Is Gemini Google's Instagram Moment
Capturing the Next Wave of Engagement Growth
Alphabet’s recent Google I/O developer conference helped ease investor anxiety about the threat generative AI and new players like OpenAI pose to Google’s core search business, however the broader debate remains far from settled. Simultaneously, ongoing antitrust litigation continues to cast a shadow of uncertainty over Alphabet's long-term outlook.
The corrective action and remedies that may arise from these legal proceedings could pose a greater risk to Alphabet than competitive threats to its search business. However, absent a value-destructive breakup or severe restrictions on its distribution reach, the company’s current valuation discount to the S&P Index is unwarranted. When considering the implicit valuation multiples investors assign to Google Cloud’s larger peers—Amazon Web Services (AWS) and Microsoft Azure—as well as YouTube’s strong market position and growing share of consumer engagement, Alphabet’s sum-of-the-parts valuation becomes even more compelling. Adding further to this case is the underappreciated optionality of Waymo, which stands at the forefront of physical AI and disrupting personal vehicle ownership. Taken together, the implied discount on Alphabet’s core search business is even deeper than headline figures suggest.
Although the legal outcomes remain uncertain, the competitive threat to Google Search can be assessed with more clarity. Comparisons made by some to past competitive disruptions—such as Netflix’s upending of legacy media—are often invoked to argue that Google faces a similar existential risk. However, these conclusions overlook critical distinctions and inherent competitive advantages that continue to favor Google.
It wasn’t long ago that Meta faced widespread pessimism over the impact of Apple’s iOS privacy changes and mounting losses in its Reality Labs division—yet today, Meta is stronger than ever. Google now finds itself in a similar position: investor sentiment is weighed down by fears of AI-driven disruption, but the company is increasingly poised to go on offense. As the AI narrative shifts from infrastructure buildout to application-layer growth, Google is positioned to leverage its scale, technical depth, and ecosystem integration to drive user engagement growth.
Time will tell to what extent Alphabet’s leadership successfully navigate the wave of AI-related disruption, but concerns rooted in the idea that Google faces a classic innovator’s dilemma may be overstated. The notion that Alphabet will sidestep certain vectors of innovation to protect its core search business overlooks that AI-driven answer engines and agentic interfaces represent a transformation of search—not a wholesale replacement.
Rather than cannibalizing its core product, Google is layering Gemini’s new capabilities into its existing platform to drive future growth—much like how Meta acquired and leveraged Instagram to adapt to shifting user behavior, appeal to different demographics, and increase overall engagement beyond Facebook. Gemini offers Google a similarly new brand and interface to adapt to evolving user behavior, launch new products, and unlock monetization opportunities. Google’s AI Overviews already has over 1.5 billion users per month and the company has recently launched AI Mode in Google Search to provide more in-depth and conversational chatbot like responses to queries. Google’s Gemini AI app also appears to be approaching a comparable scale to ChatGPT with 400 million monthly active users.
Moreover, unlike legacy industries such as automotive or traditional media—where incumbents have been forced into costly dual-track strategies, maintaining legacy operations (ICE vehicles or cable TV) while investing heavily in unprofitable new platforms (EVs or streaming)—Alphabet does not face the same structural disadvantage. The company’s AI initiatives, particularly through Gemini, are integrated within its existing business and supported by a scalable infrastructure. While the AI era requires significant industry-wide capital investment in compute capacity, Alphabet is positioned to absorb these costs without undermining its aggregate profitability. This strategic position allows Google to deploy and monetize AI applications at scale without the operational drag that burdens many traditional incumbents.
Although Google is positioned to counter emerging threats and capitalize on AI-driven growth, the disruption of legacy media by video streaming still offers a useful lens to evaluate the potential impact of AI on search. It underscores the critical importance of scale, distribution, user behavior, and economic moats—factors that continue to tilt the competitive balance in Google’s favor.
Enduring Distribution Advantage
The disruption of legacy media has been driven by a fundamental shift in distribution—from closed cable networks to the open architecture of the internet. This transition has enabled new business models and elevated the economic value of a broader range of content, expanding the addressable market for consumer attention as viewers are able to watch content anytime, anywhere.
Before streaming, the constraints of linear TV meant limited time slots for content, making premium, tentpole programming the key to success. On-demand and streaming services upended this model, creating an industry with virtually infinite content supply. Success in streaming is not only about a handful of marquee shows but about offering a breadth and depth of content that engages as many household members and demographics as possible.
While major, must-watch series remain important, Netflix has prioritized a large volume of “good enough” programming and more niche content that may not be a cultural phenomenon but keeps a wider range of subscribers engaged.
The anytime, anywhere nature of streaming and internet short form video content has not only driven higher aggregate video consumption, but also allows for a standalone platform to generate a consistently outsized share of total engagement as is the case with YouTube and Netflix.
However, unlike media companies that lost control over distribution when content consumption moved from closed cable networks to the open internet, Google continues to be a primary gateway to information online.
This distribution combined with its breadth and depth of customer touch points gives Google a significant advantage and positions it to harness new avenues of growth. With 15 products each serving over 500 million users and all of these products using Gemini models, Google benefits from an unparalleled ecosystem that can rapidly absorb and integrate new technologies. This strengthens both user engagement and monetization potential.
