Google's ‘world-model' bet: building the AI operating layer before Microsoft captures the UI

Business Mayor

25-05-2025

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After three hours at Google's I/O 2025 event last week in Silicon Valley, it became increasingly clear: Google is rallying its formidable AI efforts – prominently branded under the Gemini name but encompassing a diverse range of underlying model architectures and research – with laser focus. It is releasing a slew of innovations and technologies around it, then integrating them into products at a breathtaking pace.
Beyond headline-grabbing features, Google laid out a bolder ambition: an operating system for the AI age – not the disk-booting kind, but a logic layer every app could tap – a 'world model' meant to power a universal assistant that understands our physical surroundings, and reasons and acts on our behalf. It's a strategic offensive that many observers may have missed amid the bamboozlement of features.
On one hand, it's a high-stakes strategy to leapfrog entrenched competitors. But on the other, as Google pours billions into this moonshot, a critical question looms: Can Google's brilliance in AI research and technology translate into products faster than its rivals, whose edge has its own brilliance: packaging AI into immediately accessible and commercially potent products? Can Google out-maneuver a laser-focused Microsoft, fend off OpenAI's vertical hardware dreams, and, crucially, keep its own search empire alive in the disruptive currents of AI?
Google is already pursuing this future at dizzying scale. Pichai told I/O that the company now processes 480 trillion tokens a month – 50× more than a year ago – and almost 5x more than the 100 trillion tokens a month that Microsoft's Satya Nadella said his company processed. This momentum is also reflected in developer adoption, with Pichai saying that over 7 million developers are now building with the Gemini API, representing a five-fold increase since the last I/O, while Gemini usage on Vertex AI has surged more than 40 times. And unit costs keep falling as Gemini 2.5 models and the Ironwood TPU squeeze more performance from each watt and dollar. AI Mode (rolling out in the U.S.) and AI Overviews (already serving 1.5 billion users monthly) are the live test beds where Google tunes latency, quality, and future ad formats as it shifts search into an AI-first era.
Source: Google I/O 20025
Google's doubling-down on what it calls 'a world model' – an AI it aims to imbue with a deep understanding of real-world dynamics – and with it a vision for a universal assistant – one powered by Google, and not other companies – creates another big tension: How much control does Google want over this all-knowing assistant, built upon its crown jewel of search? Does it primarily want to leverage it first for itself, to save its $200 billion search business that depends on owning the starting point and avoiding disruption by OpenAI? Or will Google fully open its foundational AI for other developers and companies to leverage – another segment representing a significant portion of its business, engaging over 20 million developers, more than any other company?
It has sometimes stopped short of a radical focus on building these core products for others with the same clarity as its nemesis, Microsoft. That's because it keeps a lot of core functionality reserved for its cherished search engine. That said, Google is making significant efforts to provide developer access wherever possible. A telling example is Project Mariner. Google could have embedded the agentic browser-automation features directly inside Chrome, giving consumers an immediate showcase under Google's full control. However, Google followed up by saying Mariner's computer-use capabilities would be released via the Gemini API more broadly 'this summer.' This signals that external access is coming for any rival that wants comparable automation. In fact, Google said partners Automation Anywhere and UiPath were already building with it.
The clearest articulation of Google's grand design came from Demis Hassabis, CEO of Google DeepMind, during the I/O keynote. He stated Google continued to 'double down' on efforts towards artificial general intelligence (AGI). While Gemini was already 'the best multimodal model,' Hassabis explained, Google is working hard to 'extend it to become what we call a world model. That is a model that can make plans and imagine new experiences by simulating aspects of the world, just like the brain does.'
This concept of 'a world model,' as articulated by Hassabis, is about creating AI that learns the underlying principles of how the world works – simulating cause and effect, understanding intuitive physics, and ultimately learning by observing, much like a human does. An early, perhaps easily overlooked by those not steeped in foundational AI research, yet significant indicator of this direction is Google DeepMind's work on models like Genie 2. This research shows how to generate interactive, two-dimensional game environments and playable worlds from varied prompts like images or text. It offers a glimpse at an AI that can simulate and understand dynamic systems.
