Why Walmart’s quick success in gen AI search should worry Google

  • Walmart CEO Doug McMillon has talked up the retail company’s generative AI search capabilities, one more threat to Alphabet’s internet dominance.
  • Alphabet has been among the big tech losers in the stock market this year, alongside Apple, both struggling to tell investors winning AI stories.
  • Google founder Sergey Brin recently conceded missteps in gen AI but said the company will figure out the right business models; analysts say online retailers will be more competitive in search within their ecosystems.

Doug McMillon, chief executive officer of Walmart Inc., left, and Satya Nadella, chief executive officer of Microsoft Corp., during the 2024 CES event in Las Vegas, Nevada, US, on Tuesday, Jan. 9, 2024. 

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Planning purchases for a special occasion like recent Super Bowl parties or Valentine’s Day celebrations might typically require consulting more than one online source — or the primary source of Google — but if Walmart has its way, that is going to change in the future.

Walmart is talking up its ability to use generative AI as a one-stop shop to search when you need to plan an event, rather than online destination to search for individual items. During a call with analysts after its February earnings, Walmart CEO Doug McMillon talked about the gen AI search capabilities in its app.

“The thing we’re most excited about that’s already happened is the way search has improved, and the way generative AI helped us really improve a solution-oriented search experience for customers and members,” McMillon said on the earnings call. “And it happened pretty quickly.”

It also adds to the questions about future use of a search engine like Google.

Walmart long ago established itself as a major tech player, successfully fending off years of anxiety over Amazon and remaining a leader in the retail space whose shares are now trading at an all-time high. The tech narrative is one the company has been spinning since it bought, started by a former Amazon executive Marc Lore, noted Forrester vice president, principal analyst Sucharita Kodali. As a technology company, Walmart has to experiment a lot, and in the case of adding generative AI search capabilities, there’s a very low cost for failure, she said.

“It establishes them as an innovator in the space,” Kodali said. “They’re better to be a leader than a follower in their shoes. They’re operating from a position of strength.”

Experiments can go wrong, though, as happened to Alphabet recently when it launched the Gemini gen AI into the market before it was ready. In a rare public appearance, Google co-founder Sergey Brin said the company “messed up” with the launch, but he dismissed concerns about the company’s outlook.

“I expect business models are going to evolve over time,” Brin said. “And maybe it will still be advertising because advertising could work better, the AI is able to better tailor it. … I personally feel as long as there’s huge value being generated, we’ll figure out the business models.”

AI and search, shopping business model shifts

It’s not only Walmart investing in this type of search in the retail sector. Instacart’s AI-enabled “Ask Instacart” allows customers to search based on theme like dinner or date night rather than by item. Amazon’s AI shopping assistant Rufus lets people have a conversation with the platform about what they need rather than just looking for direct items. Shopify’s AI-powered “Semantic Search” helps sellers find the right items to sell potential customers, making sure their search results are more accurate.

“We’re going to see this become a norm for online retailers,” said Jacob Bourne, analyst at Insider Intelligence. “Google is anxious is about search in general, and the question this raises is will it be a death by a thousand cuts for Google Search?” Bourne said.

Kodali sees the threat in terms that are less existential. The world still relies heavily on Alphabet’s core search business for many things, and some early gen AI successes from retailers won’t change that.

“You get in the habit of using Google because you use it for everything,” Kodali said. “You use it for everything else (outside of shopping), and everything else is like 90 percent of the searches you do. So, unless Amazon and Walmart are going to get into the business of the other 90 percent of the searches, it’s not going to happen.”

Alphabet is continuing to invest heavily in Gemini, as well as more specific AI tools to embed itself inside other retail ecosystems, such as Google Cloud’s Vertex AI Search for retail, and its Conversational Commerce tools which allow companies to put virtual AI-powered customer service agents on their websites and apps. Customers of Google Cloud AI products include Victoria’s Secret, Macy’s Ikea, Lowe’s and Rainbow Shops.

Alphabet points to over 35 billion product listings from retailers on a global basis on Google, and its own AI-powered tools that make it easy to find the right one….

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