The inevitable death of Google

What got me my first two thousand twitter followers and my first 1,000 Substack subscribers were articles defending Facebook as an investment after their stock tanked 25% during the first quarter 2022 earnings call (reviewing Q4 2021). I believed at the time (still do) that the moats of all “Big Tech” companies are more impregnable than most people think. The argument in favor of Facebook going out of business in 2022 went something like the following:

It has no moat. It already lost Gen Z. Apple’s new privacy rules will knee-cap its targeting ability. TikTok dominates short-form video which will be the new way everyone spends time. The user base has already peaked. It’s terminal value is zero.

I concluded my first and third posts about Facebook with the following:

1st post

Third post

Meta finished 2022 with $116B in revenue and is tracking to hit almost $190B this year and $215B next year, meanwhile EPS in 2025 is almost triple where they finished 2022.

The more I’ve thought about it the more similarities there seem to be between Facebook’s battles with TikTok and Apple, and Google’s “battles” (if you can even call them that yet) with the new LLMs.

To be clear, as I wrote in my articles about Facebook, TikTok was a real threat to Facebook (still is a formidable competitor) and LLMs have the potential to become a real competitor with Google. However, similarly to how Facebook’s battle with TikTok played out - I think we’ll look back in hindsight and consider it a wonderful thing that other companies forced Google to pick up this new LLM “mechanic” - because it will both monetize better and dramatically expand the TAM for advertising (and add entirely new TAMs).

Idk if anyone knows what Google’s moat is?

What X/Twitter seems confident of is: “Because I am Googling 95% less Search is going to die. Google = Search so Google is going to die. End of story.” I will address this line of thinking, but first let me point out how broad Google’s moat is:

1. 5 Trillion+ searches annually

2. 7 products with 2 billion+ users (soon to be 8 given the rapid growth of AI ‘expanded search’ feature inside Google)

3. 10+ years of custom silicon and unmatched data center tech leading to lower cost of cloud / AI delivery

4. Waymo is a form of real-world “embodied” intelligence and it’s taking off

5. YouTube is pulling ahead of the competition

6. Android install base of 4 billion devices

Between the data generated by Search + Gmail + YouTube + Chrome Google has - by far without a close second - the largest funnel of valuable data that has ever been created (useful for training AI). And don’t forget maps + photos - both multi-billion user products.

This usually comes as a shock to people - but Search will account for less than 55% of revenue next year. What’s more? The only reason it isn’t an even smaller portion of revenue is that it keeps on growing faster than anyone expects!

2025 Revenue breakdown:

1. Search 54.3%

2. YouTube + Subs + Platforms + Devices: 21.8%

3. Cloud: 16.8%

4. Network: 6.6%

5. Other .5%

LLMs have been out since the end of 2022, meanwhile:

1. Google 2023 Search revenue growth rate: 8%

2. 2024 Search growth rate: 14%

3. 2025 Search growth rate (Forecast): 10%

The attack of the Google “verb”

It feels like I’ve seen at least 20 people make the joke: “I don’t Google things anymore, I Grok them”. Let’s break down where this matters and where this doesn’t.

Obviously it is not a good thing for Google to have other products with hundreds of millions of users start to get associated as “places you go to find information”. For the past 20 years Google has held a >90% mindshare as the first place you think of if you need to learn something. For 20 years, it didn’t matter if you wanted to learn about quantum physics or if you wanted to buy a plane ticket - the place you went to discover anything was Google.

Quick aside: there is a strong argument to be made that TikTok is actually a more direct competitor of Google than Meta - b/c TikTok competes with YouTube and it also is the number one place users of Gen Z start a “Search” - whether it be for a product or activity.

Today, anyone savvy will use an LLM to learn about quantum physics - they will probably also use an LLM if they want to plan out a vacation…But when it comes to purchasing the plane tickets and booking the hotels they will use Google.

The industries generating the most revenue for Google Search include:

1. Finance and Insurance

2. Retail and ecommerce

3. Travel and hospitality

4. Tech (hardware and software subscriptions)

5. Healthcare

I count myself in the basket of people who use Google 90%+ less than they used to. However - that’s because I - along with other “knowledge workers” - mostly used Google for things that never generated it any revenue in the first place (e.g. research). Rest assured, I still use Google for probably 99% of the activities that generate money for it - and so does everyone else!