Hassabis has developed this concept of a 'world model' and its manifestation as a 'universal AI assistant' in several talks since late 2024, and it was presented at I/O most comprehensively – with CEO Sundar Pichai and Gemini lead Josh Woodward echoing the vision on the same stage. (While other AI leaders, including Microsoft's Satya Nadella, OpenAI's Sam Altman, and xAI's Elon Musk have all discussed 'world models,' Google uniquely and most comprehensively ties this foundational concept to its near-term strategic thrust: the 'universal AI assistant.)
Speaking about the Gemini app, Google's equivalent to OpenAI's ChatGPT, Hassabis declared, 'This is our ultimate vision for the Gemini app, to transform it into a universal AI assistant, an AI that's personal, proactive, and powerful, and one of our key milestones on the road to AGI.'
This vision was made tangible through I/O demonstrations. Google demoed a new app called Flow – a drag-and-drop filmmaking canvas that preserves character and camera consistency – that leverages Veo 3, the new model that layers physics-aware video and native audio. To Hassabis, that pairing is early proof that 'world-model understanding is already leaking into creative tooling.' For robotics, he separately highlighted the fine-tuned Gemini Robotics model, arguing that 'AI systems will need world models to operate effectively.'
CEO Sundar Pichai reinforced this, citing Project Astra which 'explores the future capabilities of a universal AI assistant that can understand the world around you.' These Astra capabilities, like live video understanding and screen sharing, are now integrated into Gemini Live. Josh Woodward, who leads Google Labs and the Gemini App, detailed the app's goal to be the 'most personal, proactive, and powerful AI assistant.' He showcased how 'personal context' (connecting search history, and soon Gmail/Calendar) enables Gemini to anticipate needs, like providing personalized exam quizzes or custom explainer videos using analogies a user understands (e.g., thermodynamics explained via cycling. This, Woodward emphasized, is 'where we're headed with Gemini,' enabled by the Gemini 2.5 Pro model allowing users to 'think things into existence.'
The new developer tools unveiled at I/O are building blocks. Gemini 2.5 Pro with 'Deep Think' and the hyper-efficient 2.5 Flash (now with native audio and URL context grounding from Gemini API) form the core intelligence. Google also quietly previewed Gemini Diffusion, signalling its willingness to move beyond pure Transformer stacks when that yields better efficiency or latency. Google is stuffing these capabilities into a crowded toolkit: AI Studio and Firebase Studio are core starting points for developers, while Vertex AI remains the enterprise on-ramp.
This colossal undertaking is driven by Google's massive R&D capabilities but also by strategic necessity. In the enterprise software landscape, Microsoft has a formidable hold, a Fortune 500 Chief AI Officer told VentureBeat, reassuring customers with its full commitment to tooling Copilot. The executive requested anonymity because of the sensitivity of commenting on the intense competition between the AI cloud providers. Microsoft's dominance in Office 365 productivity applications will be exceptionally hard to dislodge through direct feature-for-feature competition, the executive said.
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Google's path to potential leadership – its 'end-run' around Microsoft's enterprise hold – lies in redefining the game with a fundamentally superior, AI-native interaction paradigm. If Google delivers a truly 'universal AI assistant' powered by a comprehensive world model, it could become the new indispensable layer – the effective operating system – for how users and businesses interact with technology. As Pichai mused with podcaster David Friedberg shortly before I/O, that means awareness of physical surroundings. And so AR glasses, Pichai said, 'maybe that's the next leap…that's what's exciting for me.'
But this AI offensive is a race against multiple clocks. First, the $200 billion search-ads engine that funds Google must be protected even as it is reinvented. The U.S. Department of Justice's monopolization ruling still hangs over Google – divestiture of Chrome has been floated as the leading remedy. And in Europe, the Digital Markets Act as well as emerging copyright-liability lawsuits could hem in how freely Gemini crawls or displays the open web.
Finally, execution speed matters. Google has been criticized for moving slowly in past years. But over the past 12 months, it became clear Google had been working patiently on multiple fronts, and that it has paid off with faster growth than rivals. The challenge of successfully navigating this AI transition at massive scale is immense, as evidenced by the recent Bloomberg report detailing how even a tech titan like Apple is grappling with significant setbacks and internal reorganizations in its AI initiatives. This industry-wide difficulty underscores the high stakes for all players. While Pichai lacks the showmanship of some rivals, the long list of enterprise customer testimonials Google paraded at its Cloud Next event last month – about actual AI deployments – underscores a leader who lets sustained product cadence and enterprise wins speak for themselves.
