Perplexity AI, a startup backed by tech giant Jeff Bezos, is making waves in the world of search and advertising. This company, which is aiming to take on Alphabet Inc.’s Google, is developing a new ad model that revolves around “sponsored questions.”
Instead of relying on the traditional auction-based ads that Google is known for, Perplexity’s system offers brands the opportunity to bid for a “sponsored question” that will feature an AI-generated answer approved by the advertiser. This innovative approach could potentially disrupt Google’s dominance in the massive $300 billion digital ads industry.
The San Francisco-based startup has already begun discussions with top-tier companies, including Nike and Marriott, with plans to launch the ad system by the end of the year. Perplexity’s CEO, Aravind Srinivas, a former Google intern, believes this system has the potential to be a “money-printing machine.” He emphasizes the value of relevant ads from reputable brands, pointing out that many consumers base purchase decisions on such advertising.
Perplexity’s ad system charges marketers on a CPM (cost per mille) basis, with rates exceeding $50 for every 1,000 impressions generated by these sponsored posts. This stands in stark contrast to Google’s estimated CPM of $1,100 for the same number of impressions. This pricing difference could make Perplexity’s system appealing to advertisers looking for cost-effective ways to reach their target audience.
Perplexity’s momentum has been undeniable. The startup achieved unicorn status in April after a successful funding round that more than doubled its valuation to over $1 billion. Since the start of the year, the company has seen a remarkable 700% growth in both revenue and usage. This impressive growth is reflected in the number of questions answered by Perplexity’s AI-powered search engine: about 250 million in the last month alone, compared to 500 million for the entirety of last year.
Perplexity has attracted a star-studded roster of investors, including AI chipmaker Nvidia Corporation, Amazon founder Jeff Bezos, OpenAI co-founder Andrej Karpathy, and Meta Platform Inc.’s chief AI scientist Yann LeCun. While Perplexity has seen rapid growth, it has also faced challenges. In June, Forbes and Wired accused Perplexity of plagiarism, alleging that the startup replicated articles without proper attribution and accessed websites that had specifically blocked its crawlers. Perplexity acknowledged the claims and addressed them by updating its user interface to highlight citations more clearly and adjusting its system to avoid summarizing content from restricted websites.
The future of Perplexity and its potential to disrupt the search and advertising landscape remains to be seen. However, the startup’s impressive growth, innovative ad model, and strong investor backing suggest that it is a force to be reckoned with in the tech industry.
