AI's "Holy Sh*t!" Moment (AI Search, 96% Less Website Referrals)
25% of Traditional Search Gone Next Year Alone, With Vast Ramifications for All
Today’s “brAIn” dump is a “wake up” call for all of us (or at least, it should be!). My “mAIn event” — after this week’s special “But First” feature — explores a new AI-driven search reality that most of you aren’t tracking, but absolutely should be (because it will disrupt everything, including you and your business). Then, it’s a new Dej-AI Vu segment — another major AI court development that likely is being cheered by Silicon Valley, but shouldn’t be. Next, it’s the “mosAIc” — a collage of curated AI stories & podcasts, which this week includes my interview with Nick Mason of Pink Floyd via my The Story Behind the Song podcast (no, it has nothing to do with AI, but it’s something very human that I do and think you’ll enjoy as a respite from the noise). Finally, the “AI Litigation Tracker” — updates on key generative AI-focused IP cases by McKool Smith (check out the full “Tracker” here).
But First …
Introducing My New High-Impact “AI Insider Sprint” Sessions
Does your head spin with the constant barrage of AI developments? Do you wish you had a connected ally and AI “insider” to discuss the ever-changing AI landscape, make sense of it all through exclusive insider market intelligence not available anywhere else, help you develop best strategies, and introduce you to the right potential partners for you and your business to succeed in the face of this onslaught?
Well, look no further! That’s what my firm and I do. Reach out to me at peter@creativemedia.biz if you’d like to schedule a high impact, high ROI, 30 or 60 minute “AI Insider Sprint” session. You’ll be surprised at how much ground we can cover. And these are all customized and personalized for you and what you need right now. These “AI Insider Sprints” are also available in packages for weekly or monthly checkups, updates, strategy sessions, AMA’s and whatever else you need at that moment. Consider me your secret weapon!
And now onto our regularly scheduled programming …
I. The mAIn Event - AI’s “Holy Sh*t!” Moment Is Here: AI Search Changes Everything
AI Search Is Fast Becoming The “New Normal”
For general purpose search, consumers increasingly turn to conversational AI chatbots like OpenAI’s ChatGPT, Google’s Gemini, and Anthropic’s Claude — as well as to more utilitarian AI search engines like Perplexity — instead of traditional Google and Bing search. After all, many like the ease of use and single, streamlined answers to search queries delivered by their AI chatbot/answer engine of choice (rather than wade through a sea of links). And so, not surprisingly, this new AI search reality is eroding traditional search’s long-cemented dominance, creating what The New York Times calls a “Code Red” crisis for traditional search tools.
This New Normal Is “Code Red” For Most Websites
But this new AI chatbot/search engine reality also poses a very real “Code Red” (perhaps even existential) threat for most websites in general and the advertisers that support them. That means all news, media and entertainment companies, of course. But it goes much deeper than that — to anyone and any business that is dependent on advertising and ad-driven traffic. That likely means most of you reading this.
Here are the sobering facts, as published in a recent high profile report titled “State of the Bots” by TollBit, a well-funded, pedigreed Silicon Valley-based AI startup that I’ve tracked from its inception. According to TollBit, AI prompt-based chatbots like ChatGPT drive a shocking 96% less website referrals than traditional Google search, while more general purpose AI search engines like Perplexity drive 91% fewer referrals. AI chatbot and AI search referral rates reportedly are a mere 0.33% and 0.74%, respectively, whereas rates from traditional Google search are 8.63%.
Just let that reality sink in for a moment. If TollBit’s numbers are even directionally correct, then this sobering reality should be a massive “wake up call” to all businesses that rely upon web traffic — not just news publishers and media companies. We’ve now entered an entirely new AI chatbot, AI search/answer engine world order – and its ramifications are massive.
This first really sunk in when I sat down with TollBit’s CEO Toshit Panigrahi at CES in January. He told me at the time that AI chatbot referrals to websites “will be driven down to zero.” Toshit explains it this way: “Websites are going to increasingly get disintermediated from their end visitors and it’s time to rethink the value exchange and frameworks on the internet for preparation for that.”
The Data Backs This Up
Most of you likely haven’t pondered this stark new reality, but it’s here — and coming for you and your traditional way of doing business online. That means utterly disrupted “best practices” for online engagement, conversion, economics, and overall business in general (and the dollars that flow from them). So ponder. Ponder hard. AI chatbot search is growing fast. TollBit reports that AI chatbot traffic, as a percentage of total traffic to sites, roughly quadrupled (4X) from April 1, 2024 to January 1, 2025 — rising from roughly 0.50% to over 2.00%. That may not sound like much to you, but chew on this. Research stalwart Gartner predicts that traditional search volume will decline 25% by 2026. That’s only one year away!
