Google Stock Downgraded On AI Changes To Search Affecting Ad Growth

(CTN News) – Google Stock parent company Alphabet (GOOGL) plans to use generative artificial intelligence for internet search, resulting in lower revenue growth for advertising, according to an analyst who downgraded GOOGL stock on Monday, according to Reuters.

According to UBS analyst Lloyd Walmsley, Google’s relationship with content publishers will undergo big changes that could have a negative impact on Google stock in the near future.

In addition, Walmsley downgraded GOOGL stock from a buy rating to a neutral rating. It was an early trading day for the stock market today, and the stock market fell 1.2% to near 122 in early trading.

Walmsley told clients in a note to clients that he is concerned SGE (generative AI-based search) will occupy valuable ads real estate, reducing the space Google has to serve an ad in the future.

GOOGLE Stock: New Search Competition on the Horizon

Aiming to counter Microsoft’s (MSFT) investment in artificial intelligence startup OpenAI, Google is investing in the startup.

It was announced that Alphabet will be displaying its integration of generative AI into search, maps, Workspace, photos, cloud computing, and Android devices at the Google I/O 2023 developers event on May 10.

There were more AI tools for advertisers announced by Alphabet at Google Marketing Live on May 23.

“We are aware that Google’s SGE implementation is still in its very early stages, and we are working on integrating advertising into the system,” Walmsley stated.

We observed material differences in SERPs (Search Engine Results Pages) during our initial testing of SGE when compared to the old Google. These differences suggest a possible disruption in Google’s well-oiled monetization mechanism.

Is it likely that publishers will restrict access to their content?

Additionally, the GOOGL stock analyst pointed out that relationships with content publishers have changed over time. To discover publicly available webpages, Google Stock uses software known as web crawlers, which is a form of software that operates on the Internet.

In addition to this, crawlers look at websites and follow links on those websites. In addition, they also send back data about the webpages they visit back to Google’s servers.

A publisher typically gets free traffic to its site if it allows Google Stock to crawl its site and to include links in search results in exchange for allowing Google Stock to crawl its site, Walmsley said.

In my opinion, if Google’s SGE/Bard chatbots crawl publishers just to provide answers, with fewer clicks out to the source websites, then publishers are not incentivized to allow Google access to their content in the first place.”

SEE ALSO:

ChatGPT Maker OpenAI Will Launch An AI Application Marketplace