(Reuters) - Microsoft Corp (MSFT.O) is revamping its Bing search engine and Edge web browser with artificial intelligence, the company said on Tuesday, in one of its biggest efforts yet to lead a new wave of technology and reshape how people gather information.
Microsoft is staking its future on AI through billions of dollars of investment as it directly challenges Alphabet Inc's (GOOGL.O) Google. Working with the startup OpenAI, the company is aiming to leapfrog its rival and potentially claim vast returns from tools that speed up all manner of content creation, automating tasks if not jobs themselves.
“This technology is going to reshape pretty much every software category," Microsoft Chief Executive Satya Nadella told reporters in a briefing at Microsoft headquarters in Redmond, Washington.
Shares of Microsoft rose 2.3% to $262.60 in afternoon trading, giving back some of the day's earlier gains.
The power of so-called generative AI that can create virtually any text or image dawned on the public last year with the release of ChatGPT, the chatbot sensation from OpenAI. Its human-like responses to any prompt have given people new ways to think about the possibilities of marketing, writing term papers or disseminating news, or even how query information online.
The new Bing search engine is "your AI-powered robot for the web," said Microsoft Consumer Chief Marketing Officer Yusuf Mehdi, noting that it is life in limited preview on desktop computers and will be available for mobile devices in the coming weeks.
Bing will be powered by AI and run on a new, next-generation "large language model" that is more powerful than ChatGPT, Mehdi said. A chatbot will help users refine queries more easily, give more relevant, up-to-date results, and even make shopping easier.
Bing ranks a distant second to Google in terms of search.
Microsoft is now aiming to market OpenAI's technology, including ChatGPT, to its cloud customers and add the same power to its suite of products, including search.
Google has taken note. On Monday it unveiled a chatbot of its own called Bard, while it is planning to release AI for its search engine that can synthesize material when no simple answer exists online.
Microsoft's decision to update its Edge browser will intensify competition with Google's Chrome browser.
The rivalry in search is now among the industry's biggest, as OpenAI sets up Microsoft to expand its 9% share at Google's expense, said Daniel Ives, an analyst with Wedbush Securities.
"Microsoft is looking to win this AI battle," he said in a research note on Monday.
PRACTICAL USES
At the event, Mehdi demonstrated how the AI-enhanced search engine will make shopping and creating emails much easier. A demonstration showed how Bing could estimate, for example, whether a certain type of couch could fit in the back of a car by pulling together web data on one's vehicle dimensions.
For the quarter ending Dec. 31, Alphabet reported $42.6 billion in Google Search and other revenue, while Microsoft posted $3.2 billion from search and news advertising.
Behind Microsoft's OpenAI partnership is its plan to invest in supercomputer development and cloud support so the startup can release more sophisticated technology and aim at the level of machine intelligence dreamed up in science fiction.
The fruit of this work, however, is more immediate. Last week Microsoft announced the startup's AI will generate meeting notes in Teams, its collaboration software, as well as suggest email replies to vendors using its Viva Sales subscription.
Microsoft is more upbeat than ever about its search engine Bing, which is getting a major upgrade by integrating ChatGPT's underlying technology.
That exuberance could be felt in an internal report that analyzed the positive online sentiment around Microsoft's close relationship with ChatGPT maker OpenAI, as Insider previously reported. Microsoft is investing heavily in OpenAI and is expected to further integrate the startup's technology into its other products, like the Office suite of software.
In the internal report, prepared by Sprinklr and seen by Insider, the authors asked the OpenAI chatbot to write a "funny limerick about how Microsoft beats Google by integrating ChatGPT into Bing."
ChatGPT answered:
"There once was a search engine named Bing
Which was struggling, not doing much thing
But with ChatGPT on its side
It finally got its pride
And left Google searching for its next fling"
Bing launched in 2009 and still lags far behind Google's search engine, which accounts for roughly 90% of the market. The sudden emergence of ChatGPT and its partnership with Microsoft has sparked new interest in Bing as a potential threat to Google, as Insider previously reported.
On Tuesday, Microsoft unveiled a number of new features for Bing, powered by the AI technology found in ChatGPT, like interactive chat and summaries. A day earlier, Google showcased Bard, a new chatbot that competes with ChatGPT.
"AI will fundamentally change every software category, starting with the largest category of all – search," Satya Nadella, CEO of Microsoft, wrote in a blog post on Tuesday.
I don't need to tell you that it's become harder and harder over the years to use Google to find what you need on the web. The result you want seems to always be buried beneath and between ads, or else lost in the mix with all the other often-irrelevant information that Google tries to throw at you.
And yet, Google has never faced a real challenge to its search engine empire. Microsoft's Bing has endured for years as a consistent but distant second-place search engine — despite the tech titan's best efforts. Remember the ill-fated "Scroogled" campaign? Me either.
Now, the rapid rise of OpenAI's ChatGPT chatbot has presented what may turn out to be a once-in-a-generation opportunity to actually rethink search, after literal decades of Google setting the pace. On Tuesday, Microsoft announced the first real fruits of its partnership with OpenAI, bringing a nifty natural-language search option to Bing that opens some neat new possibilities.
"Search has remained the same since the last major inflection," Microsoft corporate VP Yusuf Mehdi said at the event announcing the update, adding that "the user experience is the same as 20 years ago."
Ask this new Bing a question, like "Make me an itinerary for three days in Rome," and it comes back with one pretty darn close to instantly. Ask it to sum up each page of a document, and you'll get back some useful notes. The possibilities are, by definition, limitless. It reflects well on Microsoft CEO Satya Nadella, who has been widely praised for cozying up to OpenAI so early and moving so quickly on integration.
What's not clear is whether Microsoft will end up being the company to lead the charge through the disruption of search engine technology. Google is rapidly bringing AI to its own product lineup, meaning that Microsoft has a narrow window to eke away as much market share as it can before the competition closes in.
At the same time, this is a textbook example of how competition can be good for consumers. Even if all of this doesn't play out the way that Microsoft wants it to, and Bing never becomes the first-place search engine, this whole moment in tech history has been the swift kick in the posterior that Google has needed to get its act together and bring something new to the table.
Change has been a long time coming
That alone should be considered a huge victory not just for Microsoft, but for the industry as a whole — marking a rare moment when the acknowledged industry leader was caught off-guard by a relative upstart like OpenAI.
Disruption does come with its costs, however. Search advertising, as pioneered by Google and spread via the various arms of its business, is the revenue model that powers so much of the web. If the way we search changes, so too will Google's (and Microsoft's) ability to show the ads that keep the lights on. Maybe we won't be looking at as many display ads, but there will be something put in place to replace them.
There's a more insidious cost, as well. ChatGPT has a well-documented propensity to say things that are misleading, dangerous, or flat-out wrong. In the words of author Hank Green, this whole thing "will drive the cost of bullshit to zero," especially as shady actors try to game the AI in the same way that they gamed search engine results. If users are to trust everything the chatbots say, there's going to have to be more work done around safety.
Ultimately, however, I think Microsoft and OpenAI deserve their fair share of the credit for actually bringing change to a part of the industry that's been famously resistant to it.