ChatGPT Opened a New Era in Search. Microsoft Could Ruin It
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business
Mar 2023
Google typically gets the blame for the lack of competition in web search. The US government is even suing to block the company from using allegedly monopolistic tactics, like making itself the default search engine in widely used software such as Android, Chrome, and Safari.
But some upstart search engines trying to woo users with privacy protections or ad-free searches say their latest challenge doesn't come from Google. Instead, it's Microsoft and its Bing search engine causing their aggravation.
Search startups have long relied on licensing search results from Bing, tapping a web indexing operation larger than a small company could easily afford and adding their own features and ways of parsing queries. But Microsoft's rollout of a Bing search chatbot based on technology underlying OpenAI's ChatGPT has prompted concerns that Microsoft is unfairly squeezing out its search data customers as it launches a renewed attempt to bite off more market share from Google.
A week after rolling out Bing chat in February, Microsoft announced that its standard fees for search data would increase by as much as 10 times starting in May. The company also added a new rule with immediate effect that startups say effectively blocks them from competing with Bing chat or Google's rival chatbot Bard.
That rule levies much steeper prices--potentially 28 times Microsoft's previous fees--on any customer providing Bing results to users on a page that also has content from large language models (LLMs), the technology behind ChatGPT and Bing's chat. A startup that launched its own LLM-powered search chatbot would pay up to $200 per 1,000 Bing queries, compared to as much as $7 previously, or $25 under the new pricing that takes effect in May.
Search entrepreneurs that use Microsoft data and hoped to provide their own chat-style features say the bounty they would have to pay Bing would crush them. Microsoft's search chatbot is not on offer to API customers so far.
Some search veterans say Microsoft's price hikes add to the company's track record of restricting its search offerings for outside developers. "Bing squandered an opportunity to create a great ecosystem of search services, which I believe strongly would have ultimately benefited Bing in many ways," said D. Sivakumar, a research scientist who worked on search for 16 years at Google and Yahoo before starting the ecommerce search startup Tonita in 2021.
Microsoft spokesperson Caitlin Roulston says the price increases reflect growing investments to improve Bing, in ways that also benefit companies relying on its results. The recent use of LLMs to help rank results has improved search quality more than any previous upgrade in the last 20 years, Roulston says. "We are in early discussions with partners to explore additional opportunities and look forward to continuing to foster a healthy web ecosystem," she says.
Bing has been essential to nearly every Western startup challenging Google, from DuckDuckGo starting in the late 2000s to You.com founded in 2020. Sending out bots to explore the entire web and compiling an index to make it all searchable is expensive, and what little investment many startups could raise to take on goliath Google was mostly dedicated to a novel interface or other features. In one cautionary tale, Cuil, a search startup launched in 2008 that developed its own index, ultimately shut down within about two years after reportedly burning through $33 million.
Bing APIs, or application programming interfaces, let other search engines send in queries and get back an ad-free feed of results, spelling suggestions, or related searches that they can present to their own users. The service has become more or less the industry's only option. Yahoo in 2009 stopped developing its own search engine technology and began licensing data from Bing instead. Google's comparable API fell out of favor, as its output can differ from the search giant's regular results, and for some use cases it requires displaying ads that it sells.
After Bing's price hikes and the launch of its new chat mode, some search startups are racing to find alternatives. Brave, which provides 93 percent of its own results but still connects to Microsoft for image searches, estimates its Bing bill will triple, forcing the small company to speed up a "planned process of achieving total independence," says its chief of search, Josep Pujol.
Kagi, a new search engine that charges a subscription fee but promises no ads or privacy compromises, is making its own transition. Bing previously offered an attractive balance between cost and quality, says founder Vladimir Prelovac. "The pricing change challenges our ability to offer a competitive and sustainable product," he says. "We are actively exploring alternative search providers and expanding the investment into our own search infrastructure." With no other tech giants active in search, he worries that the remaining options may lack Bing's breadth.
Microsoft's new rule that slaps higher prices on customers that also use LLMs has startups concerned that Microsoft wants to lock them out of what might be the future of search--at a time when consumers are eagerly trying out new options such as Bing's chat mode and ChatGPT. "They did not want us to innovate," says Richard Socher, CEO and cofounder of search startup You.com, which he says has millions of users and has received $45 million in funding. "It's not viable anymore to run a search engine with them that innovates with LLMs. Maybe it shouldn't be allowed, but that's what they're currently doing."
