I am very sad to report that Perplexity.ai, my favorite hybrid AI search tool, is planning to sell ads. The company says it will focus on introducing "native ads" by allowing brands to influence the "related questions" feature, which accounts for 40% of Perplexity's queries. What's worse is that when a user dives deeper into a topic, Perplexity's AI search engine may start offering both organic and brand-sponsored questions. There are very few ways for this to go right – and an infinite number of ways for this to tank their business.
Perplexity's website previously claimed that search should be "free from the influence of advertising-driven models," but their chief business officer Dmitry Shevelenko denied this: "Advertising was always part of how we were going to build a great business."
The company obviously needs additional revenue – there are already both free and paid plans – but this is a seriously misguided and poorly thought out strategy. To achieve meaningful ad revenue, Perplexity will need to deliver "media-buy-sized" scale (which they do not have) and address AI ethics and brand safety concerns. More importantly, there is no need for another ad-supported "pay for play" search engine. Google has that covered.
Right now, Perplexity's consumer value proposition is pure and easily understandable: do 10 minutes worth of web searches in 10 seconds and get the results summarized by your choice of the best LLMs. In its current form: simply awesome!
We'll see how this goes. Perplexity was on a path to greatness. With this strategy, unless there's some "secret sauce" that Google would rather buy than build, they're practically asking Google to crush them.
As always your thoughts and comments are both welcome and encouraged. Just reply to this email. -s
ABOUT SHELLY PALMER
Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit shellypalmer.com.
