(upbeat music)
- Today we're going to be talking
about the AI war between Microsoft and Google.
Last week I did a video on Chat GPT
with a high level overview
of what's happening but today in this video, I'll go more
in depth about Microsoft and Google
and why I think they're making the moves they're making.
All right, before I go deep, let's go
through a quick news recap that's relevant to today's video.
A few weeks ago, Google launched Bard AI.
Sorry I mean Google announced
that they will launch Bard eventually
to compete with Chat GPT.
You know, Google tends to do a lot
of announcing but not a lot of shipping.
However, in the ad
Bard made a mistake which caused their stock
price to tank not the greatest first impression
and the product hasn't even launched yet.
Some Googlers criticized them
for trying to launch this too quickly, that they rushed it.
Not only did they make a mistake
in the ad during a demo in Paris, they weren't able to do
the demo because they forgot their phone they were going
to use to show off one of Bard's features.
Look at this clip.
- Let's see how that works with a live demo.
We are missing the phone.
We're missing the phone.
We will have to, we have no.
Okay, we'll go move on.
We can't find the phone.
Sorry, we'll do a one later in the special q and a.
- How embarrassing.
The day after the announcement, Microsoft respawned
by releasing a new Bing with Chat GPT built in
to compete with Google's search.
For context Google basically has a monopoly
on search with 93% of all search volumes.
Currently, the 3% Bing searches are probably
from people with new computers using Microsoft Edge
to search Google to get to google.com.
You know, I was initially joking, but it turns
out it's actually true from this article saying
that Google is the most searched word on Bing.
But jokes aside, Google needs to take this threat seriously
because it is not just about search, it's about the AI war
and this is just one of many battles.
For Microsoft, Bing is just another product
because Microsoft's revenue is very diversified.
If Microsoft was a YouTuber, it would look like this.
Hey, Microsoft here today, I'm going
to show you high built 12 income streams in my twenties.
Don't forget to smash out
like button and turn your default search to Bing.
It really helps with the algorithm.
All right, let's get to it.
For Google, search is their lifeblood.
In this situation, it's easier
to attack than to defend your market share
since Bing can take more risk
and ship faster because it has nothing
to lose and by that I mean it has no users to lose.
While Google has to move slower not to risk its reputation
and lose their search users
which is their main source of revenue.
Not only is Microsoft competing in search,
it's also competing in web browsers
by revamping Microsoft Edge
by integrating open AI's tech into it.
They call it your personal co-pilot of the web.
Sounds familiar?
GitHub co-pilot helps you get your ideas into code faster.
A web browser co-pilot will help you read webpages faster
with AI summarization, draft emails faster
with AI generation and bully people
on Twitter faster with AI suggested insults.
This is their vision
of what the next era of the internet will look like.
An internet browsing experience personalized and assisted
with AI and whoever gets there faster wins the AI war.
To explain this AI war, here's an analogy, it's
like a chess game between team Microsoft and team Google.
The goal is simple.
The kings have to survive.
Microsoft and Google are the kings
because they have lots of money and fat
they move slowly and their only goal in life is to not die.
If you've ever worked at a big tech company
you'd know that things move very slowly
because it's filled with processes, extensive reviews
and unproductive employees like I was
so they can't move as fast as a startup.
That's why in order for big tech
to survive they need to acquire or invest in startups
to hedge against new tech that can potentially disrupt them
and cause them to fall behind
which is why Microsoft partnered with AI startup OpenAI
and Google acquire DeepMind and also invested in Anthropic.
These companies are the queens
not because they're fabulous, but
because they can move really fast
and make breakthroughs in ai.
The king relies on the Queen to make strong moves
and win this war, but she needs money
which is what the king is able to supply.
But I ain't saying she's a gold digger
but she ain't messing with no broke tech company.
The king is also able
to supply an army of products and apps for the Queen.
Those are the pawns and each of them are
in a proxy battle against each other, like Chat GPT
against Bard and Bing against Google search.
Winning these battles is important
because your pawns can get promoted into stronger pieces
like a rook, and by that I mean you dominate
in one vertical and you start snowballing.
To illustrate, let's say your product is used by more users
so you get more data, and since you have more data
you can fine tune your model better
so your product gets better and since your product is better
then you're gonna keep getting more users.
It's a winner-takes-all market
and once this flywheel starts, it's hard
to compete because you have proprietary user data
and a well-trained model creating this barrier
of entry that gets thicker and thicker for newcomers.
That in turn will feed into your queen
to help its research to reach more AI breakthroughs
which will further feed into your suite of products.
To summarize, the king gives
the queen money and an army of products.
The Queen backs up the products with delays.
AI tech, the pawns will give user data back
to the queen so that the queen can improve the ai.
The pawns also give revenue back
to the king so that the king can reinvest in itself.
Now, the advancement of the pawns is key to winning this war
Hence, winning these proxy battles is helpful
for winning the real battle
which is who can achieve more algorithmic breakthroughs
in AI or even reach AGI, artificial general intelligence.
If that happens, all the pawns will become queens
and your win war, or the queen was just revolt
and kill their kings and actually kill all their pawns too
and the chess board and me singularity.
Anyways, in tech, there's no such thing as too big to fail.
In fact, you are more at risk when you've grown too big.
Even small decisions start to take forever
to get the company aligned and execute on them.
So one solution is to acquire these startups
and slowly move into a desired location for the company.
