Alphabet’s Kodak moment? Why Google could lose its search dominance in the AI age

Key points:

• Google’s search dominance may be eroding: Apple executive Eddy Cue’s testimony confirmed Safari search volumes are falling as users shift to AI tools like ChatGPT and Perplexity—signaling structural pressure on Google’s core business.
• AI threatens Google’s monetization model: Traditional search relies on ad clicks; AI offers direct answers with fewer monetizable touchpoints. Google’s new features haven’t yet proven they can replace that revenue stream.
• Investor confidence hinges on Google I/O: The May 20–21 developer event will be critical for clarity on monetization, product traction, and whether Alphabet can lead—rather than follow—in the AI-driven search era.

---

Note: This content is marketing material.

 

Alphabet’s dominance in digital search has long been considered unshakable. But a confluence of rising AI competition, legal scrutiny, and shifting user habits is challenging the tech giant's core business in a way not seen in decades.

On May 7, 2025, Alphabet stock plunged over 7% following a bombshell report from Bloomberg. Apple’s senior vice president of services, Eddy Cue, testified in the Department of Justice’s ongoing antitrust trial against Google, stating that searches through Apple’s browser had declined for the first time—a drop attributed to users turning to AI tools like ChatGPT and Perplexity for search-like queries.

A blow to Google’s core business

Cue’s comments sparked immediate investor anxiety. For years, Alphabet has paid billions to Apple to maintain its dominant position as the default search engine on iPhones. Now, with consumer behavior shifting toward generative AI tools like ChatGPT, Perplexity, and Meta AI, the foundations of that dominance appear increasingly unstable.

Cue added that while Apple still wants Google as the default in Safari, the company has been in discussions with Perplexity AI about bringing its services onboard. He sees AI search providers like OpenAI, Perplexity AI and Anthropic PBC eventually replacing standard search engines like Alphabet’s Google. The signal is clear: AI-native search alternatives are no longer fringe—they’re becoming part of the mainstream.

Why this matters?

• Search remains Alphabet’s core revenue engine, contributing $198 billion in 2024—over 57% of total revenue and an even greater share of profits.
• The model relies on intent capture and monetization through sponsored results placed above organic links—driving high volumes of paid clicks and strong cost-per-click (CPC) rates.
• Eddy Cue’s testimony confirmed search volumes are falling on Apple devices, as users increasingly shift to AI tools like ChatGPT and Perplexity for quick answers.
• While CPC remains elevated, paid click volumes are declining, raising concerns over the sustainability of advertiser demand if ad efficiency continues to deteriorate.
• AI tools pose a structural threat, offering direct, conversational responses that bypass the traditional need to scroll through ad-heavy pages.
• Google’s responses—AI Overviews, Circle to Search, AI Mode—are promising, but so far unproven in terms of matching the monetization power of its legacy model.
• The monopoly premium is now at risk, with multiple forces converging:
  • The DOJ’s antitrust case,
  • Apple exploring rival AI search partnerships,
  • OpenAI integrations across iOS and macOS,
  • And fast-changing user habits disrupting the ad click ecosystem.

In short, Alphabet’s once-defensible search position now appears vulnerable on multiple fronts: legal, technological, and behavioral.