Alphabet's AI Dominance Story Has Three Critical Blind Spots
OpenAI's search offensive, agentic MCP protocols, and YouTube's dance with "AI slop" could risk turning Google's $167.5B infrastructure into abandoned architecture
[Author’s Note: I was planning a presentation for PARQOR Platinum subscribers for today. A conversation I had yesterday made me rethink the argument. I will record and post it next week.]
Google's Q2 earnings painted a picture of AI dominance—but three emerging threats suggest their confidence may be premature.
The basic message was that its search business is thriving (up 11%). AI is also driving new revenue opportunities in its subscriptions businesses and cloud businesses.
YouTube had another good quarter: Its ad revenues are up 13% year-over-year. Subscription platforms and devices revenues increased 20% driven primarily by YouTube subscriptions (YouTube TV, YouTube Music and Premium) and Google One (cloud storage for consumers).
The story is that Google will dominate AI's future as it did search. It is a particularly confident story against context of three competitive threats:
OpenAI (and other AI platforms)
Agentic AI and Model Context Protocol (MCP)
“AI slop” on YouTube
The question from skeptics like myself is whether it is overconfident. From a Wall Street perspective, which looks only two quarters ahead, the story seems promising. But from a longer term perspective, these threats are in their early days. Google’s wins and confidence may be temporary.
OpenAI (and other AI platforms)
OpenAI has been on a full offensive against Google’s core offerings, launching products that create an ChatGPT-based approach to Search, browsing and its suite of office products. ChatGPT saw its Daily Active Users jump from around 350M to around 500M over the past three months, and recently reached 365 billion annual searches in two years whereas it took Google 11 years.
