In a rapidly evolving digital landscape, Google’s long-standing dominance in the search market faces unprecedented challenges as artificial intelligence (AI) reshapes user behavior and preferences. The recent testimony from Apple executive Eddy Cue during an antitrust trial has thrown a spotlight on the shifting dynamics, revealing that searches on Apple’s Safari browser have declined for the first time, as users increasingly turn to AI-driven alternatives.
Alphabet Inc., Google's parent company, saw its shares plummet nearly 7% this week, wiping out approximately $138 billion in market value. This decline was triggered by Cue's comments, which suggested that AI tools are beginning to encroach on Google’s market share, a development that has alarmed investors who have long viewed Google Search as a cash cow, accounting for about 55% of Alphabet's total revenue.
"The basic issue is, will Alphabet lose its cash cow?" questioned Art Hogan, chief market strategist at B. Riley Wealth Management. "This is the first time Alphabet has really seen competition in search since the category was originated, and we’re already seeing chinks in the armor." Indeed, data indicates that Google’s global market share has slipped from 93% to just under 90% since the launch of ChatGPT in November 2022.
While Google maintains that overall search queries continue to grow, including those from Apple devices, the independent data suggests a small but steady erosion of its dominance. According to StatCounter, Microsoft’s Bing, which has integrated OpenAI’s models, has seen its market share rise slightly from 3% to 3.9% during the same period.
Moreover, a Bernstein Research report from September 2024 highlighted that nearly half of Gen Z users now prefer platforms like TikTok and Instagram for searches related to travel, restaurants, and products—further fragmenting the search market.
Despite these trends, Google reported a 7% growth in search revenues for the first quarter of 2025. However, this growth rate marks a decline from the previous year, where Alphabet’s “Search & Other” paid click growth slowed to just 2%, down from 5% in 2024. The introduction of AI Overviews, which provide quick answers instead of traditional link lists, has raised concerns about click-through rates (CTR), with some studies indicating a drop of up to 35% for these new features compared to standard search results.
During the antitrust trial, Google executive Sissie Hsiao acknowledged that ChatGPT had reduced traffic in certain search categories, such as math help and homework. This revelation has led to speculation about the potential long-term impact of generative AI on Google’s revenue streams. Vidhya Srinivasan, Google’s ads chief, warned in October 2024 that generative AI could eventually cannibalize search revenue, prompting calls for more advertising integration within AI chatbot responses.
As Alphabet grapples with these developments, the company remains committed to its AI initiatives. CEO Sundar Pichai testified that Google plans to enhance its search capabilities with its Gemini AI technology, aiming to enter an agreement with Apple by mid-2025 to incorporate this technology into new devices.
In light of these changes, analysts remain divided on Alphabet's future. While over 80% of the 76 analysts tracked by Bloomberg maintain buy ratings on the stock, concerns linger regarding the sustainability of its revenue growth amid increasing competition. Current estimates forecast a net income of $115 billion for 2025, but some analysts, like Melius’ Ben Reitzes, caution that these projections may be overly optimistic given the recent trends.
As Google continues to navigate this shifting landscape, the stakes are high. The company’s ability to adapt to changing user preferences and emerging technologies will be crucial in maintaining its position as the leader in the search market. With competitors like Apple exploring AI-powered search options and the rise of alternative platforms, Google faces a pivotal moment in its history.
The implications of these developments extend beyond Alphabet; they signal a broader transformation in how information is accessed and consumed in the digital age. As users increasingly gravitate toward AI tools for immediate answers and recommendations, traditional search engines may need to rethink their strategies to retain relevance.
In conclusion, the battle for search supremacy is intensifying, and Google must respond swiftly to the challenges posed by AI and shifting consumer behavior. The coming months will be critical in determining whether Google can maintain its dominance or whether it will succumb to the pressures of innovation and competition.