Google AI Subscription Path: Google CEO Sundar Pichai is hinting at a new direction for the tech giant, one that could potentially shake up its revenue model. During the recent earnings call, Pichai discussed the possibility of subscription-based business models for some of Google’s AI products.
Morgan Stanley analyst Brian Nowak probed Pichai about Google’s investments in AI for Search and what Wall Street should expect in terms of returns from these investments. Specifically, he asked about any indications of higher utility, improved conversion rates, or increased engagement resulting from AI developments such as Search Generative Experience (SGE) and Google Bard.
Pichai responded positively, noting that he’s pleased with the feedback on SGE and that Google is expanding its availability to more users. He emphasized that AI presents an opportunity to evolve Search and the Google Assistant service over the next decade.
He went further, suggesting that subscription models could be a potential path for AI services. This is a significant departure for Google, a company primarily reliant on advertising for its revenue and profits. Google Search is especially lucrative through advertising, and any changes to its user interface could impact how these ads perform.
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Pichai’s willingness to entertain the idea of subscriptions is surprising, given the advertising-dominated landscape Google operates in. However, it’s worth noting that Google has found success with subscriptions in the past, particularly through its YouTube platform. YouTube offers services like YouTube TV, a cable-like internet-delivered service, and NFL Sunday Ticket, allowing viewers to watch out-of-market football games. These offerings come at a cost, and initial responses have been positive.
Google’s “other” revenue, which includes income from YouTube subscriptions, saw a 21% year-on-year increase in the third quarter. This suggests that the company’s foray into subscription-based services is gaining traction.
While Google remains cautious about changes to its core Search experience, Sundar Pichai’s openness to subscription models for AI services indicates a potential shift in strategy. It remains to be seen how this could reshape the tech giant’s revenue structure in the future.