Jeff Bezos-backed Perplexity AI, a startup challenging Alphabet Inc.‘s GOOG GOOGL Google, is in discussions with top brands like Nike Inc. NKE and Marriott International MAR.
What Happened: Perplexity is developing a “sponsored” question system to challenge Google’s auction-based ads model, as it plans to disrupt the tech giant’s dominance in the $300 billion digital ads industry, reported Financial Times.
The San Francisco-based startup has been in talks with a select group of top-tier companies, including Nike and Marriott, with plans to launch the ads system by year-end.
Perplexity’s new model allows brands to bid for a “sponsored” question featuring an AI-generated answer approved by the advertiser.
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Perplexity CEO Aravind Srinivas, a former Google intern, stated, “Ads are really useful when they are relevant and coming from brands that are high quality, and a lot of people make purchases based on that.”
Srinivas expressed his ambition for the advertising system to become “a money-printing machine.”
The startup’s ad system will charge marketers on a CPM basis, costing above $50 for every 1,000 impressions generated by these sponsored posts.
This is in stark contrast to Google’s estimated $1,100 for the same number of impressions, the report noted.
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Why It Matters: In April earlier this year, Perplexity became a unicorn, following a successful funding round that more than doubled its valuation to over $1 billion.
The startup’s revenue and usage have grown 700% since the start of the year, with the AI-powered search engine answering about 250 million questions in the last month, up from 500 million queries for all of last year.
Perplexity investors include AI chipmaker Nvidia Corporation, Amazon founder Bezos, OpenAI co-founder Andrej Karpathy, and Meta Platform Inc.‘s chief AI scientist Yann LeCun.
In June, Forbes and Wired accused Perplexity of plagiarism, alleging that the AI startup replicated articles without proper attribution and accessed websites that had specifically blocked its crawlers.
Perplexity acknowledged the claims in response, stating that the company had updated its user interface to highlight citations more clearly and adjusted its system to avoid summarizing content from such websites.
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