AI Search Fragmentation: Google & Baidu's Rise and Anxiety

In recent months, the tech landscape has witnessed a seismic shift marked by the emergence of generative AI. With the great success of smart hardware, companies are now diving into AI-driven search engines, sparking a race among giants and startups alike to stake their claims in this burgeoning sector.

A few pioneering steps have already been taken; for instance, Sogou Input has launched an AI search feature based on its advanced model, followed closely by 360 with its new "Nano Search" app. These developments are indicative of a trend where AI is not just an accessory to tech advancements; it's becoming an integral component shaping the methods of information retrieval.

Looking back further to late October, Google made waves by incorporating its AI chatbot Gemini into Google Maps, enhancing its capability to handle open-ended queries. Immediately after, OpenAI announced an update to ChatGPT, adding AI search functionality. Additionally, the popular Chinese platform Zhihu expanded its "Zhihu Direct Answer" product to include a professional search feature, demonstrating that the interest in AI-driven search is truly global.

Search engines have long been a highly competitive arena within the internet space, a strategic battleground for companies vying for user attention and engagement. Major players like Microsoft, Google, and Baidu have already rolled out AI search products to seize early market advantages. These moves indicate a significant evolution in how search capabilities are defined and utilized, signaling a shift in user engagement.

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Market analysts predict that by 2026, the number of traditional search engines may decrease by 25%, giving way to AI chatbots and virtual agents that will capture a significant share of the search marketing landscape. Alan Antin from Gartner cautions that the established equilibrium between organic and paid search is on the verge of profound transformation as generative AI solutions redefine the foundations of how users seek information.

Today, industry leaders and emerging startups in search technology are fervently investing in AI search, viewing it as a critical area for future growth. The vigor and enthusiasm around AI is palpable, with companies rolling out innovative models catering to varied user needs—staging a new era of competition in search technology.

This brings us to a pressing question: will AI indeed disrupt the existing search engine market structure? If such a shift is imminent, how can we anticipate it to reshape the landscape? As competitive pressures intensify, the future of search technology will likely hinge on adaptability and innovation.

AI Search Takes Center Stage

In a world increasingly leaning towards artificial intelligence, inquiries arise about the extent to which global enterprises are delving into the AI search domain. AI assistant platforms, like Kimi, attempt to gather relevant data swiftly. Kimi asserts, "Given the rapid investment in AI, it's reasonable to guess that there could be hundreds of companies engaged in developing AI search capabilities." This paints a picture of swift technological advancements and intense competition in safeguarding market positions.

With a consensus seemingly forming around "AI means search," the market showcases vibrant activity. Major tech players, along with newcomers, are racing to release distinctive AI search products. Whether it’s tech stalwarts like Tencent, Alibaba, and Baidu or newer entities such as ZhiPu QingYan, each entity is keen to capitalize on this shifting terrain.

Historically, US tech companies have led the charge. For instance, Microsoft launched a new AI-integrated Bing search engine and Edge browser in February 2023, marking a significant evolution in how users interact with search engines. By the third quarter of 2024, active users on Bing surged past 140 million, showcasing the tangible benefits of these advancements.

Similarly, Google was not far behind, unveiling its AI-powered search engine, touted as one of the most transformative updates in years. Concurrently, startups such as Perplexity and Glean are carving out niches in this competitive arena, showcasing innovation and versatility.

In China, the narrative was no different. By April 2023, Zhou Hongyi, the founder of 360, outlined an ambitious dual strategy focused on AI development and harnessing applications that can drive user engagement. The company quickly positioned itself to launch the first domestic AI search engine, aiming to revolutionize conventional search methods.

Following suit, Kunlun Wanwei introduced the Tian Gong AI search engine, blending large language models with search technologies. Baidu also revamped its simple search into an interactive AI-enabled search engine just months later, illustrating a rapid acceleration in AI adoption across platforms.

Recent statements from Baidu's leadership reveal substantial AI integration within the search ecosystem, with AI-generated content already constituting over 20% of search results, a clear signal that generative AI is dramatically reshaping user experiences.

Despite this wave of new AI search products, some industry experts urge caution. For instance, Zhou Yuan, CEO of Zhihu, acknowledges that while the issue of hallucinations in AI search has improved, the ultimate form of AI search remains undefined. He stresses that AI search, both domestically and globally, is still in its infancy.

Commercialization Too Early to Predict

Most studies categorize AI search into four segments: vertical AI search, standalone AI search platforms, comprehensive Q&A products, and embedded AI search functionalities. Each segment showcases unique characteristics and challenges that companies must navigate.

With advancements in AI search, companies are no longer solely reliant on keywords. The rising capabilities for content generation and situational awareness are rapidly altering the user information retrieval process. Major corporations are keen to roll out bespoke AI search products to meet evolving market expectations, indicating a fundamental restructuring of the search landscape as competitors enter the fray.

As AI search becomes the focal point of competition, the gradual retreat of traditional search engines is becoming increasingly evident. In a historical context, Google dominated the previous search engine warfare with its revolutionary algorithms. However, as user demands become more diverse, traditional search engines are witnessing a gradual decline in their user bases.

As of April 2024, Google's search engine market share plummeted to 86.99%, a record low since 2009. In China, Baidu is experiencing similar trends. Historically, it has maintained dominance in the internet search arena, but recent data reveals a downturn in search revenue growth, suggesting that market sentiment is shifting.

Baidu is actively working towards reconstructing its search mechanisms through large models. In October 2023, organizational shifts were announced, where the former CFO took on a new role in the search division to merge AI innovations with frontline products, reflecting an internal commitment to evolving business strategies in response to competitive pressures.

According to recent financial disclosures, Baidu is still in the nascent stages of exploring commercial opportunities for AI search, emphasizing a prudent approach that prioritizes enhancing user experiences over rushing towards monetization.

Echoing this sentiment, Zhou Yuan has shared similar reflections on potential commercialization, noting that while there have been attempts to monetize AI search features, the focus currently remains on product development rather than immediate profitability.