Google goes behind paywalls. Why should we care?
As artificial intelligence (AI) and large language models (LLM) revolutionize the digital world, businesses are reaching a crucial turning point in redefining their value creation and capture strategies. Google's venture into premium AI services serves as a prime example of this transition, underscoring a widespread industry move towards inventive, value-centric models.
The recent revelation by the Financial Times (Google considers charging for AI-powered search in big change to business model, requires subscription) about Google considering a premium, paid-for "tier" of generative AI services in its search engine marks a significant shift.
Moving away from an ad-supported model, this strategy aims to counteract the diminishing value of advertising revenues in the face of AI-driven alternatives. This pivot is not just about diversifying revenue streams; it's a strategic move to stake a claim in the evolving AI market, where capabilities such as human-level language understanding can revolutionize customer service and operational efficiency.
Google's potential shift towards premium pricing for advanced AI services like Gemini Ultra, which promises unprecedented performance in language understanding tasks, indicates the broader industry trend. AI is not merely a technological upgrade; it's redefining the paradigms of value creation, value delivery, and value capturing. Businesses across various sectors are now compelled to reevaluate their strategies to harness the disruptive potential of AI for enhancing customer engagement and operational agility.
However, the advent of AI-driven pricing models introduces complex challenges. Concerns about algorithmic collusion and dynamic pricing strategies that could potentially harm consumer interests highlight the need for robust regulatory frameworks. Ensuring fair pricing while leveraging AI for strategic advantage requires a delicate balance, emphasizing the importance of ethical considerations in AI deployment.
For leaders navigating this transformative landscape, the imperative is clear: Embrace AI not just as a tool for automation or efficiency, but as a strategic asset that can redefine market positioning and value propositions. This involves exploring new models for value creation and delivery including new revenue models that complement traditional streams while being cognizant of the ethical and regulatory implications.
Moreover, the commitment to customer-centricity remains paramount. As businesses leverage AI to drive growth, maintaining transparency in pricing and ensuring that technological advancements enhance, rather than detract from, customer experiences will be critical for sustaining trust and loyalty.
The AI revolution presents both significant opportunities and formidable challenges for business leaders. Success in this new era demands a proactive approach to innovation, a willingness to explore new business models, and a steadfast commitment to ethical and customer-focused practices. As the landscape continues to evolve, the agility to adapt and the vision to lead will distinguish the pioneers from the followers in the quest for sustainable competitive advantage.
Tor W Andreassen is a Professor of Innovation at NHH Norwegian School of Economics and currently a Visiting Professor at The Institute for Manufacturing (IfM) at Cambridge University.
Jan Oscar Bolin is a PhD candidate at NHH. The text is partly based on Bolin’s PhD dissertation.