Gartner rates privately-held Algolia ahead of Google in the $56 billion market for search and product discovery. With Alphabet stock down this year, investors should be worried.

Google shares have lost value in 2025. That’s because the search giant — which developed the core transformer concept underlying generative AI, according to my book, Brain Rush — is struggling to catch up with ChatGPT when it comes to commercializing its idea.

Is the drop in Google stock a buying opportunity? The answer depends on whether Google can keep its search business relevant.

“The market will need to see fundamental evidence that Google search is indeed going to be more durable than currently appreciated,” Morgan Stanley analyst Brian Nowak wrote in a report featured by Investor’s Business Daily.

If rivals such as ChatGPT, Perplexity, and Meta AI better deploy generative AI to cash in on advertising and improved e-commerce and travel verticals, Google’s stock could keep dropping, noted Nowak.

For Google bulls, I have bad news: Algolia is clearly ahead of Google in those two search and product discovery verticals.

While this market seems like a natural for Google, in 2018, I was surprised to learn Google had abandoned the business of helping consumers search through a company's online product catalog, according to my October 2018 Forbes post.

Google was good at bringing users to a website but once there, customers relied on the websites’ own search functions to find products. Some companies "build their own engines; others use open-source software, such as Elasticsearch,” the Economist reported.

At the time, Algolia — founded in Paris in 2012 — was rapidly taking a piece of that pie by supplying a service that "hunts the client’s website and swiftly offers consumers relevant results," added the Economist.

Since then Google has entered this market and this year was deemed a leader in Gartner’s Magic Quadrant for vision and ability to execute. However, within that elite group of leaders, Algolia was the leader of the pack.

Read on for why this market is significant and why I do not think Google is doing enough to overtake Algolia.

I requested comment from Google and will update this post if I receive a reply.

While analysts use many ways to describe the digital commerce search industry, they agree the industry is growing fast and will become far larger in the next decade.

The industry’s goal is to understand consumers’ needs and recommend the products that best satisfy those needs. Since 2018, the most significant development propelling growth has been the use of AI to enhance consumer experiences, increase sales, and boost engagement, according to SuperAGI.

AI-driven recommendation engines can boost customer loyalty, average order size and the lifetime value of a customer. For example, 71% of consumers are more likely to return to a website offering personalized experiences. Moreover, such systems suggest complementary products — thereby increasing average order value by 10% to 15%, reported SuperAGI.

Algolia appears to be riding this growth wave. The company provides an AI-native search and discovery platform to enable brands such as PetSmart, Best Buy, Chewy, Twitch, Stripe, and Under Armour to deliver fast, relevant, and personalized search experiences, according to an Algolia release.

Algolia’s search-as-a-service solution uses AI recommendations, NeuralSearch, and real-time personalization to boosts user engagement and increase conversion rates, the release added.

Algolia has added many customers in the last five years. “When I joined Algolia we had less than 7,000 customers, now we have 18,000,” Nixon told me. “We process two billion transactions per year and have millions of developers on our platform.”

Algolia’s growth can be attributed to its ability to satisfy e-commerce search customers’ need for reliable performance at scale. “We provide five nine’s reliability which means only 26 seconds of downtime per month,” she said. “Reliability is really important and it is difficult to do when operating st scale.”

Algolia has repeatedly introduced meaningful innovations. “We disrupted the market three times and we are about to do it a fourth,” Nixon explained.

Instead of relying on preexisting search software such as Lucene, Algolia’s search was built from scratch to work on mobile.

Next, the company introduced search as a service and charged customers based on the number of searches — with the price per search declining with the number of searches.

Finally, in 2023, Algolia introduced hybrid search — “combining keyword and natural language search incorporating large language models,” she told me.

Algolia is most excited about agentic AI — which will enable consumers to take action towards a goal. The company uses Anthropic’s Model Context Protocol — which allows AI agents to access Algolia's search, analytics, recommendations, and index configuration APIs.

“AI agents must be able to work across walled gardens to traverse a company’s back-end seamlessly to retrieve data,” she said. “To that end, we have partnered with Salesforce Commerce Cloud and Adobe Adobe Experience Manager.”

Nixon is also excited about how much consumers’ use of ChatGPT to search for products is adding to e-commerce providers’ web traffic. “Adobe Analytics has found generative AI is giving retailers and banks 1,200% traffic increases while travel sites are seeing 1,700% increases,” she told me. “When people come to a retailer’s site they bounce 23% less frequently and look at 12% more pages per visit.”

Algolia also provides personalized digital shopping guides — say, for Mother’s Day and Valentine’s Day targeted towards various lifestyles. “In beta test, we have 73 shopping guides already,” she concluded.

Google's offerings — notably Google Ads and Vertex AI Search for Commerce — can boost retailer revenues in three ways:

In July 2025, Gartner ranked Google and Algolia as Magic Quadrant for Search and Product Discovery leaders based on their completeness of vision and ability to execute.

Algolia is the leader among leaders — prevailing over Google. Algolia is proud of Gartner’s recognition. “This is the second year we have been a leader in the Gartner Magic Quadrant for Search and Product Discovery,” Nixon told me.

“We are up and to the right in the leader box which makes us the best in the industry for vision and ability to execute. How? We want to make search easy for the masses. We wanted to be massively scalable in the enterprise. We solve the search puzzle for the masses.”

Google was happy to be an MQ leader. “We believe this recognition affirms Google’s evolving commitment to delivering high ROI-generating product discovery, through the use of AI in relevance, ranking, and personalization,” noted Google Cloud AI Director, Product Management in a July 8 company release.

Algolia is ahead of Google in applying agentic AI for search and product discovery. While Google has not yet launched such a service, on July 11 the search giant acquired executive talent and intellectual property from Windsurf — a leader in agentic AI, noted CNBC.

Algolia’s MCP Server — launched in June 2025 — enables LLMs and autonomous agents to work together to help consumers buy what they need more quickly.

For example, Algolia’s agentic AI service can help consumers book a Mediterranean cruise. By retrieving relevant consumer information from platforms such as Adobe and Salesforce. For example, Algolia agentic AI service can recommend and book a Mediterranean cruise based on each guest’s chosen destinations, travel history, and other preferences — in milliseconds, according to a company release.

“This isn’t about showing off what agents could do,” Nixon said. “It’s about showing what they can do right now with a powerful user experience, if they have the right layer of intelligence underneath. That’s where Algolia fits.”

Meanwhile, Google is currently experimenting with agentic AI for travel. Google’s “AI Mode” will be able to “plan full itineraries, remember context, and keep users within the AI interface — even for booking,” noted Hospitality.today. “Google’s Project Mariner” will enable “AI to take actions online -- like booking a hotel or tracking flight prices.”

Google stock is 12% undervalued based on the average price target of 37 Wall Street analysts, according to TipRank.

If Algolia’s lead over Google in search and product discovery is any indication, those analysts could be too optimistic.