What’s more - people on X/Twitter are an anomaly. Most people have never used an LLM. Only 1% of the world knows how to code. ChatGPT has 400 million weekly users (so I’ve read) - which makes it the only AI product thus far with a possibility of becoming a sustainably consumer facing company (Ben Thompson calls it the Accidental Consumer Tech Company - article here worth reading for anyone interested).

Perplexity? Claude? DeepSeek? Great products, I use Claude all the time and it’s my favorite LLM for certain tasks. But these products have zero chance of addressing the consumer market - which is the biggest by multiple orders of magnitude - and they represent ZERO threat to Google.

According to Sundar (Google’s CEO) - Google’s AI search overviews are now being used by 1 billion + monthly users - this for a product only launched in May of 2024. Zuck says Meta’s AI product now has over 700 million monthly users up from 600 million in December. Considering a typical ratio for weekly/monthly users of ~50% for products like Google and Meta’s - it’s probable that their LLMs already have more users than ChatGPT.

So, begs the question, in what situations does it matter that Grok/ChatGPT become new verbs and replace Google? The answer is Agents. Until the agents arrive the primary threats to Google will be what they always have been, namely, companies with massive amounts of distribution becoming an alternative channel for ad-generating searches. Apple could be a threat here, Amazon is already their biggest direct competitor due to product searches starting on Amazon.com, Meta is a threat here. What isn’t a threat to the Search business is LLMs.

Agents will change everything though…

The Agents are Coming!

I’ve written extensively about agents, I’ll link to those posts along with the Facebook posts at the end of this article. The relevant definition for an “Agent” here is something that can take actions on your behalf just like a highly tech-savvy virtual (human) assistant would. For example, it can respond to emails, book travel, do market research, etc.

LLMs are far from human virtual assistants today, but they won’t be for long. My guess is that by the end of next year you will be able to have an AI Butler purchase items on your behalf. HOWEVER, and this is a HUGE caveat. There are only a handful of companies who will be able to deliver agents, and NONE of the new LLM companies have any prayer of doing so (wrt to mass market consumers). There are 3 reasons why:

1. Something that has the ability to take actions on your behalf needs to be next level secure. If it can open your email and web browser it can also open your bank account, password file, etc. It is plainly obvious that none of the operating system owners (Apple w/ iOS; Microsoft w/ Windows; Google w/ Android) are going to provide this level of access to other applications - much less their most dangerous competitors.

2. People don’t want to talk to an agent for every app. Because the operating system owners won’t let any random app talk to the operating system itself or the other apps - the ONLY way to have a single agent for all apps will be for it to come from the operating system owner itself.

3. Apple, Google, Microsoft etc know they have this “Ace in their pocket”. They know that at any point they can absolutely knee-cap the LLMs by launching their own AI assistants that have operating system access - and not permitting that access to other apps. They’ll be able to invent whatever reasons around security, privacy, etc for ensuring that only they are capable of providing true Agentic AI. Even if there were no security issues, they would never start the precedent of giving such deep access to their operating systems.

It doesn’t matter how good ChatGPT is - the killer application that will be used by literally everyone can only be delivered by companies who control the operating system.

Where does this leave us with respect to Google? Right where we started. As has been the case for the past 20 years, the biggest threats are what they always have been - other Tech Giants - not new rabble rousers.

Two quick asides:

#1 If you are thinking “what if Apple used ChatGPT as the backbone for their intelligence instead of Google or an in-house model?” - I would say, yes absolutely that’s a threat - but it’s the same threat that has existed to Search for ever - namely - an attack from another member of Big Tech w/ massive distribution.

#2 I wrote a post explaining why only Big Tech can really threaten other Big Tech back in February of 2024 - I also explained in that post why cannibalization of one Big Tech’s services by another member of Big Tech is likely to have little impact or be margin accretive to the winner+loser’s combined flow-through P&L. The takeaway is to buy the basket - because the basket is impermeable and won’t cannibalize itself.

