Unlock Editor's Digest without spending a dime
FT editor Roula Khalaf selects her favourite stories on this weekly newsletter.
Artificial intelligence-based search engine Perplexity is currently in talks with brands comparable to Nike and Marriott about its recent promoting model, in an ambitious try and break Google's dominance within the $300 billion digital promoting industry.
The San Francisco-based group wants to revamp the auction-based promoting system developed by Google, wherein marketers bid for a sponsored link to be placed in search queries.
Currently, Perplexity's AI chatbot answers users' questions comprehensively based on information from the Internet, citing sources and adding links to web sites. Below, Perplexity suggests further questions.
Under the brand new promoting model, brands can bid on a “sponsored” query that features an AI-generated and advertiser-approved answer.
According to correspondence seen by the Financial Times, Perplexity has been in talks with a small variety of top corporations, including Nike and Marriott. The company said it hoped to roll out the ad system by the top of the 12 months, targeting “premium” brands. Nike and Marriott declined to comment.
Aravind Srinivas, CEO of Perplexity and former Google intern, said: “Ads are really useful once they are relevant and are available from high-quality brands. Many people make their purchases based on that.”
Perplexity's efforts are a part of a wave of latest competition facing Google because the search business undergoes its most radical transformation in greater than twenty years.
OpenAI's ChatGPT also offers quick and comprehensive answers to many questions and threatens to make a conventional search engine's list of links and the lucrative ads that appear alongside them obsolete.
Google has invested billions of dollars in developing generative AI and launched an experimental AI search feature. It can also be considering offering a subscription-based AI search service, the FT reported in April.
Analysts say Google is being held back by the “innovator's dilemma” because generative AI could damage the muse of its existing search offering. But skepticism stays that the technology will seriously threaten Google's dominance.
Under Perplexity's promoting system, marketers are charged on a so-called CPM basis, meaning they pay greater than $50 for each 1,000 impressions generated by these sponsored posts, said an individual accustomed to the model. In contrast, Google charges an estimated $1,100 for a similar variety of impressions, in keeping with analyst firm eMarketer.
Last 12 months, Microsoft CEO Satya Nadella said the multi-billion dollar alliance with OpenAI would improve the Bing search engine while helping to destroy the high profit margins on which Google's core business relies.
But despite the fact that Microsoft was one in every of the primary major tech giants to integrate AI into search, the corporate only began to extend its market share in search promoting last quarter, says Joseph Teasdale, chief technology officer at Enders Analysis.
Meanwhile, Google's search business grew 14 percent within the three months to June in comparison with the identical period last 12 months. Parent company Alphabet's revenue was $48.5 billion, greater than half of total revenue.
“As the reigning champion, Google has essentially the most to lose in any shakeup,” Teasdale said. “But Google can also be within the strongest position: It's strong in AI, users trust it for search, and it controls key user interfaces like Android and Chrome where it may possibly deploy its version of AI search.”
The financial success of Perplexity's recent ad system relies on whether it may possibly achieve significant scale. The company says 250 million searches were made on its search engine in July, in comparison with 500 million for all of last 12 months.
Perplexity makes its money through subscriptions. The company charges $20 a month for its Pro service, which offers access to more advanced models and image generation. Annual revenue – an extrapolation of full-year revenue based on last month's sales – has risen from $5 million in January to $35 million in August, in keeping with the corporate.
Srinivas said he desired to turn the corporate's promoting system right into a “money printing machine.”
“A number of our traffic comes from the US and other high-GDP countries, which makes it a superb experiment… We wish to do an IPO and be our own successful company, and there's no reason to not be.”
