Evaluating Google's Latest AI Play

Intensifying the race for global AI supremacy, Alphabet Inc. (NASDAQ: GOOG), the parent company of Google, is testing AI chatbots modeled after celebrities and influencers. According to a recent report by The Information, these chatbots will not just answer customer queries but will be able to hold a conversation with users, improving the user experience. In addition to this, users will also be able to create their own customized chatbots using characteristics of their choice. In the long run, Google may attempt to integrate these chatbots into YouTube directly, allowing creators to connect with their audiences better and in a more personalized way. The AI chatbot market is one of the fastest-growing industries within the broad AI sector. Mordor Intelligence projects this market to grow at a stellar CAGR of close to 25% through 2029, pushing the industry valuation to more than $7 billion. Google’s experiments in this sector, therefore, do not come as a surprise.

A Crowded Field

The AI chatbot market is fragmented and competitive, with players such as Meta Platforms, Inc. (NASDAQ: META) and Character.ai enjoying some first-mover advantages. Meta, the parent company of Facebook, Instagram, and WhatsApp, launched chatbots modeled after celebrities last November, giving users access to chatbots developed after popular names such as Snoop Dogg, Kendall Jenner, Tom Brady, and Chris Paul. Character.ai, on the other hand, focuses on helping users create their personalized chatbots based on the appearance and characteristic traits they prefer. Google, reportedly, is attempting to combine both these capabilities into a single platform, giving users more freedom to explore.

What It Means For Alphabet

There are a few ways AI chatbots can help Alphabet financially. The core objective of this new AI tool is to keep users engaged with Alphabet’s various platforms such as Google and YouTube in this AI era, thwarting the threat posed by Microsoft-backed OpenAI. Alphabet seems to be winning the trust of users already with its innovative tech, evidenced by recent survey results published by Jefferies. According to these findings, 63% of consumers associate Google with AI, followed by 51% for OpenAI and 44% for Microsoft. Successfully launching AI chatbots will further tilt the odds in favor of Alphabet, paving the way for the company to earn higher ad revenue in the future thanks to increased engagement levels. Integrating these chatbots with Alphabet’s products may create new monetization opportunities tied to the usage of chatbots as well. It will not come as a surprise if the company integrates chatbots into Gmail, Google Workspace, and Google Assistant in the future, driving the usage of these platforms.

Both Dilantha DeSilva and Stocks.News have positions in Meta. Stocks.News also positions in Alphabet.