Google lowers Gemini pricing, pressuring Microsoft Copilot

Google has significantly reduced the cost of using Gemini in Workspace by making the multimodal AI model a feature within the cloud-based productivity and collaboration suite. The move follows a market trend that's pressuring Microsoft to rethink pricing for Copilot AI in Microsoft 365, an analyst said.

Starting Thursday, new Business Standard subscribers will get Workspace with Gemini for $14 per user per month, $2 more than the previous plan without the AI model. The Business Plus subscription will cost $22 per user, per month, $4 more than the previous plan.

Google will update pricing for existing customers starting March 17, the company said.

Before the new subscriptions, companies paid $32 per user, per month for Gemini Business, which Google embedded in Workspace tools including Gmail, Docs, Sheets, Chat and Meet. Model-powered capabilities included email summaries, note-taking during online meetings, and assistance in creating slides and spreadsheets. Gemini also enhanced audio and video recordings.

Gemini is a direct competitor of OpenAI's GPT-4o, which Microsoft uses in Copilot. Google hasn't said how many people use Gemini. In December, OpenAI reported that its online chatbot, ChatGPT, had 300 million weekly users.

Google's new Gemini pricing is more attractive than the $30 per user, per month companies pay for Copilot in 365. Such a difference will lead companies to pressure Microsoft to change its pricing for Copilot before agreeing to expand its use within the enterprise, Forrester Research analyst J.P. Gownder said.

After talking to more than 140 enterprises, Gownder found that most have Copilot licenses for only a small portion of employees, not across the enterprise.

"They're not penetrating deeply into the organization," Gownder said of Microsoft. "Only a handful of people get a license."

Also, significantly reducing pricing will help justify trying Copilot, despite the difficulty of measuring ROI. Formulating ROI requires a lot of work, and "even then, it's hard to know for sure," Gownder said.

Microsoft is also up against the trend in the office productivity and collaboration market to make AI a software feature instead of a paid add-on. With the latest pricing changes, Google took a big step in that direction, following rivals such as Zoom.

Despite market pressures, Microsoft has some leverage with customers because of the challenges they face when switching from 365 to Workplace.

All the development that went into customizing 365 for an organization cannot be migrated easily to Workspace. Also, the two can't be managed as one suite, so adding Workplace for some employees would introduce more complexity to the IT environment.

"[Pricing] is not solving the problems that make it hard to switch, despite Google's best efforts to create migration tools," Gownder said.