With Google's latest move, internet's becoming less ad-driven search, more user-paid GenAI
wwwhats-up@doc.com? As you browse the web, you must have encountered the 404 error, signifying that a web page can't be found. What you haven't seen is a similar code: 402. When Tim Berners- Lee was creating the World Wide Web, 402 was the code for 'payment required'. The original intention was that every visitor had to pay something to view a web page. But the schema was never built. So, there is no standardised encoded way to send or receive money online.
In a 2019 podcast, Netscape builder Marc Andreessen explained: 'One would think the most obvious thing to do would be building in the browser the ability to actually spend money, right? You'll notice that didn't happen... we couldn't actually build economics into the core of the internet and so therefore advertising became the primary business model... We tried very hard to build payments into the browser. It was not possible... We made a huge mistake.'
In 2014, internet expert Ethan Zuckerman wrote that 'advertising is the original sin of the web. The fallen state of our internet is a direct, if unintentional, consequence of choosing advertising as the default model to support online content and services.' Arguably, it's this 'original sin' that has made the largest destinations of the web the morass that it has become now. Thus, social networking has morphed into social media, as TikTok and Instagram pivoted to attention-seeking content that is optimised for views and clicks. This is also why Google's famous '10 blue links' are dominated by sponsored and advertiser preferences, rather than the succinct and accurate answer that a user wants. This drove even Berners-Lee to often regret his 'invention' and made him and others dream of a new kind of web - the concept of Web3, conceived to be 'owned' by users rather than advertisers, decentralised rather than concentrated with a handful of powerful tech companies, and, most importantly, have a different business model: that of micropayments. Thus, the user pays for the content she wants to consume, rather than advertiser paying for it, and the payment is also shared with the original creator.For the last 20 years, the company around which the existing web has revolved has been Google. While the 'advertiser pays' model was first brought in by companies like Yahoo and MSN, it was Google that perfected it as it made 'search' the way to organise the web. On the internet, if it's free, you're the product. Thus, Google and others sharply targeted and sold your attention, intentions and interest to advertisers who paid handsomely for it.
How handsomely? Search contributed $54 bn of Google's $96 bn revenue in the last quarter, and reportedly most of its profitability. But it's also the model that held Google back and made it tiptoe tentatively into the world of GenAI. The search-through-chat business model of AI, which Perplexity or ChatGPT uses, does not lend itself as effectively to the advertising business model. Google experimented with 'AI Overviews' since I/O 2024. This model of AI-generated answers to common topics became popular with users, but reduced click rates on ads. This is the classical 'innovators' dilemma' that Harvard professor Clayton Christensen proposed in 1997, where he posited that great companies lose out to startup innovators, because they do not want to cannibalise their existing profitable business models.Last month, Google finally bit the bullet at I/O 2025, announcing that all its US users will be able to activate 'AI mode' in Google search and Chrome browser that will provide a conversational, question-and-answer experience akin to OpenAI's ChatGPT, rather than a traditional list of links.So, what happens to the super-profitable search business model? The company is tight-lipped about it, and is reportedly working to insert ads into AI answers. This is not as easy, however, since GenAI is a probabilistic tech, unlike the deterministic nature of traditional search. Thus, predicting what search result will come and matching advertiser needs to them becomes much more difficult.Interestingly, Google has hinted at a change in revenue model, with a $20 subscription for the service, and a $250 subscription for the super-premium version. So, with this monumental change, is the World Wide Web shifting on its axis? And does it take us one step closer to the dreams of a new web - user-owned, more democratic, and where you are finally not the product?Time will tell. But what is clear is that I/O 2025 did not signal just the re-emergence of Google in AI leaders, but also the emergence of a new kind of internet. So far, it was search around which the web was organised and the advertiser-driven model that paid for it. Maybe, we are now inching towards a web organised around GenAI, with subscribers paying for it - and content creators getting ably rewarded too. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Warren Buffett-fan Pabrai is betting big on Edelweiss' Rashesh Shah. Will it pay off?
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