You.com launched a conversational interface called YouChat in December, shortly after the debut of ChatGPT, styling it as an "accomplishment engine." YouChat can help users write computer code, generate images, and summarize academic research. "Those are things that you wouldn't have even asked your old search engine," Socher says.
You.com has had to make adjustments. It started sourcing results from elsewhere--Socher won't provide details but says it includes systems developed internally--whenever they appear next to YouChat. "YouChat does not use Microsoft Bing web, news, video or other Microsoft Bing APIs in any manner," a disclaimer on You.com reads. "Other web links, images, news, and videos on you.com are powered by Microsoft Bing."
DuckDuckGo, one of the most prominent and heavily marketed search upstarts, earlier this month launched a feature that uses LLMs from OpenAI and Anthropic to provide what it calls "instant answers" on certain topics using knowledge from sources such as Wikipedia. DuckDuckGo spokesperson Allison Goodman calls the offering "totally separate" from the company's partnership with Microsoft and says "we are not affected by" the pricing increase.
Ecosia, which uses Bing results and invests its profits in environmental projects, is considering potential partners to develop its own chatbot. Its leaders would be eager to license Bing's chatbot technology if Microsoft was willing to share. "It's important to ensure that this isn't another tool for these companies to further entrench dominance," says CEO Christian Kroll.
The small search player escapes Bing's price increases because it is a syndication partner of Bing, meaning it repackages both ads and search results from Microsoft and gets a split of ad sales. However, Kroll says the multi-fold fee jump for Bing API customers is an "urgent red flag" signaling a market with great power imbalances that the European Commission should regulate under the Digital Markets Act, a law enacted last year to ensure small companies can compete with Big Tech on equal terms. The EC did not respond to a request for comment.
Bing serves less than 3 percent of searches worldwide, analytics service StatCounter estimates, far behind Google, which takes 93 percent. But Bing's share is over 8 percent on desktop computers, where Windows is the dominant operating system and Microsoft gives its own search engine preference.
Search ads on Bing search results are a key portion of Microsoft's $18 billion in annual advertising revenue. Every 1 percentage point of market share increase could translate into $2 billion of additional ad sales, Microsoft finance executive Philippe Ockenden told analysts last month during its chatbot launch. Microsoft does not break out Bing API sales.
The chatbot race has stoked excitement for the first time in years about competition between Bing, Google, and everyone else around. You.com's Socher says users until the past few months recoiled from features not familiar to them. "People would be like, 'I'm just so used to Google. I don't want it to be too different,'" he says. Now users seem open to new experiences. "It's just a different, new world," he says.
Sivakumar, who's building the shopping search service Tonita, says Microsoft might have more success with its chatbot if it opened it up for other companies to license on reasonable terms, winning wider usage and turning more consumers away from Google. Microsoft's handling of its existing APIs does not instill optimism. He decided against using Bing APIs because their long-standing terms of service do not let customers modify, store, or process search results, limiting the data's potential application.
The same technology enabling Microsoft's search renaissance is also making it easier for companies to imagine doing without Bing. After building search startup Neeva on Bing's API, CEO Sridhar Ramaswamy says user bug reports about misinterpreted queries, outdated results, and other quality issues convinced him to shift course in late 2019.
Neeva drew on its $80 million in funding to develop its own system to serve results, though it still relies on Bing for image and video searches. The startup benefited from hiring top ex-Googlers, cheaper memory for servers, and the advent of LLMs that made it easier for software to understand misspellings and synonyms, despite having limited user data to analyze. Ramaswamy says the project has "more than paid for itself," enabling the launch of the startup's quick-answer tool NeevaAI in January.
Bing is still not easy to oust. Like Google, Microsoft has a wide ecosystem of products and services that can help direct people to its search box. Some users have complained that Windows resets Bing as the default search engine from their preferred alternative. (Microsoft says it's committed to users being in control.) Microsoft also requires using its browser or mobile app to give the Bing chatbot a try, fueling a surge in downloads. Says Ramaswamy, "If we enter into a world in which there are only two large players with the infrastructure and expertise in search, it is clear that they are not going to be welcoming of competition."
