On Tuesday Microsoft announced they have launched an all-new, AI-powered Bing search engine, which is currently available for preview. Microsoft say it will "deliver better search, more complete answers, a new chat experience and the ability to generate content”.
At ClickedOn we have always strongly encouraged our clients to advertise on Microsoft Bing and across the Microsoft Advertising Network. Our detailed customer lifetime value analysis over the years has shown that the average user of the Bing search engine is older and wealthier, and we have also observed a circa 30% lower average cost per click, it just made a lot of sense for advertisers.
We understand that Bing has less than 10% market share in search in most countries compared to Google's share at over 90%, and that managing two platforms takes additional effort. However, our clients typically see a 10% increase in customer acquisition from advertising on Bing, and we believe that the extra effort is well worth it.
Everyone is talking about ChatGPT at the moment. Personally I think AI enhanced functionality is the biggest societal and productivity revolution of the 2020’s. The integration of ChatGPT into Bing search further enhances our reasons for recommending advertisers to be visible on Bing.
Looking at the market dynamics, AI powered search requires more computing power and time to deliver answers than traditional search results. I believe Google’s new AI tool Bard will be an effective AI search provider, but as the biggest player in search revenue, Google are financially motivated to keep people using traditional search, which they monetise extremely well. I believe this may result in a less than optimal experience for users on Google and we will see a trend of more searchers moving over to Bing.
In another industry I have observed a similar trend first hand. In international money transfers, WorldFirst (our client of 8 years) and my previous employer OFX compete against the big banks to send money overseas at a cheaper rate and with better service. The big banks in Australia and other markets charged around 4% in transfer fees (mainly through lower FX rates) while the online providers charge around 0.50%, saving significant money for customers who switch.
Despite the rise of cheaper online alternatives, the major banks have maintained their 4% fees while seeing their market share drop from roughly 95% to 50% in some markets. The major banks have maintained these fees because it is more profitable to charge the 4% fee on 50% of customers than the 0.5% fee on 95% of customers. I predict we will see a similar trend occur with Google where they slowly lose customers to Bing in order to maximise their search revenues, as this is the most logical decision for Google to make in this situation.
The addition of AI powered chat functionality into Bing is a significant improvement in the user experience, like the 80% reductions in fees and better service that occurred with the creation of online money transfer alternatives. The improved functionality will see new people migrating to use Bing search. I predict that Bing will have 20% market share within the next two years.
With less certainty, I can envisage new viable search competitors to Bing and Google appear and gain segments of the market serving specific niches. Maybe an AI search tool specifically for creatives, a right leaning AI search engine, a not for profit search engine or others, tailored to specific markets or groups. Built using Open AI and related technologies.
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