Artificial intelligence: Alphabet pushes Google in the chatbot challenge

In short, everything is rosy? The situation is more difficult. One of the issues experts are wondering about is the impact of Ai on the business model of Internet search engines. Google remains the almost uncontested leader of the global web-search. In 2025, the big 'G' will hold around 89-90% of the global market share. The number is impressive and - at present - does not induce concern in Alphabet's management. However, according to recent market analyses, conversational chatbots are gaining an increasing number of users. About 5.6 per cent of desktop browser search traffic in the US is now intercepted by tools such as ChatGPT and Perplexity. The growth of conversational search via Ai is exponential: it was at 2.5 per cent just a year ago, and even below 1.3 per cent at the beginning of 2024.

Not only that. Among users considered to be 'early adopters' - those who started using chatbots as early as 2023 - the trend is even more evident: 40 per cent of desktop traffic in this group now passes through Ia tools, while the share of traditional search engines has dropped from 76 per cent to 61 per cent in just twelve months. In short: the challenge exists and - if not in the very short term - will produce its effects in the world of web search.

Beyond the individual dynamics, which, in more detail, are Google's challengers? Among the giants is, precisely, ChatGPT. The application boasts more than 5.2 billion monthly visits at the beginning of 2025, and the version with active browsing and real-time mentions makes it a credible alternative to the big 'G'. In particular - this is the indication of several analysts - ChatGPT has changed the expectations of users, who are beginning to prefer conversational interactions to classic lists of links. Having said that, however, one must not forget that there are many frictions between OpenAI (from which ChatGPT was born) and its big backer Microsoft. There are several points of contention: from the fact that OpenAi itself has become a competitor of the Redmond group on Ia for enterprises to the exploration by Sam Altam's 'start-up' of partnerships with other cloud providers (Google Cloud, Oracle, CoreWeave) in order to reduce dependence on Microsoft Azure. Clearly, such situations can create turbulence for OpenAi Ia.

But it is not just a matter of ChatGPT. There are also - along with Microsoft's Bing 'doped' with Copilot's Ia - other competitors emerging. One among others: Perplexity Ai. It is a start-up - founded in 2022 by former OpenAI and Google engineers - where the answer engine provides articulate answers with citations of sources to verify their reliabilityy. In less than two years, Perplexity has seen explosive growth: in March 2025, the site exceeded 160 million monthly visits, with an annual increase of more than 200% In May 2025, the company revealed that it processes around 780 million monthly queries, equivalent to 30 million per day. A volume that is still small compared to the big engines, but rising very quickly.

Alphabet - obviously - reacted to the onslaught of ChatGPT and the other chatbots. How? First, it enhanced the search ecosystem by introducing native conversational tools such as AI Overviews and Ai Mode. These are integrated into Google Search and offer synthetic answers generated by Gemini 2.5 over traditional links. True! One of the big question marks of such a strategy is that - by not inducing the user to click on the link - search monetisation may take a hit. That being said, however - in order to avoid the unwanted effect - Alphabet started to place sponsored ads directly in the content generated by the Ia. What is more, it has chosen to limit the use of the Ai to a part of the 'queries', precisely in order not to cannibalise commercial traffic. In addition, visual features such as Lens and Circle to Search have been enhanced, which, integrated with AI, improve interaction and loyalty. In the wake of such moves, the group reiterated - recalling the latest quarterly figures - that Ai does not replace search but expands it. The do-it-yourselfer -obviously- has to tare up such considerations, monitoring search-related advertising revenues and the performance of search itself.

So far, some suggestions regarding economic data and the fundamental challenge of web-based research. The investor, however, must also remember another aspect. The antitrust trial involving Alphabet in the US. As is well known, in August 2024, a federal judge ruled that Google had acted illegally to maintain its market position. After several steps, the proceedings concerning the 'remedies' to be imposed by Google itself have reached the final stage. A decision is expected by the first part of August. According to some analysts, - although the exact nature of the remedy remains uncertain - the most likely outcome could be a ban on exclusionary practices and exclusive pre-loading of Google Search on major access points in the US, such as Apple devices, Android smartphones, third-party browsers, and Chrome.

More punitive measures - such as the obligation to sell Chrome or the restriction of artificial intelligence programmes - are considered less likely. And yet, they remain possible. Consequently, caution must be exercised. Also with regard to the reactions of the stock on the stock exchange.

That stock, which - according to Seeking Alpha - has a non-GAAP P/e on 2025 of 19.5 times and a 3-5 year non-GAAP PEG of 1.3. These are somewhat higher than the reference sector, but certainly not that high. So much so that Seeking Alpha itself calls the valuation 'challenging'. Momentun is considered 'moderate' while marginality is rated 'strong'.

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