How The AI Internet Will Look Without Websites — The $1.1 Trillion Challenge
The End of The Internet and The Last Website
- 🤯 The internet industry in the crossfire for disruption amounts to a whopping $1.1 trillion.
- 📈 AI-driven GUIs could disrupt this industry by replacing websites, e-commerce platforms, and search engines.
- 🚀 However, AI also presents new opportunities for businesses that can adapt and leverage AI’s capabilities.
- 💡 Companies like Amazon have a history of successfully pivoting to new markets, and they may be well-positioned to capitalize on the opportunities created by AI-driven GUIs.
In part 1, we discussed the classic internet, webpages, and the industry surrounding it. Now, let’s look at the numbers and examine the challenges and opportunities that are reshaping this entire industry.
Anything Google search touches involves search queries roughly grouped like this:
- Navigational — how to get to a place.
- Informational — news, stock prices, etc.
- Everything else — trip planning, complex shopping.
How are websites built, and who pays for them?
WordPress
More often than not, websites are constructed on platforms that are essentially drag-and-drop at this point. These platforms are called CMS — Content Management System, with “content” being the information on the website. They are further integrated with other platforms like e-commerce (Shopify, WooCommerce, etc.), payment systems (PayPal, Stripe, etc.), and others.
As with any industry, the market leader holds a dominating position — out of these, WordPress is used by a huge majority.
- Estimates suggest 1.88 billion websites exist, 810 million of which use WordPress.
- The percentage of World Websites on WordPress is 45%.
- WordPress has the highest CMS Market Share of about 64%. While WordPress as a company has a revenue of only $1.3 billion, the WordPress ecosystem is estimated to be worth around $636 billion at the end of 2021, highlighting the platform’s success in terms of its continued growth. Read more here
Shopify
The second-largest CMS is Shopify, the platform that can help you set up your internet store. Shopify’s revenue in 2021 was roughly $3 billion; however, the Shopify ecosystem (how much Shopify processes from its platform users — Gross Merchandise Volume) is around $55 billion a quarter or $220 billion a year.
There has been a substantial increase in the total number of global eCommerce sites over the period from 2019 to 2023, growing from 9.2 million to 26.5 million.
What about ad revenue?
Ad revenue is what drives traffic between websites. Search engine marketing, also known as paid search, is the practice of advertising on search engine results pages (SERPs). All the major search engines offer ad space, and the most prominent platform is Google Ads (formerly known as AdWords). Google Ads is a pay-per-click platform: an advertiser pays every time someone clicks on its advertisement.
In 2022, Google’s ad revenue amounted to $224.47 billion. On top of ad revenue, a smaller size of SEM/SEO is the affiliate marketing global market, and that is over $17 billion. That’s up from $13 billion in 2016. The American affiliate marketing market alone is worth over $6 billion.
Overall, this is roughly a $1.1 trillion industry that is powered solely for delivering the right information to internet users.
This is the industry that will ultimately feel the direct impact of having an AI-driven GUI that provides any and all information needed to internet users. Whatever model or paradigm will replace it in the future needs to follow the footsteps of rewarding and incentivizing the right stakeholders for the whole dynamic to work. After all, it takes two to tango.
Infrastructure
On top of this, if we are to see a decline in user-generated content on the internet in the next years and decades, what will happen to the actual infrastructure that all these websites use? That estimate is a bit more fuzzy. What we call the “internet industry” includes servers and cables and internet ads — everything from Google to your neighborhood networking shop. 2019 study for the Internet Association for the Internet Association believed it to be worth US$2.1 trillion to the United States’ US$20.5 trillion yearly GDP.
Although the infrastructure companies will definitely feel some impact and a realignment of their customer base, this disruption is not left without opportunities that might see some become the next giants of the industry or for those that won’t pivot fast enough, the laggards.
Opportunities vs. Wealth Destruction
A few great examples of how previously undiscovered markets managed to create a wealth of new opportunities and, with it, amazing revenue streams.
Amazon started as one of the first e-commerce websites, starting from selling books to what it is today. There are at least two great examples of how Amazon moved ahead of its competitors and even created new industries and markets with two key decisions (one of which was purely by chance). Amazon launched its third-party marketplace in 2000, allowing small business owners to put their products on Amazon (for a price). There are now millions of third-party sellers on the site, and third-party sales make up about 60% of Amazon’s physical product sales. Opening up its store to independent retailers is a move that was replicated by Apple with its App Store (see below) accompanied by the same success. Today more than 60% of sales in the Amazon store come from independent sellers — most of which are small and medium-sized businesses. Amazon’s third-party seller revenue was $117.7 billion in 2022, accounting for 23% of total revenue.
The second decision Amazon did beautifully was AWS (Amazon Web Services). The very beginning of AWS was in 2006 when the Amazon Simple Queue Service (Amazon SQS) was launched. This was shortly followed by S3, EC2, and with these first offerings made by AWS, the foundations were being built to push AWS to be a global player in cloud computing. In 2021, AWS’s operating profit was nearly three times the operating profit reported by the rest of the company.
What about apps?
We’ve covered websites, looked at Amazon how it kickstarted the platform industry that carried over with everyone else Uber, AirBnB, Shopify, and others. The app economy is just as interesting a use case for its ability to create a new industry that dwarfs its predecessors. The App Store was opened on July 10, 2008, with an initial 500 applications available. The number of apps peaked at around 2.2 million in 2017 but declined slightly over the next few years as Apple began a process to remove old or 32-bit apps. As of 2021, the store features more than 1.8 million apps. From this, the App Store (part of Apple services) became Apple’s second biggest revenue stream, bringing in 25% of their yearly revenue, second to the iPhone at 49%.
In terms of wealth generation, this new market is shockingly big.
This chart is from Apple’s own website: Apple Newsroom Link
The entire ecosystem of apps is estimated to be worth approximately $6.3 trillion according to App Annie. This includes Google’s Play store and all in-app purchases or ads.
So is there a Kodak moment coming or not? AI will certainly impact many industries, a lot of which have not been touched by disruptions in the past. A whopping $1.1 trillion is in the crossfire of the backbone of the user-dedicated internet — once AI assistants roll out, this market will feel the impact until Google decides they can still provide value and a new paradigm on how to charge us for watching ads. There are certainly a lot of opportunities, as with any new technologies; some new markets will certainly appear and based on past experiences, these markets can dwarf the existing ones — from new roles, markets, products, and services to the creation of new unicorns and ultimately the new Googles and Amazons of the AI era.
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