Google Search Is Under Attack. Why ChatGPT Won’t Overthrow It Yet.

Google Search remained the “core search engine” in a survey of 2,400 users, Citi Research said. (Getty Images)

While ChatGPT’s meteoric rise in popularity has positioned it to rival to traditional search engines, analysts say the chatbot hasn’t knocked Google out of the top spot just yet.

Citi Research analysts led by Ronald Josey reiterated a Buy rating and $203 target price on shares of Alphabet, Google’s parent, on Friday. The stock was down slightly at $177.18 in morning trading.

Citi polled 2,400 Google Search users in the U.S. and found that the search engine “remains core to most users’ Internet usage.” The same conclusion held true across all age groups, Citi said.

Still, the bank cited a rise in “alternative search experiences” among young users, naming ChatGPT and Meta Platforms’ Facebook and Instagram as examples. ChatGPT has become the “go-to” destination for younger users, with Google usage rising with age, Citi said.

While 85% of respondents selected Google as their “core search engine,” with 72% saying Google was their first site to search online, differences emerged among age groups. Among users aged 41 to 55, 88% of respondents named Google as their core search engine, but that number dipped to 83% for respondents aged 14 to 24.

With that being said, the use of AI agents appears to be “more research-driven than commercial,” as opposed to Google Search, where shopping was ranked as the top use case among respondents, Citi said. And the bank believes there’s more to love about Google’s growth story, as responses indicated that the use of other features such as Shopping and Travel continued to accelerate.

Overall, the results suggest that Google Search is standing its ground for now, which is good news for Alphabet. Revenue attributed to Google Search and other services accounted for more than half of the total in the latest quarter.

Google is set to report second-quarter results on July 23. Based on Citi’s preliminary analysis, “we believe the broader online advertising environment, including search and YouTube, is healthy,” the analysts wrote.

Other firms have sounded the alarm about AI and its effects on Google Search. However, Citi believes the search engine’s advertising market improved throughout the quarter. Earnings will put that theory to the test.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com