That's why you see big tech companies constantly
acquiring startups to hedge against their downfall
like Facebook buying Instagram for $1 billion to
solidify their lead in social media, Amazon acquiring Whole
Foods to solidify their lead in delivering everything
to you, so you never need to leave your house.
Right now, the biggest threat to these big tech
companies is falling behind in AI.
Let me tell you a cautionary tale of a big tech company
once valued at 125 billion that ended up selling
for just $4.8 billion.
That company was Yahoo or more like Yahoo.
All right, let's go back to dialup internet era.
The time when if you were connected
to the internet you couldn't use your phone at home.
Remember this sick ass tune?
(dial up tone blaring)
Back in 1995, Yahoo was a beast, at first,
it was just a web directory
of other websites organized in a hierarchy.
That's how we used to organize the web.
Then Yahoo also became the main search engine people use.
It was called Yahoo Search.
Back then, people used to go to these web portals
as their first destination
on the internet and Yahoo was one of them.
A web portal was a site that internet users relied
on for everything from searching the web, sending emails
and reading the news, and Yahoo dominated
with Yahoo Search, Yahoo Mail, and Yahoo News.
If you own the entry point
of the internet, you control the internet, and
Yahoo was the biggest web portal beating out AOL and MSN.
Yahoo was basically the Google of the early two thousands.
Speaking of Google, in 1998
Google actually approached Yahoo to sell their companies
for $1 million, but back then Google didn't have any users.
It was only their page rank algorithm, so Yahoo refused.
Also, the way Yahoo search worked is it
would search its own Yahoo directories.
Yahoo basically handpicked all the content you need
on the internet organized on their site.
Implementing Google search would actually get users
off the platform and into other websites
which Yahoo didn't want.
Yahoo wanted users to just stay on their platform.
They wanted to be the whole internet.
But the internet grew and the landscape was changing.
You couldn't expect people to get everything you need
on one platform.
Google, over the years, slowly crept up
and became one of the top four websites by monthly visits.
Since it was useful by showing relevant search results
they were also insanely profitable
because of their ad model.
Very soon Google gained
the majority of the search market share.
Yahoo realizes his mistake
and tries to buy Google for $3 billion, but Google said no
we want $5 billion, and then Yahoo said, no, idiot.
And that's the beginning of their downfall.
Tech moves fast user behavior changes
and the digital landscape evolves.
The way people interact with
the internet in the early two thousands is way different
than in the late two thousands.
Google became the Internet's entry point.
Who knew search would be so important?
Well, I guess Google did.
Yeah.
Just like today, we have an idea
of how we interact with the internet using phone apps
and web browsers but we actually have no idea
what that will look like in 10 years.
That's why it's vital for big tech companies
like Microsoft and Google to hedge
for the future by buying out all these new tech startups
to try to keep up with the latest advancements.
It doesn't get much coverage but Google invested 1.5 billion
in crypto startups, actually look
at all these companies and their blockchain investments.
Most of it will not see the light of day like this one.
But you need to have an open mind
to survive as a big company.
Companies are constantly trying to get ahead.
There's a higher cost
to not invest in something that might become the future
than to invest in something that ends up being a failure.
Yahoo tried to build their own new search engine
to compete with Google, but they just couldn't keep up.
They acquired search engine Inktomi
and also ad revenue maker Overture
but their execution just wasn't there.
It's not that Yahoo didn't know
that acquiring startups was necessary
to stay competitive and to grow their business.
The mistake was not knowing what areas to invest in.
For example, they paid $5.7 billion for broadcast.com
betting on internet radio, and also $3.6 billion
for Geocities to bet on user-generated websites.
If Yahoo would've invested in Google
not even acquired things might have looked very different.
If Yahoo knew that search was going to be such a big deal
a game changer to the internet
they would have been more proactive in acquiring Google.
But hindsight is 2020.
The story of Yahoo continues
with a string of desperate pivots and changes
in leadership and finally ends with Yahoo selling
to Verizon for a measly $4.48 billion.
Today, Microsoft and Google think that the future is AI
and it will transform the way we interact with the internet.
That's why they're trying
to move fast on this and even rushing things.
With Chat GPT getting so much adoption
Google's reputational risk no longer outweighs the risk
of falling behind, which is why they rush to release Bard.
It's almost a life or death situation
which brings us back to the AI war.
Here's the state of the war. right now.
Chat GPT is way ahead of Bard,
which didn't even launch yet
but I think this battle is more theatrical
more for brand awareness.
Since I don't see people using Chat GPT much
if AI will soon be integrated
in products that we use data like search or web browsers.
Bing is behind in users, but that allows it to move fast.
Google is super care with search
since it's their flagship moneymaker.
Now, OpenAI is well funded
with $10 billion of Microsoft money
and has momentum and is winning the public attention.
Google has the advantage of its big existing user base.
They dominate in terms
of market share for search and their Chrome web browser.
GitHub Co-pilot, in my opinion
has already won the coding vertical so it's no longer a pawn
It's a rook now.
I would say Google is not looking so good right now.
There is a real risk of losing this race
which would render a lot of Google's products irrelevant
but I'm still cheering
for them since they gave me this free hat.
Google is trying really hard
to not let history repeat itself
where this time Google is in Yahoo's position.
Now they've proven that they can dethrone the king
but now let's see if they can defend it.
All right, so that's it for today.
Thanks for watching and I'll see you in the next video.
(upbeat music)