A $10 billion investment is a lot of money to spend playing a game of catch-up.
As reported, Microsoft is investing billions in OpenAI, in a deal that according to several media outlets will be worth $10 billion over 10 years. The investment expands on a relationship between the two firms that stretches back to 2019.
And it may not be enough to reverse the pressures faced by Bing, Microsoft’s search engine, which is arguably the most immediate place to bring artificial intelligence (AI) deeply into the tech giant’s offerings.
OpenAI makes ChatGPT, a chatbot that was launched a bit more than a year ago. Generally speaking, the bot uses natural language processing to respond to user queries and to craft responses that are conversational, closely resembling the natural flow of verbal human interaction. And in terms of search, beyond the traditional processes of entering search queries and getting pages’ worth of links, the idea would be that the responses could be in paragraph form, richly detailed, eliminating the scrolling and hunting for what a user needs.
There’s no shortage of ethical debate on how the information is culled, analyzed and disseminated back to users of AI-powered search. Critics charge that using high-powered tech to parse vast swaths of data online spanning everything from books to chat rooms to, well, pretty much everything else can inject harmful bias into the search responses. That’s a debate, we note, that will last for years, and may never be settled.
Laying Out the Strategy
In terms of general corporate strategy, the blog post this week that announced the expanded relationship between Microsoft and OpenAI said the goal was “to deploy our technology through our API and the Azure OpenAI Service — enabling enterprise and developers to build on top of GPT, DALL·E, and Codex.” In the latest earnings conference call with analysts this week, CEO Satya Nadella said that “the way for our investors to see this is we fundamentally believe that the next big platform wave … is going to be AI.”
For Microsoft, most immediately, the strategy seems to supercharge Bing. The company is reportedly going to launch a new version of Bing that would use ChatGPT.
The impetus is there for Microsoft to revamp Bing. The search engine, renamed Bing back in 2009, has only roughly 9% market share, compared to Google’s massive 84% share, as determined by sites such as Statista. Bing, according to those stats, has not been able to break into double-digit market share.
The company does not break out the financial contribution from Bing specifically. But in Microsoft’s results and earnings call on Tuesday (Jan. 24), management noted that search and advertising revenues were up 10%, a relative bright spot in the “More Personal Computing” segment, that was off 19% as Windows-related and Xbox-related revenues declined double digits. Management also noted on the conference call with analysts that in the words of CFO Amy Hood, “advertising spend declined slightly more than expected, which impacted search and news advertising and LinkedIn Marketing Solutions.” Some torque in search, it seems would be welcome, but do so means gaining share in search — to, in effect, lure users away from the 800-pound Google gorilla in the space.
There are some glitches to be ironed out, especially as Microsoft looks to forge a super app that would have search at the center of it all, connecting everything from navigation to payments.
OpenAI’s own site states ChatGPT “sometimes writes plausible-sounding but incorrect or nonsensical answers” and the model “is often excessively verbose and overuses certain phrases, such as restating that it’s a language model trained by OpenAI” and added that “while we’ve made efforts to make the model refuse inappropriate requests, it will sometimes respond to harmful instructions or exhibit biased behavior.”
For Microsoft, AI may be the answer in its search to, well, improve search … but fine-tuning, and time, will make all the difference.