At the same time, focused competitors advance. Microsoft's enterprise march continues. Its Build conference showcased Microsoft 365 Copilot as the 'UI for AI,' Azure AI Foundry as a 'production line for intelligence,' and Copilot Studio for sophisticated agent-building, with impressive low-code workflow demos (Microsoft Build Keynote, Miti Joshi at 22:52, Kadesha Kerr at 51:26). Nadella's 'open agentic web' vision (NLWeb, MCP) offers businesses a pragmatic AI adoption path, allowing selective integration of AI tech – whether it be Google's or another competitor's – within a Microsoft-centric framework.
OpenAI, meanwhile, is way out ahead with the consumer reach of its ChatGPT product, with recent references by the company to having 600 million monthly users, and 800 million weekly users. This compares to the Gemini app's 400 million monthly users. And in December, OpenAI launched a full-blown search offering, and is reportedly planning an ad offering – posing what could be an existential threat to Google's search model. Beyond making leading models, OpenAI is making a provocative vertical play with its reported $6.5 billion acquisition of Jony Ive's IO, pledging to move 'beyond these legacy products' – and hinting that it was launching a hardware product that would attempt to disrupt AI just like the iPhone disrupted mobile. While any of this may potentially disrupt Google's next-gen personal computing ambitions, it's also true that OpenAI's ability to build a deep moat like Apple did with the iPhone may be limited in an AI era increasingly defined by open protocols (like MCP) and easier model interchangeability.
Internally, Google navigates its vast ecosystem. As Jeanine Banks, Google's VP of Developer X, told VentureBeat serving Google's diverse global developer community means 'it's not a one size fits all,' leading to a rich but sometimes complex array of tools – AI Studio, Vertex AI, Firebase Studio, numerous APIs.
Meanwhile, Amazon is pressing from another flank: Bedrock already hosts Anthropic, Meta, Mistral and Cohere models, giving AWS customers a pragmatic, multi-model default.
Google's audacious bid to build the foundational intelligence for the AI age presents enterprise leaders with compelling opportunities and critical considerations:
Move now or retrofit later: Falling a release cycle behind could force costly rewrites when assistant-first interfaces become default. Tap into revolutionary potential: For organizations seeking to embrace the most powerful AI, leveraging Google's 'world model' research, multimodal capabilities (like Veo 3 and Imagen 4 showcased by Woodward at I/O), and the AGI trajectory promised by Google offers a path to potentially significant innovation. Prepare for a new interaction paradigm: Success for Google's 'universal assistant' would mean a primary new interface for services and data. Enterprises should strategize for integration via APIs and agentic frameworks for context-aware delivery. Factor in the long game (and its risks): Aligning with Google's vision is a long-term commitment. The full 'world model' and AGI are potentially distant horizons. Decision-makers must balance this with immediate needs and platform complexities. Contrast with focused alternatives: Pragmatic solutions from Microsoft offer tangible enterprise productivity now. Disruptive hardware-AI from OpenAI/IO presents another distinct path. A diversified strategy, leveraging the best of each, often makes sense, especially with the increasingly open agentic web allowing for such flexibility.
These complex choices and real-world AI adoption strategies will be central to discussions at VentureBeat's Transform 2025 next month. The leading independent event brings enterprise technical decision-makers together with leaders from pioneering companies to share firsthand experiences on platform choices – Google, Microsoft, and beyond – and navigating AI deployment, all curated by the VentureBeat editorial team. With limited seating, early registration is encouraged.
Google's I/O spectacle was a strong statement: Google signalled that it intends to architect and operate the foundational intelligence of the AI-driven future. Its pursuit of a 'world model' and its AGI ambitions aim to redefine computing, outflank competitors, and secure its dominance. The audacity is compelling; the technological promise is immense.
The big question is execution and timing. Can Google innovate and integrate its vast technologies into a cohesive, compelling experience faster than rivals solidify their positions? Can it do so while transforming search and navigating regulatory challenges? And can it do so while focused so broadly on both consumers and business – an agenda that is arguably much broader than that of its key competitors?
The next few years will be pivotal. If Google delivers on its 'world model' vision, it may usher in an era of personalized, ambient intelligence, effectively becoming the new operational layer for our digital lives. If not, its grand ambition could be a cautionary tale of a giant reaching for everything, only to find the future defined by others who aimed more specifically, more quickly.