Artificial intelligence-powered search engine Perplexity is in discussions with major brands such as Nike and Marriott regarding its new advertising model. The San Francisco-based start-up aims to challenge Google’s dominance in the $300 billion digital ads industry by revamping the auction-based ads system pioneered by the tech giant.
Currently, Perplexity’s AI chatbot provides comprehensive responses to user queries, citing sources and including relevant links. Additionally, it offers suggested follow-up questions. Under its proposed advertising model, brands will have the opportunity to bid for a “sponsored” question that features an AI-generated answer approved by the advertiser.
According to correspondence seen by the Financial Times, Perplexity has engaged in talks with Nike and Marriott, among other top companies. The company plans to launch its new ads system later this year and is targeting premium brands. Both Nike and Marriott declined to comment on these discussions.
Perplexity’s CEO Aravind Srinivas, a former Google intern, emphasized the importance of relevant advertisements from high-quality brands that influence consumer purchases. This effort from Perplexity is part of a larger wave of competition faced by Google as the search industry undergoes significant transformation.
OpenAI’s ChatGPT poses another challenge for traditional search engines like Google since it provides quick and complete answers without relying on a list of links. In response, Google has launched an experimental AI search function and considered offering a subscription-based AI search service.
Perplexity intends to charge marketers using their ad system on a CPM (cost per thousand impressions) basis at around $50 per 1,000 impressions generated by sponsored posts. In comparison, analysts estimate that Google charges approximately $1,100 for the same number of impressions.
While Microsoft has also incorporated AI into its Bing search engine through its alliance with OpenAI last year, it has only recently started gaining more share in search advertising compared to Google’s continued growth in this sector.
The success of Perplexity’s new ads system hinges on achieving significant scale. The company reported 250 million queries made on its search engine in July alone compared to 500 million throughout all of last year. Currently generating revenue through subscriptions for advanced models and image generation services priced at $20 per month under their Pro service plan; annualized revenues have grown from $5 million in January to $35 million in August according to company projections.
Srinivas expressed his ambition for their advertising system stating they aim ”to become a money-printing machine.” With substantial traffic coming from high GDP countries like the US making it an ideal testing ground; he envisions taking Perplexity public as a successful independent company.
