Sam Altman’s Move to Microsoft Changes Its Bing Search Battle With Google

While Microsoft’s swift hiring of Sam Altman could boost its position as the frontrunner in the race of AI, there are unintended consequences that will benefit Google’s position in AI dominance, industry analysts tell Adweek.

Altman’s move to Microsoft capped a whipsaw weekend that began Friday with the co-founder and CEO of OpenAI being ousted by the board, attempts to retain him and finally the move to the world’s No. 2 most valuable company, which already had invested $13 billion in OpenAI.

The dizzying unfolding of events has left executives in the ad industry pondering the implications of the market dominance of search engines.

A potential shift by Microsoft from a GPT-powered model to an internal technology might hinder the tech giant’s standing in the AI race. This move could prove advantageous to rival Google, potentially granting it a speed-to-market edge due to its in-house tech development.

“If Altman was ousted because he is moving too quickly to ship products, and that worried some of the AI ethicists at OpenAI, that means ChatGPT could go slower or fall apart,” said Erik Hamilton, vp of search and social at Good Apple.

Microsoft CEO Satya Nadella hired Altman to lead a newly established advanced AI research team.

“He’s basically working for the same team, just on the side of the commercial stakeholder,” said Nicole Greene, vp analyst at Gartner. “It’s a shift in focus.”

Microsoft had a strong quarter ending in September, suggesting the company’s investments in gen AI were starting to positively impact revenue. In addition to integrating gen AI features across its devices, Microsoft expanded AI-powered advertising in its search business on Bing.

Still, advertisers are yet to see a material lift in query volume in Bing after Microsoft launched the generative experience, according to Aaron Levy, vp of paid search at Tinuiti.

“I see this as a long-term advantage for Microsoft as they’ll now be able to develop on their terms, without the oversight from a non-profit board,” he said. “Azure will provide an arguably unlimited supply of computing power, and they’ll be able to develop the search experience in tandem with the model itself.”

Elsewhere, industry insiders have indicated the recent changes at OpenAI might result in short-term product quality issues for ChatGPT, increased downtime and delays in new signups. These developments are raising concerns about OpenAI’s long-term sustainability.

Not an immediate win for Microsoft

Microsoft still has its work cut out for it to change consumer sentiment about AI.

Gartner research found that 82% of consumers are concerned there’ll be no net benefits to society from gen AI. Conversely, 56% of marketing leaders see a greater reward than risk with gen AI.

“Any short-term advantage, or disadvantage, to [Microsoft] will likely be muted until a shift in consumer behavior takes hold,” said Levy.

Meanwhile, if Microsoft remains steady in building its AI capabilities for both its commercial partners and consumers, it could find an opportunity for business growth, according to Greene.

The end of OpenAI?

Following Altman’s departure, OpenAI quickly hired a new interim CEO. In his first order of business, Emmett Shear, former CEO of Twitch, said he planned to enlist an independent investigator to look into the C-suite drama at OpenAI.

“It’s clear that the process and communications around Sam’s removal has been handled very badly, which has seriously damaged our trust,” Shear wrote on X.

Elsewhere, in a letter addressed to the OpenAI board, more than 500 employees have called for the resignations of the three independent board members.

OpenAI had been considering a new funding round with the goal of raising an estimated total of $100 billion, per The Information.

“This seems improbable now, with potential funding at a reduced valuation. Investor confidence may also waver due to the board’s dominant role, evidenced by Altman’s dismissal,” said Chris Harihar, evp of Mod Op-owned Crenshaw Communications. “For ChatGPT, this means likely reduced resources, potentially impacting the maintenance of its capital-intensive infrastructure.”

The head-spinning nature of the changes might not be over. Sources are telling The Verge that Altman, who co-founded OpenAI, would be willing to return as CEO under the right circumstances. Given that Microsoft is already the largest shareholder in OpenAI, the return would be smoother, with a lot less drama, than the departure.