Cloud services and artificial intelligence are key battleground markets for Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google and many of its tech peers. Popular cloud services accumulate more and more data from users and companies, and AI algorithms churn that information into actionable steps.
Cloud and AI services help Google craft better targeted ads, which generate the lion's share of its revenues. That's why it upset investors when Apple hired away Google's AI and Search chief, John Giannandrea, back in April. Unfortunately, Giannandrea's departure wasn't the last. Two other cloud and AI leaders have left Google over the past month.
A series of lights shaped like a human brain float above a woman's upturned palm.
IMAGE SOURCE: GETTY IMAGES.
First, Google Cloud COO Diane Bryant, who joined the company last November, resigned. Shortly afterward, Facebook (NASDAQ:FB)reportedly poached Shahriar Rabii, Google's senior director of engineering, as its new VP and "head of silicon." Rabii will help Facebook develop new AI-focused chips, according to Bloomberg.
This ongoing brain drain could hamper Google's ability to compete against aggressive rivals like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). Let's examine Bryant's and Rabii's projects at Google to see why their departures matter.

Big money in the cloud

Google's current cloud CEO, Diane Greene, took the position after Google acquired her start-up, Bebop, in 2015. Greene previously co-founded VMware in 1998, then joined Google's board of directors in 2012.
Bryant, meanwhile, was an Intel veteran who most recently led the chipmaker's massive data center group. She joined Google in November and last December, The Information predicted that Bryant would eventually replace Greene as Google's cloud CEO since Greene "hasn't managed to move the needle on Google Cloud's business."
In February Google revealed its total cloud revenues for the first time. During a conference call, Google CEO Sundar Pichai stated that its cloud was "already a billion-dollar-per-quarter business." Pichai didn't break down the revenue by SaaS (software as a service) platforms in G Suite and IaaS/PaaS (infrastructure as a service/platform as a service) platforms in its Google Cloud Platform. And while a billion dollars per quarter sounds impressive, it pales in comparison to Amazon's and Microsoft's cloud revenues.
Amazon Web Services (AWS), the largest IaaS/PaaS platform in the world, generated $5.4 billion in revenue during the first quarter. Microsoft, which generates most of its cloud revenues from SaaS (software as a service) products like Office365, generated $6 billion in "commercial cloud" revenue during the third quarter of 2018. Its IaaS/PaaS solution, Azure, is the second-largest cloud platform in the world, after AWS.
An illustration of cloud connections.
IMAGE SOURCE: GETTY IMAGES.
Google's cloud business is struggling to counter Amazon's first mover's advantage and Microsoft's dominance of enterprise software in the public cloud market. Bryant's departure is a setback and dampens hope of a quick rise for Google's cloud ambitions.

Facebook's AI hardware ambitions

Google is also trying to catch up to Amazon's Alexa-enabled Echo devices in the growing smart-speaker market. Google Home could control 29.5% of that market this year, according to eMarketer, compared to Amazon's 66.6% share.
Rabii worked on a wide variety of chips at Google, which powered the company's Google Home speakers, Nest smart thermostats, Pixel devices, and AR/VR devices. That experience makes Rabii an ideal leader for Facebook's Building 8 hardware division, which has reportedly been developing a touchscreen-enabled smart speaker to challenge Echo and Home.
Facebook, like Google and Apple, wants to develop its own chips to reduce its dependence on third-party chipmakers. It's also heavily invested in the development of its own machine learning and AI platforms, which can help it craft better targeted ads from its user data.
Facebook and Google hold a near-duopoly on internet ads in the US and many other countries, but Google still generates much higher annual ad revenues. If Facebook starts creeping into homes with smarter hardware devices, it could join Amazon in loosening Google's grip on voice-assistant-powered searches.

Can Google keep talent?

People have been worrying about a Google "brain drain" for years. Ambitious start-ups and aggressive rivals constantly woo away many of Google's brightest stars by offering higher salaries and better benefits. This trend will be tough to reverse, and Google's losses of Giannandrea, Bryant, and Rabii cast a dark cloud over its future in the cloud and AI markets.
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