The Six Five team discusses Microsoft getting default Samsung Galaxy search.
If you are interested in watching the full episode you can check it out here.
Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Daniel Newman: We know Microsoft has been spending incredible amounts of dollars to win this early AI race. It started with the $10 billion investment in Open AI, and then in what, a matter of weeks, the company rolled out GPT or their version of ChatGPT using Open AI into Bing Edge. It went into 365, Teams, and basically the whole product mix.
And of course, that’s been a massive differentiation in dynamics, by the way. So we just talked about the attractiveness of potentially having these capabilities inside your tool set. And if you’re a Microsoft environment, Microsoft has made it very compelling very quickly by putting this capability, experiment or not, usefully wrong or not, into all of its products at such a fast clip. But here’s one thing. Microsoft has single digit percent of the search market right now. During the event you and I went to in early September, the early announcements, September or February. I’m just making up times now. I’m Dan Bot GPT.
Patrick Moorhead: It’s okay. You’re getting in your 40s, Dan. That happens to us.
Daniel Newman: Memory starts to bleh. Anyway, we went to the event, and one of the things that they did, they did a financial call on that day. And they talked about how it would be worth almost $2 billion a year in revenue for every 1% of search that Microsoft could win in terms of its growth. The first iterations of GPT and ChatGPT in Bing were on the desktop. The thing I said immediately is, what about mobile? Well, that came next. Now they have it on mobile. But the one challenge Microsoft has, and this is kind of one of the things that was really criticized Steve Balmer’s era, was they just didn’t win mobile. They just missed the opportunity. And now the apps have improved and Microsoft certainly has a better mobile experience with the apps, but they’re not native. They don’t have an OS.
They were not able to penetrate the OS market on the mobile device. They tried a couple times without much success. And now you’ve got a little over half the market in the world worldwide on Android, and you’ve got the other, what’s a little less than half, on Apple. And so there’s an opportunity right now to potentially put Bing as the default search on Samsung devices. And that would be a major pivot from Samsung natively running Chrome. And so, the question mark right now is, should Microsoft pay big for the opportunity? And I think Samsung, Pat, you probably might even know it better than me. In the 20ish percent of all the devices in the market, it’s a significant number. It’s not all the Android devices, but Samsung, if they were able to be the default search on the Samsung device family, which is a large family, even bigger on a global scale than it is domestically here, could that help them become a de facto search?
And long story short is I think there’s a very compelling case to be made that Microsoft needs to go all in on this opportunity. I don’t know how it wins search, especially if Bard catches up quickly and becomes embedded in Chrome anytime soon. They won’t miss the opportunity to win a large swath of mobile search with generative AI if they don’t look at these kinds of opportunities as moments to lean in. Now again, look at that 1%, $2 billion. There’s a fairly easy set of math for them to do based upon some assumptions on how much market share they think they could gain in terms of default search. Are there risks? Yeah. Spending billions of dollars where people can still go ahead and load Chrome and decide to stay with Google is certainly a risk for the company. But here’s my take, Pat, and I’ll pass it to you. I don’t think people will actively go out and download Bing onto the Samsung devices if Google’s already there when they buy it.
Patrick Moorhead: Three words. Competition is good. And we would not be having this conversation if there weren’t some healthy competition. And whether it’s innovation, whether it’s pricing, having three strong players in each market is paramount. I would say we have two at this point on the search side, but Google dominates all over the place. We have Apple who’s paying tens of billions of dollars to Google for this. And you have Samsung, I don’t know what the math there is, but it would be really interesting to see, if this went through, if nothing else, it’s either going to lower prices or increase competition. There was a lot of speculation on whether this was even possible. There’s this thing called Google Mobile Application Distribution Agreement, which says that Chrome and Google Search needs to be the default. So here’s all I have to say is there are standard agreements and then there are agreements with the largest Android provider on the planet, and that’s Samsung.
If you remember, Samsung was working on an alternative operating system, and that went away. And then there was a strategic alignment between Google and Samsung where Samsung and Google agreed to do certain things. We don’t know exactly what was in there, but I guarantee you Samsung does not have the standard NADA out there that the number 27 Android handset provider in some nuanced country would be signing. And this looks nothing but good for Microsoft and what it’s been able to do. I mean, no matter how many billions somebody would pay, a device maker isn’t going to put something on there that its users are going to hate. So I’m going to leave it there, Daniel, but competition is good and this is good for Microsoft.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
