Google is not new to controversies. From tax evasion to unfair business practices that include the abuse of its monopoly status in online search and advertising or patent infringements to violation of its users’ privacy, the internet behemoth has faced many serious allegations over the years. It has fought and paid billions of dollars in penalties in several anti-trust cases across the markets it operates in.
None of this, however, vexed its investors in a consequential manner in the past. Their trust in and support to the corporation continued unabatedly. Last week, however, the investors dealt it a blow that shocked the industry, and it came after Google’s new chatbot Bard made a factual error in a promotional video.
Bard Gets It Wrong
In an advertisement released on Twitter on February 7, Bard ‑ introduced to the world as Google’s experimental conversational artificial intelligence service and launchpad for curiosity that can help simplify complex topics - was asked about the new discoveries from the James Webb Space Telescope (JWST) that a 9-year-old could be told about. Amongst a few things Bard rattled off in response was a statement that JWST took the first ever pictures of a planet outside the Earth’s solar system or exoplanet. Some Twitter users, including Bruce Macintosh, the director of the University of California Observatories and part of the team that took the first images of exoplanets, pointed out that this was factually incorrect. Soon the internet was rife with concerns about not only AI’s limitations and potential to make mistakes that may be grave but more importantly, with Google losing hold over its dominance in the internet search business.
The stock market reacted sharply to this development, and Google parent Alphabet Inc’s stock started getting hammered; within hours, it had lost $100 billion in market cap.
Bard is meant to be Google’s answer to ChatGPT, the new AI sensation that has taken the internet world by storm. It is being touted as the next-gen consumer tech tool that internet companies across the world had been breathlessly vying for over the past few years. Both ChatGPT and Bard are based on Long Language Model which is essentially a deep learning algorithm that has the capability to process large datasets to recognise, translate, predict, synopsise and generate text when prompted.
ChatGPT Too Erred
Incidentally, this wasn’t the first time a chatbot had made a mistake. In fact, ChatGPT itself had generated a frighteningly inaccurate response to a prompt suggesting that mixing crushed porcelain with breast milk can support infant’s digestive system. That some errors will occur is a likely outcome in the future, too. Besides, the slip-up by Bard was not going to have any immediate bearing on Google’s monopoly in the search engine space. Yet, the investors, who chose to turn a blind eye to the company’s many serious and some even deliberate transgressions in the past took a harsh view of the lapse. They continued to hammer Alphabet’s shares in subsequent days and the company had lost around $170 billion in less than a week since the incident.
Incidentally, a few days before this incident, on January 20, the company announced that it was sacking 12,000 of its employees. Its shares rose more than five percent after the announcement.
What Investors Want
One doesn’t need a chatbot to draw insights from this episode into what tickles investors.
Google has had an unshakable run in the search advertising and browsing market. It has had lion’s share in total digital advertising for years now. Earlier this month in an analyst call, Microsoft pegged the total digital advertising market at $500 billion and said that search advertising accounts for 40 percent of this or is $200 billion in size. Google has around 93 percent share in search advertising market and this 93 percent accounts for more than 50 percent of Alphabet’s entire revenue.
Clearly, Alphabet’s, and hence, its investors’, fortunes are tied to the search advertising market which is now showing signs of a shake-up. It didn’t help that Bard made the boo-boo just around the time when rival Microsoft announced an investment of $10 billion in OpenAI, the startup that owns ChatGPT and that it will be integrating ChatGPT in its own search engine Bing, and browser Edge.
Intensifying Competition
This presents a double whammy for Google. One, Microsoft is snapping at its heels in an extremely threatening manner and in the long term, even if Google manages to retain leadership in the market, it will lose market share. Two, the integration of chatbots into search functions is likely to push the costs up significantly. Both these factors mean a squeeze on margins and that’s something the investors are clearly not kicked about.
The Bard episode once again shines the light on the fact that investors’ fundamental concern continues to be profit and its potential. Ethics, environment, governance, and social goals make for happy reading in annual reports, but they are happier to look the other way if these weigh the bottomline down. In other words, the return on investment is inviolable, return on social and ethical goals is not.
Another equally unsettling message is that corporations continue to see their investors as the primary stakeholders and are ready to sacrifice their employees’ future to appease this constituency.
Archna Shukla is a senior journalist based in Delhi. Views are personal, and do not represent the stand of this publication.
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