Will Google Become the World’s Largest Subscription Business?

A Google Subscription box, via Dall-E

Those of you who’ve been reading for a while may have noticed a break in my regular posts — it’s August, and that means vacation. I’ll be back at it after Labor Day, but an interesting story from The Information today is worth a brief note.

Titled How Google is Planning to Beat OpenAI, the piece details the progress of Google’s Gemini project, formed four months ago when the company merged its UK-based DeepMind unit with its Google Brain research group. Both groups were working on sophisticated AI projects, including LLMs, but with unique cultures, leadership, and code bases, they had little else in common. Alphabet CEO Sundar Pichai combined their efforts in an effort to speed his company’s time to market in the face of stiff competition from OpenAI and Microsoft.

Much is at stake. Google can’t afford to fall behind as its closest competitors throw massive resources at AI-driven products and services. But beyond keeping up, Google finds itself in an even higher-stakes transition: Its core business, search, may be shifting into an entirely new consumer model that threatens the very foundation of the company’s cash flow spigot: Advertising.

I’ve written about this topic quite a bit (here, here, and here), ultimately coming to the conclusion that over time, Google’s core business will shift from advertising to a direct-to-consumer subscription model. Generative AI chatbots are in the process of commoditizing Google’s core monopoly in search, and the race is on to create a new class of products that offer more value than the once-magical list of blue links. And because the chatbot interface doesn’t lend itself to the advertising model currently pouring hundreds of billions into Google’s coffers, the company will be forced to build something that regular folks like you and I will actually pay for.

This is why the stakes are so high for Google’s nascent Gemini project, which The Information reports will ship initial product (mainly for developers) this Fall. “Google is betting on Gemini to power services ranging from its Bard chatbot,” The Information writes,”which competes with OpenAI’s ChatGPT, to enterprise apps like Google Docs and Slides. Google also wants to charge app developers for access to Gemini through its Google Cloud server-rental…