Google's main revenue is ads based on search. LLMs are a competitor to search. Creating better LLMs will cut into search volumes.
In any large organisation this is extraordinarily difficult to manage - they have to incentivise the new tech that is actively harming the current revenues, while maintaining as much of the old revenues as possible, without creating internal conflict between these two parts of the organisation that will kill it.
Though in fairness to Google they do seem to realise this and are trying to adapt - they're letting the LLM folks mess with search. It'll be interesting to see how this goes.
Sundar and many of his executives have certainly read or heard of The Innovator's Dilemma, and I expect they're all moderately paranoid that it will be their downfall.
Also, that's not it. Google has a great ai app called Gemini where they have at various points hosted the top ai image generation model (certainly for speed, and for a while for accuracy) and have innovated with features like deep research
They are monetizing their ai conversations more effectively than OpenAI could dream of via ads and chat in Google search.
They are heavily investing in compute and talent.
When they've added llm results to Google search it has _increased_ engagement and re-engagement.
What part of the competition are they blissfully ignoring?
(I have counter arguments to some of these points, but I would rather hear other people's)
Are they actually implementing ads in chat yet? I haven't seen an ad in Gemini yet.
Again, the results I've seen is that LLM results in search have resulted in more zero-click searches (as a proportion of all searches), which isn't increasing engagement? But again, I may be wrong, what are you basing your assertion on?
I didn't say they were blissfully ignoring anything. I gave them credit for knowing the situation they're in and doing something about it.
The problem that I was talking about (probably badly getting my point across) is that it's internal conflict and strife that causes the pain here. One part of the company is incentivised on increasing revenue on the existing business. The other part of the company is incentivised on increasing revenue for the new business. But the new business is at the expense of the old business, so it sets up internal conflict where each part of the business tries to protect its own incentives. And Google has always been afflicted with rife internal politics.
If there is a "crack" there you might be able to get out of it, or it will let a disruptive idea to grow, but my way of thinking about innovator's dilemma is that is it a "culture bias": knowing about it give you some small advantage but it needs a real change to maybe have a chance to escape/act on it and the most important part is that under pressure it will quickly and imperceptible run the entire process or decision making.
But I also disagree with your reading of the innovators dilemma. You're being far too absolute
Have you seen their Cloud business?
Moreover, Google has continued to drive search growth since ChatGPT arrived and is executing competently. Their models are good (not great), but they have enough compute and one of the best ML-focused chips such that they aren't beholden to Nvidia (instead, they're beholden to fabs: tsmc - this is a much better dependency since Nvidia is hell bent on extracting as much value as they can from their position in the stack and it would be against the nature of tsmc to behave similarly)
Will Google's ad revenue decrease? Advertising is an incredible business because it is anti fragile.^ Even if search revenues decrease from their current highs (I would bet heavily against this), they still have YouTube with shorts and a robust display ads business that is going to improve if AI supercharges the economy (more companies - # startups founded in Jan 2026 is much higher than # founded the previous January, more products, advertising and distribution become the differentiators for these products)
If you're wondering how anthropic is going to continue to grow its base, the answer is advertising. In fact, Google is situated to fundamentally support everything that anthropic needs. Who cares if they make worse margins than anthropic? They'll benefit from the entire ride up, and they'll do the same for the next startup of that scale.
coding models? their own devs use claude code.
Google is well positioned to earn from this service, especially if they can prove that their search service is superior to competitors. While they lose some of their moat, they are well positioned to dominate the market, just like they did in the consumer space.
People asking any AI chat interface for ideas for their honeymoon will trigger some kind of search. SEO is still relevant and Google might still be able to sell top spots in their search so LLMs will pick it up.
"You tried to find a recipe for cupcakes, well all I can offer you is an advert on kitchen appliances"
Some already do, and some of the ones that don't will in the future.
See for example https://help.openai.com/en/articles/20001047-ads-in-chatgpt
Of course that's not to say that the advertising situation will be identical to that of pre-LLM search engines, and the differences may lead to radically different economic models and user experiences. But I was just correcting your statement.
a bit more nuanced take on the failure would also account for executives backgrounds at the critical period:
- in 1981 Vince Barabba — Kodak's Head of Market Intelligence — conducted an extensive internal study that explicitly concluded digital photography could replace film and that Kodak had approximately 10 years to prepare for the transition.
- Kodak's leadership in 1980–1993 saw the company through the lens of its founding identity — silver-halide chemitry, precision coating and manufacturing, and the extraordinarily high margins of the film-plus-processing business. This identity-driven decade was spent on failed diversification and defending film instead of building an electronics cost structure and a defensible high-margin position. They steered capital and attention toward businesses that fit that self-image (specialty chemicals, pharmaceuticals, hybrid film products) rather than toward digital cameras, which meant fighting Sony and Canon on low-margin electronics turf where Kodak felt no competence and feared cannibalizing film.
- It was an inside executive culture, crystallized in the 1990 choice of film-lifer Kay Whitmore over the digital-minded Phil Samper. When Chandler retired, the finalists were Whitmore and vice-chairman Phil Samper, who had a deep appreciation for digital technology. The board chose Whitmore, and was explicit about why: as the New York Times reported, Whitmore said he would keep Kodak closer to its core businesses in film and photographic chemicals. Samper resigned and went on to become president of Sun Microsystems and then CEO of Cray Research — i.e., to lead exactly the kind of digital/computing companies Kodak was avoiding becoming.
- so when Kodak did get serious to compete in digital (in 1993 board made Fisher the CEO, he came from running Motorola and held an engineering degree plus a doctorate in applied mathematics) it did so as one commodity hardware maker among many and that was too late since film began to drop as digital started to pick up, exactly as Vince Barabba predicted in 1981