In sharp contrast, traditional cable TV channels largely lacked direct consumer relationships. When legacy media companies launched streaming services, they faced the costly and time-consuming task of essentially building consumer bases from scratch. Google, by comparison, enters the AI era with billions of existing daily touch points across its global user base, giving it a formidable market position. While remedies from ongoing antitrust litigation may constrain its distribution reach, absent a more extreme outcome, Google’s business appears well equipped to absorb and adapt to such changes.
The Next Phase of Engagement Growth
The competitive threat to Google Search is not driven by a change in distribution channels—as was the case with legacy media—but potentially by a shift in consumer behavior enabled by emerging technologies such as generative AI and AI agents.
The legacy cable TV bundle once provided a collective economic moat for media networks, sustaining engagement and ad revenue. The unraveling of that bundle through cord-cutting not only fragmented audiences but forced traditional media companies into a costly dual-track strategy: maintaining declining linear TV businesses while building initially unprofitable streaming platforms. Outside of long-dated sports rights, most legacy players lack durable moats around content production, leaving them increasingly exposed to the shift toward streaming and internet video. These dynamics led to shrinking cable profit pools and rising infrastructure and content costs—exacerbated by the strategic misstep of reallocating a significant share of premium content from cable to streaming accelerating declines in the linear TV profit pool.
In contrast, Google benefits from a broad ecosystem of direct user touch points, extensive data advantages, and scaled AI capabilities that will power product development and drive engagement growth. While the composition of search-related activity is shifting—from traditional query-based search to answer engines and AI agents—the rise of AI presents Alphabet with more opportunity than threat—success is theirs to lose.
Although some cite increased personal use of ChatGPT and similar apps—as well as recent data showing slower search traffic and paid click growth—as evidence of structural headwinds for Google Search, this reflects a narrow snapshot of a rapidly evolving landscape. AI chatbots and agents are broadening the definition of search and expanding the total addressable market. The more relevant question is not whether Google’s share of this expanded market will be lower than its dominance in traditional search—it will be—but whether the broader market can still support aggregate revenue growth. With greater monetization potential from AI-enhanced services and the ability to leverage its core competitive advantages to launch new applications, Google is favorably placed to sustain—if not accelerate—growth as the shift unfolds.
As the leading search engine across Android devices, Chrome, and Safari, Google captures billions of daily queries and remains deeply embedded in user behavior. This habitual use is reinforced by a tightly integrated suite of services—including Gmail, Maps, Docs, and Drive—that form a self-reinforcing ecosystem. While ChatGPT is growing rapidly, it lacks Google’s broad embedded presence across multiple daily-use applications that provide natural, established entry points for introducing new AI experiences.
Google’s ability to layer interfaces like Gemini across its existing platforms—combined with its infrastructure and data advantages—not only strengthens its defense of core products but also unlocks new growth opportunities. Travel is a prime example. With unmatched visibility into user intent across Search, Maps, Gmail, and Google Flights, Google is uniquely positioned to deliver personalized, context-aware travel planning. Unlike standalone OTAs, it has the potential to embed AI agents directly into its ecosystem surfacing trip ideas, optimizing itineraries, and handling bookings across multiple touchpoints. Its data advantage enables more accurate recommendations and pricing visibility, positioning it to capture greater value across the entire travel funnel.
Ownership of YouTube also provides a differentiated advantage in the generative AI context. YouTube is not only a dominant platform for video content but increasingly serves as a discovery and how-to engine, especially among younger users. Its rich mix of user-generated video data provides Google with a training edge for multi-modal AI and a highly engaging monetization surface. In a world where generative AI shifts user preference toward more dynamic responses—including video—YouTube uniquely enables Google to meet that demand. YouTube’s comment threads and watch-time signals also feed into Google’s broader understanding of relevance and intent, further improving its AI systems.
Another critical advantage is Google’s superior monetization engine and efficient digital ad product with a proven ability to match high-intent queries with highly targeted ads. Other than Meta, there are no comparable global platforms for advertisers to generate a comparable level of reach and return on ad spend. ChatGPT, by comparison, remains early in its monetization journey, with a current focus on a subscription based revenue model.
Conclusion
Taken together, Google’s distribution scale, advertising dominance, infrastructure depth, and ownership of YouTube place it well ahead of ChatGPT in both user reach and monetization leverage. While ChatGPT has introduced a compelling new interface paradigm, Google’s expansive ecosystem enables it to integrate similar capabilities without ceding its core advantages—allowing the company to play both offense and defense.
Importantly, reliability remains a key differentiator. Google’s brand is firmly associated with trustworthy, high-quality information—an advantage that matters to both consumers and advertisers. In contrast, ChatGPT and its peers continue to grapple with hallucinations and response accuracy, limiting its suitability for certain use cases and for many advertisers.
Although, ChatGPT has established itself as a formidable first mover and one of the fastest-growing consumer tech products in history, the AI landscape remains highly fluid, with competitors regularly leapfrogging one another through successive large language model upgrades. No player has yet developed a durable moat that rivals Alphabet’s scale, integration, and distribution power.
This is not to discount the promise of ChatGPT or emerging platforms like Perplexity. Rather, it underscores that AI is not a zero-sum game. The addressable market for user engagement and AI applications is expanding rapidly, creating room for both Google and new entrants like OpenAI to grow.