Google’s parent company Alphabet Inc. on Monday fell as much as 4% following a report that South Korea’s Samsung Electronics may replace Google search with Microsoft’s Bing as its default search engine on its devices.
The report published by the New York Times over the weekend highlights the growing challenges Google’s $162-billion-a-year search engine business faces from Microsoft-owned Bing.
Bing, once a minor player has recently risen to prominence after Microsoft incorporated ChatGPT’s artificial intelligence (AI) features in its Bing search engine to help answer user queries. The search engine runs on a next-generation large language model (LLM) that is considered more powerful than ChatGPT.
After The New York Times report was published, executives and employees of Alphabet expressed shock over the report that the South Korean tech giant is contemplating extending its contract with Google Search or switching to Bing.
The report while citing internal messages between Google employees said the company’s reaction to the threat was “panic”, as the company earns an estimated $3 billion annually from the Samsung contract.
Also, Alphabet has another $20 billion tied in a similar contract with Cupertino tech giant Apple to have its “Search” as a default search engine on iOS that will be up for renewal this year, the report added.
Google Search has dominated the search engine market with a share of over 80% for decades and serves as a profit resource for the company making most of the tech giant’s total revenue. For instance, in 2022, Google’s Search engine business accounted for $162.5 billion or nearly 60% of the total revenue ($279.8 billion) earned by the company.
However, if Samsung and Apple decide to pull out from their contracts, Google stands to lose $23 ($3 + $20) billion out of its $162 billion annual revenue.
On Monday, Alphabet shares closed at $105.97, ending 2.7% lower for the day. The fall in stock depleted nearly $50 billion from Alphabet’s market capitalization. On the other hand, Microsoft’s stock was up over 1.5% in the broader market.
When Reuters contacted Google for comments on The New York Times report, the search giant responded by saying it was working to bring new AI-powered features to Search without commenting on its alliance with Samsung. Meanwhile, Samsung has also not officially confirmed about the South Korean electronics giant possibly replacing Google Search with Bing.