The news: Google is reportedly building a new AI-powered search engine under the working name “Magi,” according to a report from The New York Times.

• Though there’s no clear launch timeline, Google may begin testing Magi as soon as next month, with plans to expand access to 30 million users by year’s end.

Google’s AI rush: Magi is part of a broad initiative at Google to rapidly launch AI-powered products and add AI features to existing services in order to protect its market share against competitors who were earlier out of the gate with their own offerings.

• According to the Times, Google created a number of AI task forces to prototype products in a “panic” after word that Samsung might choose Microsoft’s Bing to replace Google as its default search engine.
• That switch would represent a $3 billion loss for Google, made especially concerning by a similar $20 billion contract with Apple ending this year. In the last two years, there have also been rumblings that Apple may develop its own search engine for iOS.
• Google has launched its own AI chatbot called Bard and has promised to introduce AI features into existing products like Gmail, Google Drive, and more.

What would it look like? Magi is still in the early stages, but the Times report suggests that Google is attempting to build a search engine that preempts what consumers need, in addition to several other AI products and features for Chrome.

• Some features that may eventually launch will likely be tested in existing products first. Among the working products are a chatbot that can write code, introducing AI to Google Earth, a music-search chatbot, a language-learning tool, an AI image generator, and a research assistant chatbot, among others.
• Regardless of which specific features end up in Magi itself, Google is aiming to create a highly personalized service that can anticipate user needs by showing suggested products and research topics.

Adapting the ad business: Google offering a new search engine is an earth-shaking big deal. Google is the premier access point to the internet for many, and a staggering $141 billion of its projected global revenues of $170 billion will come from search.

• Already, there are concerns about how AI-powered search could affect not just Google’s ad revenues but internet companies at large. The argument is that if AI surfaces results quickly or at the top of a results page, ad purchases will be buried and sites will lose out on revenues from clicks.
• But documents obtained by the Times show that advertising is top-of-mind for Google. Searches on Magi would still feature ad placements and recommended products, and that code-writing chatbot may display ads underneath its results, to name two examples.

Our take: Google is trying to find a delicate balance between staying ahead of competitors that are advancing new technologies and calming advertisers who are used to the established ways of doing business. The advertising-first approach suggested in the documents shows Google trying to find a rocky middle ground, but may appease advertisers that a smoother marriage between AI search and advertising is on the way.