarter.

"It's extremely important to us that in this new experience, advertisers still have the opportunity to reach potential customers along their Search journeys," Google's chief business officer Philipp Schindler said during the call.

The company had earlier said it would experiment with search and shopping ads that are directly integrated within the AI-powered snapshot and conversational mode.

Rising competition

Google's move to infuse its search business with generative AI capabilities comes at a time when the tech giant is facing its biggest challenge in over a decade from Big Tech rivals such as Microsoft and upstarts such as OpenAI.

Recent advancements in generative AI, fuelled by the popularity of OpenAI's ChatGPT over the past year, is changing the way people interact with information, making it more conversational.

In May, Google unveiled a new integrated search results page, called SGE, which will feature an AI-powered snapshot at the top of the search results. This snapshot will display a quick topic summary and links to learn more about the topic.

"We are surfacing more links with SGE and linking to a wider range of sources on the results page, creating new opportunities for content to be discovered," Pichai said during the call.

"With Generative AI applied to Search, we can serve a wider range of information needs and answer new types of questions, including those that benefit from multiple perspectives," he added.

Google extended its generative AI search experience to India in August this year, along with a slew of India-focused features in the AI search experience, including voice input, language toggle, and the ability to listen to responses.

Earlier this month, Google added new visual capabilities to this experience by incorporating videos and images into several AI-powered overviews in India. Additionally, it plans to soon integrate user reviews to help people explore places and things to do in a particular city.

In addition to this, users in India will be able to access summaries of over 100 government schemes across key areas such as employment, housing, healthcare, and farming, as well as women's welfare in the coming weeks, the firm said.

During the call, Pichai said he sees the latest AI advances as an "opportunity to evolve Search and Assistant over the next decade."

"When you continue to invest in and build great experiences, you can get value on the other side and I do think over time, there will be newer paths just like we've done on YouTube. I think with the AI work, there are subscription models as a possible path as well," he said.

Over the past year, Google has also raced to integrate generative AI capabilities across its suite of products in addition to Search.

Earlier this year, Google introduced its AI chatbot Bard, which now has deep integration with several of the company's consumer applications and services, including Gmail, Docs, YouTube, and Maps.

Last month, video sharing platform YouTube unveiled a suite of generative AI products and tools for creators on its platform.

Earlier this month, Google debuted Assistant with Bard, a virtual assistant that combines the generative and reasoning capabilities of its AI chatbot Bard with Assistant's personalised help.

"Bard's language understanding, complex reasoning and generative capabilities have fueled our excitement in realizing our vision for Google Assistant. It's a step towards our vision to deliver the world's most helpful personal assistant," said Sissie Hsiao, Google's VP and general manager of Bard and Google Assistant at the time of launch.

The company's cloud unit Google Cloud has also rolled out a range of AI offerings to help developers, businesses, and other organizations to build their own AI-powered products and services.