Samsung is considering ditching Google for Bing as its default search engine, following the integration of ChatGPT 3 by Microsoft’s web search arm.

Google has enjoyed being used in Samsung phones as the default search engine for 12 years. The smartphone maker’s move will likely set an unpleasant precedent for Google search business, which has over 90 percent dominance of the search engine market.

New York Times reported that there was panic within Google when employees reportedly found out that Samsung was considering switching to Bing last month.

Alphabet Inc’s shares dropped by nearly 4% on Monday following the news.

Microsoft incorporated ChatGPT 3 into Bing early this year, marking the company’s most innovative move to wrestle some shares of the search engine market off from Google.

The emergence of the AI-powered chatbot, which Microsoft has invested billions of dollars in, has become the game changer for Bing. Google issued ‘code red’ late last year following the emergence of ChatGPT 3. The tech giant has since announced its own AI-powered chatbot named ‘Bard’ but said it does not intend to incorporate it into Google search.

If Samsung goes ahead with the plan, Google will lose $3 billion out of its $162 billion annual revenue, according to the company’s internal messages.

ChatGPT 3 provides humanlike context to queries with its capability to take on a whole range of tasks – from writing poems to codes.

But unlike ChatGPT 3, which accumulated over 100 million users within three months, Bard failed to impress potential users at trial. In early February, Google lost $100 billion after Bard collated inaccurate information in its promotional video. The chatbot also suffered other setbacks prompting Google’s employees to write CEO Sundar Pichai, criticizing the hurried nature in which it was launched.

Though ChatGPT 3 has experienced the same challenge of inaccurate information, Microsoft is working to make the AI tool reliable on Bing. The software maker is also working on onboarding other AI features, including Bing’s image generator.

Google is reportedly working to create a new AI-powered search engine. Pichai said in an interview with Wall Street Journal early this month that the company plans to use Large Language Models (LLM) to elaborate search contexts with conversational features.

“Will people be able to ask questions to Google and engage with LLMs in the context of search? Absolutely,” he said.

Samsung’s move will likely force Google to hasten its plans to integrate AI chatbot into search, even though the company said it’s working to make search experience better for users by improving its algorithm.

Atlantic Equities analyst James Cordwell told Reuters that “investors worry Google has become a lazy monopolist in search and the developments of the last couple of months have served as a wake-up call.”

Now we learn that Google was again blindsided by Samsung reportedly considering whether it really wanted to renew its $3 billion-a-year contract to keep Google Search as the default search engine on its mobile devices—or to instead switch to Microsoft’s A.I.-happy Bing, which was until recently more of a punchline than anything else.

According to the Times piece, Googlers “reacted with emojis and surprise” when asked to knock together a pitch that might convince Samsung to stay on board, with one saying “Wow, OK, that’s wild.” That right there is the definition of complacency.

I can certainly understand what’s behind it—Google’s global market share has been at 90% or more since the late noughties—and I also appreciate that Google’s reluctance to go all-in on generative A.I. is partially motivated by a desire to keep search reliable and safe. But there’s clearly a degree of organizational inertia involved when employees are shocked at the suggestion of a key business partner re-evaluating the competition (Fortune newsletter)

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In the past, I’d noted that Google was largely wasting money paying Apple to have its search engine as the default search in Apple products. My thesis was based on the construct that Google Search being the #1, Apple even without being paid would have used it. It was not really about Apple; it was about Apple delivering the best experience to its customers. An iPhone on Bing would not have given Apple that end-to-end great experience Apple had envisioned.

So, the estimated $20 billion Google sent to Apple in 2022 for its search position was not money well spent. Sure, you could argue that the money possibly included an incentive for Apple to stay away from developing an inhouse search engine. In other words, if you receive a cheque of $20 billion yearly, why would you bother building that product line? Apple pockets about $20 billion yearly, and punts for Google to own the world of search!

Google was the absolute search’s category-king, and remains the best as I write. But that is changing. How do you know? Buy a Windows laptop, get the system connected to the internet, you will likely do one of these two things within the first five things on Internet Explorer/ Edge: type Google.com or search “download Chrome” on the browser. In other words, most begin from the Microsoft browser to get Chrome, and quickly change the default browser to Chrome, with Google search the obvious choice over Bing.

But that is changing and Samsung dropped some hints: “Alphabet Inc shares fell as much as 4% on Monday following a report South Korea’s Samsung Electronics was considering replacing Google with Microsoft-owned Bing as the default search engine on its devices. The report, published by the New York Times over the weekend, underscores the growing challenges Google’s $162-billion-a-year search engine business face from Bing – a minor player that has risen in prominence recently after the integration of the artificial intelligence tech behind ChatGPT.”

Google now provides summaries for searches, to mimic one of the coolest elements of ChatGPT, cooking the food, instead of just providing the grocery of Internet links, and requiring  one to enter the kitchen to prepare the meal. But just like making short videos does not take TikTok out with its best-in-class AI system for video discovery and distribution, the only future for Google is the lab: it must create good AI to withstand the frontal assault which ChatGPT is bringing to its business.

Indeed, ChatGPT provides a real challenge to Google Search. On Friday, I noticed something with my Microsoft Word (within Microsoft 365). I was working on a document on economic development. As I typed, Word was not just suggesting words but phrases and clauses. It was systematically predicting me as I wrote. Then on Sunday, working on a courseware on Professional  Personal Branding for Tekedia Mini-MBA, I noticed that Word could extend my thoughts. Quickly, I shouted, “Microsoft Word has evolved to Microsoft Phrase and if it continues like this, we will have Microsoft Sentence and Microsoft Paragraph soon”!

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@60minutes

“Holy cow!” exclaimed Scott Pelley as he used Bard, Google’s newly released artificial intelligence chatbot. The technology appeared to possess the sum of all human knowledge, with microchips 100,000 times faster than the human brain. #artificialintelligence #google #60minutes #chatbots

? original sound – 60 Minutes

Google’s reaction to the threat was “panic” as the company earns an estimated $3 billion in annual revenue from the Samsung contract, the report said, citing internal messages.

Another $20 billion is tied to a similar Apple (AAPL.O) contract that will be up for renewal this year, the report added.

In a response to Reuters, Google said it was working to bring new AI-powered features to Search without commenting on its association with Samsung. The South Korean consumer electronics major did not respond to a request for comment.

Google has for decades dominated the search market with a share of over 80%, but Wall Street fears the company could be falling behind Microsoft in a fast-moving AI race.

Parent firm Alphabet lost $100 billion in value on Feb. 8 after its new chatbot, Bard, shared inaccurate information in a promotional video and a company event failed to dazzle.

On Monday, the stock fell to $104.90 and erased nearly $50 billion from Alphabet’s market capitalization. Microsoft, meanwhile, outperformed the broader market with a rise of 1%.