Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) is reportedly working on its own search engine, a move that analysts at Bank of America see aligning with the company’s strategic priority to reduce dependence on its tech peers.
According to a report by The Information, Meta is developing a search engine to provide conversational answers about current events in its Meta AI chatbot in a bid to reduce its reliance on Google Search and Microsoft Bing, which current provide information for Meta AI.
Bank of America analysts believe that Meta's announcement aligns with its long-term strategy to reduce reliance on competitor platforms and technology. They also suggest that Meta is likely to reveal new AI and search capabilities during its upcoming Q3 earnings call.
The analysts see Meta as well positioned to develop internal AI assistant and query response capabilities.
“Compared to new Gen-AI companies such as Open AI and Anthropic, Meta potentially has a larger user and content base to train its own large language model (LLM), and more capital to sign licensing agreements,” they wrote.
“However, we think Meta will be at a data and web scraping disadvantage vs Google given still limited number of Meta AI users (in August, Meta had reported that Meta Al has more than 185 million weekly active users).”
Assuming three queries per user per week, the bank’s analysts estimate Meta AI could generate 30 billion queries a year, compared to Google’s estimated 2 trillion.
As such, they do not see Meta developing its own search engine as posing an immediate risk to Google. However, growing news flow on potential competition in Search has led to negative sentiment around Google Search.
“Given the significant amount of time spent on Meta's apps (approximately 40 minutes per day per user on Facebook and approximately 60 minutes on Instagram), if users increasingly engage with Meta AI for information, there is a possibility that a portion of internet traffic could shift away from Google Search (currently leading the market with 90% Search share globally),” they wrote.
“We think Google could (and should) highlight new AI Overview capabilities and any related search query traction to improve increasingly cautious sentiment on search share risk.”
The analysts repeated their ‘Buy’ rating for Meta and $630 price objective.
Shares of Meta traded up 1.6% at about $587 on Tuesday morning.