Is Google in trouble? Oh yeah.

Their search monopoly means that webpages are optimized for showing up high in results. This is a chicken and egg problem for Google: with pages optimized for scoring well in the algorithm, the algorithm now prioritizes optimized pages, not useful information. This is a significantly different position than google was in back in say 2001 when the world's webpages were optimized to be interesting and useful, and Google's task was to sift through that.

Google is unwilling and unable to break their cash cow ad business to do the above any differently. Huge cash cow businesses always are. They can't change, they won't change, so they are exposed to any better solution that comes along from the outside. Today we all know that every Google result is trying to sell us something. Increasingly, the information provided isn't even useful enough to make that an acceptable trade.

Finally, both users and advertisers have an implicit deal with Google, and it's based on trust that Google will surface correct information. It only takes one or two "... what on earth?" instances of incorrect or distorted search results to destroy trust in the accuracy. If Google has their history-rewriting fiasco bleed over into core search - and I think there's some limited evidence that it is happening - what then? AI image generation is by definition fiction; that's recoverable. Core search making stuff up would destroy their value prop entirely.

Google is competitively walled in by their own product. The competitive advantages in this industry lie with other players. The elevated valuation multiples that were justified for a “eternal monopoly” are not the same as those that will apply to a company that’s on the precipice of losing it.