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Pichai was asked about Search Generative Experience and Google Bard during the Q3 earnings call. The CEO said subscription business models are “a possible path” for Google’s AI products.Revenue from YouTube’s subscription offerings is growing strongly.
Google CEO Sundar Pichai suggested the company could embrace subscription business models for some of its new AI products.
During the third-quarter earnings conference call on Tuesday, Morgan Stanley analyst Brian Nowak asked about Google’s investments in AI for Search and how Wall Street should think about future returns from this capital deployment.
“Are there any examples that you’re seeing with SGE or Bard on higher utility, higher conversion rates, more engagement, just something to sort of show a signal around the return that could come from these investments?” Nowak said.
He was referring to Google’s Search Generative Experience, a new version of Search that includes generative AI capabilities, and Google Bard, the company’s chatbot rival to ChatGPT.
“I’ve been pretty pleased with how the user feedback has been on SGE,” Pichai said. “We are rolling it out to more users.”
With AI, the CEO said there’s an opportunity to evolve Search and the Google Assistant service over the next decade.
“Over time, there will be newer paths, just like we have done on YouTube,” he added. “I think with the AI work, there are subscription models as a possible path as well.”
This is a big deal for a company that still generates most of its revenue and profit from advertising. Wall Street is nervous about any big changes to Google Search because Search ads are so lucrative. Turning the traditional Search experience into a ChatGPT-style user interface could disrupt how these ads appear and perform. So Google is treading carefully.
With that backdrop, it’s surprising that Pichai is willing to float the possibility of subscriptions as a possible business model for some of its emerging AI services.
The CEO may be emboldened by the success of YouTube’s subscriptions. The video business offers YouTube TV, a cable-like service delivered over the internet. And it recently launched NFL Sunday Ticket, which lets viewers watch football games outside their local markets.
YouTube is charging hundreds of dollars per season, on top of more than $70 a month for YouTube TV. That’s a lot of money for a company that usually provides free, ad-supported internet services. And yet, Google executives said on Tuesday that they’re pleased with the initial response to NFL Sunday Ticket.
Google’s “other” revenue rose 21% year-on-year in the third quarter, led by strong growth in YouTube subscription revenue.