Recently, discussions surrounding the 'search engine crisis theory,' which suggests that artificial intelligence (AI), including ChatGPT, will replace traditional search engines, have spread, leading to a sharp decline in the stock prices of search platform corporations Naver and Kakao. Experts believe it is still too early for AI to completely replace search engines, but short selling of Naver has surged.
With global AI technology increasing, the future stock price trends of these companies are expected to be influenced by how specifically the results of AI new businesses emerge.
On the 8th, Eddy Cue, Apple's vice president, noted that 'AI companies like OpenAI and Perplexity AI will ultimately replace the Google search engine,' adding that discussions are underway to introduce AI as a search option. He continued, saying that 'the search volume of Safari, Apple's web browser, decreased for the first time last month,' explaining that 'this is a result of people using AI more.'
Following these remarks, on the 8th, the stock prices of Naver and Kakao fell by 5.22% and 3.52%, respectively. Following Apple’s statement, the search engine crisis theory re-emerged, causing the stock price of Alphabet, Google’s parent company, to plummet by more than 7%.
There has been an increase in those betting on the decline of Kakao’s stock price. The amount of Naver’s short selling increased by 65.9% from 40,619 shares on the 7th to 76,329 shares on the 8th, marking the highest trading volume in the last month (from April 9 to May 8). Kakao’s short selling surged from 58,690 shares on the 7th to more than 11 times that amount, reaching 708,623 shares on the 8th, also the highest trading volume during that period.
Some are reacting that the search engine crisis theory is becoming a reality. Since the emergence of ChatGPT, discussions have been continuously raised about the possibility of AI changing the way information is searched, and Apple’s official mention this time has stoked concerns.
A researcher in the internet sector at a securities firm explained that 'in the long run, it is a predetermined course for AI to replace search engines,' adding that 'the recent sharp drop of Kakao was essentially a mechanical drop due to Alphabet's decline, and Apple’s vice president has once again pointed out the current industry situation.'
However, Google rebutted the following day, the 9th, stating that 'it is not true that the search volume on the Safari browser is decreasing,' and the stock price of Alphabet rebounded by 2% overnight. Naver, which announced its earnings on the 9th, also dismissed the controversy, stating, 'Currently, no adverse effects have been found (in traffic)' when asked about the possibility of decreased search traffic due to the growth of generative AI.
The recent concerns regarding search engines are not new. Even before AI, there were theories suggesting that YouTube's rapid growth could replace traditional search engines with video-based searches.
However, as Google and Naver continue to see growth in their search advertising revenue, the controversy has subsided. Jeong Ho-yun, a researcher at Korea Investment & Securities, explained that 'the search crisis theory has been consistently present,' adding that 'the purpose of search has been more concentrated on moving to other websites or checking simple information rather than acquiring deeply nuanced information or knowledge, making it difficult for AI to replace this demand.'
Furthermore, he noted that 'search should not be viewed in a bifurcated manner of traditional search versus AI-based search,' emphasizing that 'traditional search operators like Google are currently enhancing their existing search services using AI.'
Nevertheless, it is a situation where Kakao cannot simply feel at ease. If a new form factor emerges and the search behavior itself changes, it may become difficult for traditional search and AI to coexist in a two-track manner as it currently does.
A researcher at a securities firm stated, 'Unlike AI such as ChatGPT, traditional search engines like Kakao are well-positioned in terms of content utilization and inter-service partnerships, creating a significant lock-in effect for domestic users,' but added, 'however, it is a domestic corporation that lacks global competitiveness and needs to find a proper value in competition with global companies that are actively investing in AI, such as Amazon and Alibaba.'
There is no disagreement that the performance of AI new businesses is a key variable in the future stock price flow of Kakao. Lee Jun-ho, a researcher at Hana Securities, reported on the 9th that 'if initial results such as the confidential beta test of Karana (Kakao's AI service) and the application of generative search are confirmed, a rebound in performance can be expected.' Previously, Naver launched 'Naver Plus Store,' an AI-based shopping application, in the first quarter of this year (January to March), recording the highest advertising revenue ever.