Who Benefits From This New World Order?
Not surprisingly, ChatGPT — first to market when OpenAI unleashed the chatbot into our worlds in November 2022 — appears to be the happy camper, boasting 300 million weekly active users (roughly a 60% share of chatbot usage) according to TollBit. Google appears to be second with 42 million active users. And AI search engine Perplexity — embroiled in major copyright infringement litigation as we speak — places with 15 million active users.
Consider the ramifications of these numbing numbers to your businesses — and to your Big Tech investments, too.
So What Can You & Your Businesses Do About It?
For news publishers, media and entertainment companies, one critical thing is to actively explore new licensing agreements with major AI chatbot and search developers. To be clear, I’m not talking here about AI “training” agreements that aim to solve the current copyright crisis filling courtrooms across the country. Rather, I’m talking about forward-looking revenue sharing agreements with Big Tech players that pay when your content is “played” for RAG and outputs/display purposes. If structured correctly, these can be “win win” ongoing royalty deals instead of one-time payment AI training licensing deals. (I directly play in this world — and believe this kind of ongoing monetization points “the way” for non-training deals).
You should also check out “opt in” monetization services like TollBit that unleash tech of their own to track and monetize the use of your content by this new crop of AI chatbots and search/answer engines — and then pay via a continuing string of micro-payments as your content is used in AI’s elixir. Toshit Panigrahi says that TollBit provides “a missing piece of the internet infrastructure; a way to have an autonomous exchange of value.” He explains that his approach “allows publishers to think of AI as an opportunity, as a new class of visitor that is just as important as human visitors.”
“Ethically Sourced” AI May Be The Best Differentiator
For traditional search engines threatened by the emergence of this new crop of AI search tools, the best strategy is to develop, launch, market and grow a differentiated AI search product that breaks out from other AI chatbots and search tools. And the same breakthrough strategy goes to those AI search tools themselves. Right now, virtually all AI chatbots/search engines look and feel roughly the same. But it doesn’t need to be that way.
One key differentiator is to be “ethically sourced” (I wrote about this in last week’s newsletter). This isn’t just the right thing to do, both legally and morally. It’s also smart and obvious from a product perspective, because trusted content sources yield significantly higher quality answers and overall results (fewer hallucinations, etc.). “Ethically sourced” chatbots and search engines will lead to far better customer experiences, and better customer experiences drive winning products. “Ethical sourcing” also drives a winning marketing message — not to mention “win win” partnerships with content sources (rather than adversarial and wasteful litigation).
The Best Product Usually Wins
To ground my argument in the real world, take a short journey with me to an earlier media-tech revolution. Back during the turn of the century in 2000, bad (very bad) Napster obliterated traditional music industry monetization by obliterating respect for copyright. In the process, an entire generation of new music listeners downloaded all the music they wanted for free (illegally of course). So how did the music industry survive — and then begin to thrive again in the past decade?
Yes, litigation helped. But the music industry’s ultimate winning solution against pirate sites was to build a better music mousetrap — paid and advertising supported services that featured fully licensed music packaged in high quality, uncorrupted audio files — all accessible via a much more compelling user friendly interface. This new crop of legitimate music services — most notably Apple with iTunes, but also pioneering streaming services like Musicmatch (where I served as President) — offered consumers an incomparable value proposition and overall customer experience that pirate services couldn’t match. That is, the entire world of music (now 100+ million tracks) for an insanely low price. (Musicmatch ultimately sold to Yahoo! for $160 million by the way, giving investors a massive ROI and demonstrating that cooperation with rights-holders is good business).
And so, here we are. The music industry lives on, albeit in a very different form.
A similar thing should be expected here in our inevitable new AI chatbot-dominated search world. New players and business models will emerge — which will impact every business and everyone. So my advice to you is to take this new reality seriously (very!), be stoic about it, and face it head on. Now!
Time is not your friend. Those who act proactively to develop and test new strategies and partnerships are far more likely to adjust to this coming wave.
Others may be swept away by it.
What do you think? Reach out to me at peter@creativemedia.biz with your feedback, and to explore how my firm and I can help you navigate these tumultuous waters via new AI licensing strategies and partnerships. We’re deeply tapped in and defining the path forward.
II. Dej-AI Vu: Another “Winning the Battle, But Losing the War” Scenario for GenAI Developers
Late last week, I wrote an “emergency post” about a California federal judge’s denial of Universal Music Group’s attempt to enjoin (i.e., stop) Anthropic’s scraping of its song lyrics. I underscored that Silicon Valley should hold its applause for that decision, because the Judge expressly wrote that the sole basis for her decision was that actual damages could be both ascertained and assessed if she ultimately rejects Anthropic’s “fair use” defense (which I believe she will, just like another federal judge already has in Thompson Reuters v. Ross Intelligence). So, for GenAI developers, the Reuters ruling is likely a “winning the battle, but ultimately losing the war” scenario.
