The Death of Google Search

Steven is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Google’s (NASDAQ: GOOG) business model is pretty straightforward.  Everything is hinged upon growing loyalty to Google.com.  The more users search, the more they can charge for advertising, and that makes shareholders happy.  Their approach has been to develop killer products and services that keep users in the Google mindset.  How many people really use Gmail and Bing?  Often imitated, but hardly duplicated, their search engine has given them a sustained edge against competitors.  But what if someone came along and invented a far superior way to search?   

That’s exactly what one major technology company has done.  Their invention has the potential to completely undermine Google’s search business.  It’s not surprising that Google is already taking measures to mitigate this threat.  This new technology has the power to leap society into the next productivity growth phase of the twenty-first century.  It’s the definition of game changer.  Today we will examine this technology and what steps Google is taking to remain relevant.    

Talking Productivity
Aside from population growth, productivity gains are the ticket to added economic prosperity.  The more efficient we become as a society, the more we can output, and thus, the greater GDP per capita increases.  Technology has played a major role in facilitating a more productive society.  Google search has essentially eliminated the need for libraries.  What took you a day in the stacks now takes a matter of seconds.  All that free time can be put to good use. 

The world is ever changing.  The technology of today will look a lot different from the technology of tomorrow.  We are starting to get a glimpse of what the technology of tomorrow looks like.  Apple’s (NASDAQ: AAPL) Siri is a great example of the future direction of search.  Virtual assistance will be a big part of lives in the future.  That is, once it gets smarter.

In current form, Siri is reliant on Nuance Communications’ (NASDAQ: NUAN) voice recognition engine.  It doesn’t actually know language.  Engineers have programmed it to “understand” words and translate them into commands.  It’s essentially a voice activated Google with a dash of virtual assistant.  The truth is, Siri is far from becoming a functioning member of society, mainly because it lacks brains.            

A Siri with a Brain
For Siri to make the jump from novelty to productivity monster it requires a more advanced form of artificial intelligence (AI).  The addition of AI would make Siri an unbeaten pair.  When I caught wind of International Business Machines’ (NYSE: IBM) plan to make Watson available on smartphones, my inner nerd started geeking out.  Once the excitement settled, the investor from within took over.  This is the Siri the world has been waiting for.  And it’s extremely disruptive.

As IBM explains it, a farmer could stand in a field and ask their phone when they should plant their corn crop.  Watson would take into account location specific trends along with scientific analysis to provide a credible answer in a matter of seconds.  Now take the concept of having a genius in your pocket with the power of 6,000 desktop computers and apply it to every industry known to man.  That’s the endgame.          

The intermediate goal with this initiative is to grow Business Analytics annual revenue to $15 billion by 2015.  For perspective, Global Business Services, the division in which Business Analytics get grouped with earned $19.3 billion last year.  Based on this aggressive growth target, Watson likely won’t come cheap, meaning this service will be more suited for corporate users at first. 

This doesn’t mean individuals won’t realize any upfront benefits.  For instance, a doctor could have Watson on their payroll that they and the patient consult with to help diagnose and interpret treatment options.  Watson is currently enrolled in med school to become an in-house oncologist for insurance giant WellPoint.  It should have a mastery of the field by the end of next year.

To the search engines of the world, this technology is approaching the forefront quickly.  To remain relevant, they must invent a more robust search experience.     

Semantic Search
Google isn’t sitting idle and waiting for IBM to disrupt their business.  Neither is Microsoft (NASDAQ: MSFT).  Both have recently introduced different enhancements to their search engine that give users greater depth. 

Google brought Knowledge Graph to their search engine.  When you search for a popular topics or people, you’ll get a snapshot of information directly to the right of the web results.  It’s a quick and dirty way to get basic facts on widely known information.     

Microsoft has a taken a social approach with Bing.  They have integrated social networking into their search engine to give the web a more personal touch.  If you’re looking (Binging?) for a travel destination, you can leverage your social network to get better perspective.  It doesn’t add much value because it’s essentially an embedded Facebook feed within your search engine.  It just eliminates the step of having to log into a social network to get the same “perspective.” 

Both versions are still within their infancy and semantic search is just starting to enter the realm of possibility.  The ultimate result for both Google and Microsoft is to develop a more polished web experience that understands the user’s intent, derived from context.  It that sense, Google and Microsoft will be in direct competition with IBM, but from a lagging position.

Another Angle
Nuance Communications has a compelling growth story for this space.  Its voice recognition software is the ears of both Siri and Watson.  They are also making a huge push into healthcare, automotive dashboards, and virtual assistant spaces, which is serving them quite well.  Sales growth for the last five years has risen 27.7% on an annualized basis.  Once Watson becomes commercially available, it should translate into more usage fees for Nuance.  With a $7.5 billion market capitalization, a large-cap company could easily acquire Nuance.    

Bottom Line
With the power to read 66 million pages in one second, Watson will become a huge asset for the world.  It will diagnose disease, help farmers make better decisions, and allow companies to make better use of their resources.  That just scrapes the surface of the near limitless applications.  It is going to push the envelope of possibility.  World domination is hardly a straight line and there will likely be bumps in the road for IBM. 

Externally, Google has made some serious inroads in creating a viable alternative to Siri with their Google Now mobile application.  They both have their strengths and weaknesses, but like Siri, it lacks brains.  Unless Google can develop a serious competitor to Watson, their search business is at risk, mainly because Watson doesn’t click on advertisements.  In the end, IBM is poised to change the world and make a smarter planet, even if it means overtaking Google’s dominating position.    

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TopDownTrends owns shares of International Business Machines and Nuance Communications. The Motley Fool owns shares of Apple, Google, International Business Machines, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Nuance Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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