Perplexity CEO Starting to Sound Like Elon Musk

​Perplexity.ai​ has recently revealed its plan to incorporate advertisements into its search results.

Will this decision to shift focus disrupt Perplexity’s vision as an AI-driven platform dedicated to assisting users in decluttering their digital space?

OR was it part of the plan all along?

Let’s see if it all adds up.

• What is Perplexity?
• So, What? AI-Powered Advertising
• Now, What’s in it for u⁺

What is Perplexity?

Perplexity.ai is an AI-powered conversational search engine that launched in 2022.

It uses natural language processing to interpret user queries and provide personalized search results in the form of a summarized text response with inline citations from web sources.

Take a look at how this content creator used Perplexity to explain HEX T-share.

This post is a prime example of how Perplexity helps users in delving deeper into a topic. It offers a concise explanation of the query and enables users to explore attached resources cited.

The company has raised $100 million in funding at a $520 million valuation as of 2024, from investors including Jeff Bezos, Nvidia, Databricks, and others.

As per the X post attached below, Perplexity has a freemium model with a free version powered by GPT-3.5 and a paid “Pro” version with access to GPT-4, Claude 3, Mistral Large, and an experimental Perplexity model.

The AI-powered search engine has approximately 10 million monthly users and over 1 million daily users as of March 2024.

Perplexity.ai aims to provide credible, up-to-date answers by cutting through the clutter of traditional search results.

It has gained buzz for potentially challenging Google in AI-powered search, with prominent tech CEOs like Nvidia’s Jensen Huang and Shopify’s Tobi Lütke praising it as a Google alternative.

HOWEVER, as this company plans to introduce ads on its results page, how will it address the digital clutter that Google couldn’t tackle?

AI-Powered Advertising

Advertising has played a crucial role in the growth and success of the internet, and it has been particularly instrumental in Google’s rise to become one of the most influential companies in the world.

Online advertising has allowed companies like Google to offer many of their products and services for FREE to users.

Search, Gmail, Maps, and other Google offerings are accessible without charge because they are supported by advertising revenue.

This ad-supported model has made the internet’s vast information and resources available to billions of people worldwide.

Advertising is at the core of how Google makes money. Over ​80% of Google’s revenue comes from advertising​, primarily through search ads, display ads on partner sites, and YouTube ads.

On the other hand, Perplexity’s main source of revenue is the $20 monthly subscription from its Perplexity Pro users.

One of the main reasons why Perplexity was designed this way is for the platform to provide an ad-free search experience, even stating on its website that search should be “free from the influence of advertising-driven models.”

Yet, Dmitry Shevelenko, the Chief Business Officer of Perplexity, highlighted in an ​exclusive interview with Ad Week​ that “advertising has always been a core component in our strategy to establish a thriving business.” Pivoting from its company mission.

I was intrigued to discover that there were X posts on this topic from a month ago.

Users crying out for help for an ad-free experience.

It will be interesting to see this decision unfold.

As avid users of Perplexity, we believe that the introduction of ads, even in the form of “sponsored suggested questions”, could disrupt the seamless user experience that has attracted us so far.

As per the Ad Week exclusive, there are also concerns around the relevance of sponsored content and brand safety. Of course, advertisers will want to ensure their ads appear in appropriate contexts. If not implemented thoughtfully, ads could clutter the interface and dilute the core value proposition.

On a more positive note, marketer Daniel Pearson highlighted how utilizing the Perplexity platform for marketing enables him to focus on particular audiences.

Pearson emphasized in his post that advertising on Perplexity would be a fantastic opportunity, considering that the users already possess purchasing power.

As an AI-first search engine, Perplexity aims to provide users with the most relevant and accurate answers to queries by aggregating and synthesizing information from multiple sources.

Incorporating ads, if not done carefully, could compromise this mission. The company will need to strike the right balance between generating ad revenue and preserving the integrity of its core product.

What’s in it for u⁺

This decision from one of the AI front runners might affect how interact with the platform.

Here are some of the factors we think that will be affected by this pivot:

Compromised User Experience

Introducing ads, including “sponsored suggested questions,” poses a threat to the smooth user experience that has drawn Perplexity’s user base. If not implemented properly, this change could clutter the interface and diminish the core value of receiving direct, unbiased answers.

Potential Loss of Trust

Perplexity has built trust with users by providing transparent, ad-free results with clear source citations. Users may start to question the integrity and objectivity of Perplexity’s answers if there is a perception that advertisers are influencing the information presented.

Pressure on the Freemium Model

Perplexity currently offers a free tier as well as a $20 per month Pro plan with advanced features. The introduction of ads on the free tier could push more users to consider upgrading to Pro for an ad-free experience. However, this could also alienate users who were attracted to Perplexity precisely because of the fully free, ad-free model.

Perplexity’s move to introduce ads marks a significant shift that could have both positive and negative implications for users.

While it opens up a new revenue stream for the company to sustain its growth and innovation, it also risks compromising the user experience and trust that have been central to Perplexity’s rise. How the company implements this advertising model, and how it communicates the changes to users, will be critical in determining the ultimate impact.

We will be watching closely to see if Perplexity can maintain its differentiated, user-centric approach as it enters the complex world of ad-supported search.