The cost of Microsoft's AI conflict with Google will be high.

Microsoft's most recent battleground in the conflict with Google might not be all that it looks. Yet first...

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A. Maximus Satya

The Roman tyrant Fabius Maximus devised an innovative plan for the battle with Carthage in 217 BC. Hannibal, his rival, had won a number of bloody wars, and the Roman populace was eager to try something new.

Fabius was aware that Hannibal enjoyed fighting and has the military might to do it successfully. Fabius made a point of avoiding major clashes with Carthage rather than confronting it head-on. In order to cause turmoil by depleting their food supply or by finding methods to make Carthage's march longer, he dispatched small assault groups to lure Carthaginian forces into disadvantageous positions. In the end, Rome suffered significantly less resource loss as a result of that than did Hannibal's sizable army.

Even if chatbots weren't around in 217 BC, there are similarities to the current conflict between Microsoft Corp. and Google.Although there has never been much of a rivalry between the two businesses in the search battle, it is a lucrative one. The cost of conducting a web search is quite low, and the majority of Google's $283 billion in yearly income comes from advertising. Even with Bing's small market share more than seven years ago, Microsoft was still able to generate a profit.

If there were a significant change in how consumers search for items online, Alphabet Inc.'s Google would stand to lose a lot more. The change is not guaranteed. The cost of creating an effective, trustworthy chatbot is high. The recurring cost of having customers use the product might be considerably more expensive.

How much it actually costs It's unknown if Google or Microsoft exists. According to Ritter, a specialist in natural language processing, they have their own cloud infrastructures that can be enhanced to function more effectively with their own chatbots.

It's only been said that it's "probably single-digits cents per chat" by Sam Altman, a Microsoft ally and founder of the firm that powers ChatGPT. A more manageable 2 cents was Morgan Stanley's estimate for the cost of a ChatGPT query. According to Ritter, even that is a significant premium over a standard online search, which can be conducted for just pennies.

It's possible that a chatbot may improve in accuracy to the point where Google or Microsoft can justify significantly higher advertising charges. It hasn't taken place.

Imagine all online searches abruptly changed toBing's profit margins would suffer if a chatbot conversation were to occur tomorrow, but Alphabet's would take a severe hit. Even when it seems like Google is winning, it really loses.

This is when the Fabian tactic is useful. Microsoft's Bing has been fighting Google with a conventional strategy for more than ten years, with dismal results. Google is under increasing pressure to compete as a result of the buzz surrounding Microsoft's chatbot, perhaps at a significant expense to the firm.

The Bing chatbot, meanwhile, is only accessible to a small number of users — there is still a wait list — and in a restricted capacity – on a search engine that few people use, within a similarly unpopular Microsoft web browser, or in a Windows 11 upgrade.

an inventive Microsoft is seeking to rethink portions of search in a way that is less profitable for everyone, according to one interpretation of the company's approach. This successfully lures Google into little battles it won't win. The issue is whether Google participates. Although it has promised to produce its own chatbot, it hasn't made the same commitment as Microsoft to include it in search results.

Yet, it appears as though Microsoft CEO Satya Nadella is hoping that Google would fall for the trap. They are the 800-pound gorilla, according to Nadella, who stated this in an interview with the Verge. "And I'm hoping that with our invention, they'll be compelled to show off their dancing prowess. I also want people to be aware of that.