A similar scenario played out last week in a different federal court, when the federal judge in The New York Times case against OpenAI and Microsoft (the single most closely watched AI infringement case) rejected OpenAI’s and Microsoft’s attempts to dismiss The Times’ core copyright infringement claims. Sure the Judge dismissed some of The Times’ claims, but those were tangential to the “main event” — which is the fundamental question of infringement or “fair use.” So, again, my advice to GenAI developers is to stop cheering, and instead accelerate the pace of your content licensing — because that’s where it’s all going. The courts certainly appear to be siding with rights-holders, consistent with the Supreme Court’s most critical “fair use” rationale and precedent.
III. The mosAIc — My Curated “Must Read,” “Must Listen” Playlist
(1) Is Reuters’ Recent Win on Copyright a Fatal Blow to “Fair Use”?
Watch or listen to my interview on the “Future Media” podcast by hosts Ricky Sutton and Alan Chapell by clicking on this button.
(2) Listen to My Recent Episode of “the brAIn” Podcast: “Is ‘Ethically Sourced’ Generative AI Even Possible?”
It’s an enlightening discussion based on last week’s feature story of the same name.
(3) Listen to My Interview of Pink Floyd’s Nick Mason About “Dark Side of the Moon”
I interview Pink Floyd’s legendary drummer and songwriter on my The Story Behind the Song podcast series on Consequence. We discuss Mason’s story behind the making of the band’s legendary album Dark Side of the Moon and classic song Time, which he penned with his bandmates. It has nothing to do with AI, but not everything needs to. A good double shot of music and humanity is essential for the soul — and that’s why I host this show.
If you like my interview with Mason, you’ll love my 50+ other interviews with legendary artists that range from Don McLean (American Pie) to Lindsey Buckingham of Fleetwood Mac (Tusk) to Debbie Harry of Blondie (Rapture) to Billie Idol (White Wedding) to the Cure, Tears for Fears, Run DMC, The Killers, and so many more. You get the point. All artists are legendary. All of their stories are timeless.
This series — and my conversations with these iconic artists — are priceless. You’ll enjoy them. And Season 4 is coming soon in April, featuring Nancy Wilson of Heart, Mike Campbell of Tom Petty & The Heartbreakers, Adam Duritz of Counting Crows, Mark Mothersbaugh of Devo, and others who are equally legendary.
Check out all of my interviews on Apple Podcasts, Spotify, and all other podcast networks. You can also check out the official The Story Behind the Song website via this link. And ….
You’ll see my interview of Pink Floyd’s Nick Mason in a whole new light. It’ pretty cool.
(4) ICYMI - Critical Topics/Important Recent Articles
(ii) “$1 Trillion for GenAI: So Where Are The Content Dollars?”
(iii) “Does AI Dumb Down Creativity?”
IV. AI Litigation Tracker: Updates on Key Generative AI/Media Cases (by McKool Smith)
Partner Avery Williams and the team at McKool Smith (named “Plaintiff IP Firm of the Year” by The National Law Journal) lay out the facts of — and latest critical developments in — the key generative AI/media litigation cases listed below. All those detailed updates can be accessed via this link to the “AI Litigation Tracker”.
The Featured Updates:
(1) The New York Times v. Microsoft & OpenAI
(2) Kadrey v. Meta
(3) In re OpenAI Litigation (class action)
(4) Dow Jones, et al. v. Perplexity AI
(5) UMG Recordings v. Suno
(6) UMG Recordings v. Uncharted Labs (d/b/a Udio)
(7) Getty Images v. Stability AI and Midjourney
(8) Universal Music Group, et al. v. Anthropic
(9) Sarah Anderson v. Stability AI
(10) Raw Story Media v. OpenAI
(11) The Center for Investigative Reporting v. OpenAI
(12) Authors Guild et al. v. OpenAI
NOTE: Go to the “AI Litigation Tracker” tab at the top of “the brAIn” website for the full discussions and analyses of these and other key generative AI/media litigations. And reach out to me, Peter Csathy (peter@creativemedia.biz), if you would like to be connected to McKool Smith) to discuss these and other legal and litigation issues. I’ll make the introduction.
About My Firm Creative Media
We represent media companies for generative AI content licensing, with deep relationships and market access, insights and intelligence second to none. We also specialize in market-defining strategy, breakthrough business development and M&A, and cost-effective legal services for the worlds of media, entertainment, AI and tech. Reach out to Peter at peter@creativemedia.biz to explore working with us.
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