Alphabet Doubles Up Efforts on AI as Tech Industry Races to Get a Foothold in the Sector

Google's parent company  Alphabet Inc., released its fourth and fiscal year 2022 results on Thursday. They were not an exception to the effect of the current market downturn affecting the world, as they saw revenue slum and growth slowed when compared to Refinitiv projections. For Q4, consolidated revenues were $76 billion, a 1% gain over Q4 in 2021.

 In the conference call, Alphabet CEO Sundar Pichai described the growth run during the pandemic as a period of significant acceleration in digital spending, which has made the current macroeconomic ecosystem challenging as the world returns to normality.

As communities and business owners embrace artificial intelligence, the search and android giant is aligning itself to be a key player in the field. The call was centered mainly on three things: the impact of AI, how to unlock its potential across its products, and how to focus investment to make necessary decisions as a company to get there.

“First, the AI opportunity ahead. AI is the most profound technology we are working on today. Our talented researchers, infrastructure, and technology make us extremely well-positioned as AI reaches an inflection point. More than six years ago, I first spoke about Google being an AI-first company.” Pichai said.

According to a New York Times report, Google management had several meetings around its company AI strategy amidst the soaring popularity of OpenAI chatbot ChatGPT and the partnership of its search engine competitor Microsoft. During the call, Pichai talked about the company’s plans to release large language models (LLMs) like LaMDA and PaLM to the public in the coming weeks and months.

LaMDA will be the first to go public as they will await feedback from people to improve. He described this model to be particularly amazing for composing, constructing and summarizing. The company will be incorporating these LLMs in companionship with search, as it will become more useful as they provide up-to-date factual information. The company also plans to introduce LLMs into two of its products — Gmail and Docs. Pichai said there are plans in motion to incorporate generative capabilities into its design segment.

He further stated the company would provide tools and APIs for developers and creators to enable them to create their applications and explore the possibilities of AI on the platform.

Google ads business is its biggest revenue source despite going down by 2% in the last quarter, coming in at $42.6 billion. According to senior vice president and Chief Business Officer Philipp Schindler, the company was able to outsize growth in advertising revenues during the pandemic, which saw advertising revenue of 2022 to be $90 billion higher than that in 2019.

He reiterated the company's focus on generating revenue through AI-driven innovations, highlighting the progress made by smart bidding, which uses AI to predict future ad conversions and their value which help business to stay agile and responsive to a rapid shift in demand. The uses of AI advances boosted the bidding performance in the last year, which allowed advertiser outcomes down the funnel to drive ROI and use budgets more efficiently.

“In 2022, AI advances boosted bidding performance, allowing us to move advertiser outcomes down the funnel to drive better ROI and use budgets more efficiently. In search query matching, large language models like MUM matched advertiser offices to user quarries. This understanding of human intent of language, combined with advances in bidding prediction, is why businesses can see an average of 35% more conversions when they upgrade exact match keywords to broad match in campaigns that use a target CPA. Google AI also underlies our creative products like tech suggestions in Google ads and creative optimization and responsive search ads.” Schindler said.

Alphabet is throwing a strong signal to the AI industry after the company announced that they changing the financial report as it relates to its DeepMind AI in Q1. CFO Ruth Porat said this is due to increasing collaboration between DeepMind and Google products, and it will no longer be reported in other Bets and will now be reported as part of Alphabet’s corporate costs.

Despite announcing a plan to layoff 12,000 people in late January and taking a severance charge of $1.9 to $2.9 billion, the company will be incurring an approximate sum of $500 million of costs related to exiting leases to align offices spaces with the adjusted headcount. Porat said the company would continue to hire in priority areas like artificial intelligence. She also said the company has a longer-term plan to re-engineer the cost base by incorporating AI to improve productivity across Alphabet for operational tasks.