No one knows exactly what Search will look like in a world where Agents are doing the searching and making the purchases. The tech hasn’t been figured out. The business model hasn’t been figured out. However - one thing is very likely:

The TAM of digital advertising will dramatically increase. As a rule of thumb, here is a ranking of the most valuable information for a company trying to target us with digital ads.

The TAM for digital advertising grows as companies get more and higher quality data about us. LLMs will deliver to tech companies an entirely new quality of information. We’re heading to a world where LLMs:

1. Become our trusted confidants and advisers

2. Know everything about our personal physical and mental health

3. Know everything we purchase, everything our friends purchase, etc

Here are two examples of where the future is going:

And here’s one from me - I wrote a post about using ChatGPT to analyze and improve mental health (linked here if anyone is interested):

When Facebook first came out parents scoffed at the idea of their college students “putting pictures of themselves online” - or - horror of horrors - “letting predators know where they’ve been or where they are”. Now no one cares, and the number one preferred career of Gen Z is “Influencer” - essentially living your life on the internet for everyone to see. And have you heard of OnlyFans? Lmfao…

The goal post keeps moving. To anyone claiming they don’t want to divulge everything about themselves to AI - good luck with that. The future is obvious - and the future is sharing literally all of your deepest darkest secrets with an “Agent” that becomes one of your closest friends.

In digital advertising there are different concepts like “Click through rate”; “Cost per thousand impressions”; “Cost per action”. Today Google may need to show 200 ads to get a person to buy a product. The person whose product gets sold pays Google $2.36 for the click that led to the sale. They may need to get 10 people to click on an ad in order to get 1 sale - which would make their “Cost per acquisition” = $23.60.

In a world where LLMs know everything about us - just imagine how much more effective targeting will be?

More knowledge about us = better targeting = higher ROI for advertisers = bigger TAM for digital ad companies.

Consider two possible use cases for LLM targeting in the future:

1. A woman has her period and asks the LLM for quick tips to improve cramps. The LLM suggests things she can do and also asks if she’d like to have some pads delivered later that day. The woman says yes, the LLM orders them, the vendor (maybe a combination of Procter and Gamble + Amazon?) pays the LLM a fee for originating the transaction.

   1. What we don’t know is what’s going on behind the scenes - how did the LLM select which product to buy? If it just bought the same product as last time does any ad revenue get generated? Lots to figure out here.

2. Here’s one relevant to me: You have been having conversations with an LLM for over a month about health and fitness. The LLM correctly identifies that enough time has passed that it’s probably worth taking a new blood test, Vo2Max and Dexascan (body composition).

   1. Again, how does the LLM pick the product? If it has a discussion with you about what you want (e.g. the closest testing location) - does the business pay for the lead? Idk…

I’ve seen some people comment that if Agents are doing the searches then there will be fewer searches and fewer eyeballs seeing ads and hence ad revenue will go down. I disagree. More effective ads = more ad revenue. This is obviously the case and always has been (in the digital ad space), people who think otherwise just haven’t really grokked the real drivers of digital advertising’s success over the past 20 years.

Summary:

It’s frankly wild to me how pervasive the idea is that Google stands to be one of AI’s biggest losers. The financials don’t back up this view. The user data doesn’t back up this view. The different paths the future of AI might take don’t back up this view. Google is trading as if Search has already entered terminal decline. It’s trading at a lower multiple than the S&P 500 with twice the growth and a variety of rapidly expanding TAMs. It’s absurd.

The biggest threats to Google today are the same as they have been for the past 20 years. LLMs don’t pose a threat unless they get Agency - and once Agents become technically feasible the only companies capable of delivering them will be the operating system owners.

Just like with Meta and TikTok - LLMs will expand the TAM for advertising by a lot - as well as create entirely new TAMs like AI butlers…and will end up with the benefit of hindsight as being obviously a very good thing for Google.

People don’t realize that while LLMs are now a better place to do research, research never generated Google any $$$ in the first place.

People don’t realize that even IF LLMs had agency, the way they will get into most people’s hands is through operating systems (iOS + android). Distribution is the moat.

Posts referenced above for further reading…

Here are the Facebook articles if anyone wants to go revisit them: