AI-powered search engine Perplexity AI has shown explosive growth and is ready to compete with Google
Perplexity AI, a company based in San Francisco and founded by former Google intern Aravind Srinivas just three months before the launch of ChatGPT, has developed a search engine powered by artificial intelligence that generates real-time answers to user queries based on information from the internet. Instead of developing its own model, Perplexity opted to license a combination of AI systems from various providers, such as OpenAI and Google. Initially, the Perplexity search engine used a licensed version of Microsoft’s Bing index but later abandoned it in favor of its own index and ranking system. «We use signals from all kinds of search engines, but we have our own crawler and ranking system,» claims Perplexity’s business director, Dmitry Shevelenko.
This year, the company successfully raised $250 million in investments, tripling its estimated value from $1 billion in April to $3 billion today. Perplexity’s investors include Nvidia, Amazon founder Jeff Bezos, OpenAI co-founder Andrej Karpathy, and Meta’s chief AI scientist Yann LeCun.
Perplexity’s growth comes amid the integration of AI features into Google’s search engine and the launch of OpenAI’s SearchGPT prototype. «In the end, a smaller player in this field has two advantages: speed and focus,» says Shevelenko. «Our users and team think of only one thing when it comes to Perplexity: the place where you get answers to your questions. Competition sharpens our focus even further.»
At the beginning of the year, based on extrapolated monthly sales, Perplexity’s annual revenue was estimated at $5 million, but this projection has now increased sevenfold to $35 million. The company is now transitioning from a subscription-based business model to monetizing through paid advertising. This shift brings Perplexity closer to direct competition with Google, which dominates the $300 billion advertising industry.
The platform targets journalism and academic circles as sources of reliable information and data. Perplexity views this focus as an advantage over traditional search engines that index a much broader range of websites. However, some analysts believe that the introduction of advertising could negatively impact user growth due to concerns about a «less trustworthy environment» and skepticism about the impartiality of search results.
«For Perplexity to become a useful product on the open internet, there need to be good business models for publishing new and updated facts about the world,» says Shevelenko. «If you want to align incentives [with journalism] in the long term, revenue sharing is a more effective way to do that than one-time lump-sum payments, which OpenAI has adopted.»
According to Shevelenko, the company will share a «double-digit» percentage of its revenue with each partner news publisher. He mentioned that agreements have already been made with Time, Der Spiegel, and Fortune, and more than 50 publishers expressed interest in joining Perplexity’s revenue-sharing program within two weeks of its launch. It’s worth noting that Forbes and Wired previously accused Perplexity of intellectual property violations, «reproducing stories without clear attribution and copying websites that explicitly blocked its crawlers.» The company took the criticism seriously, making changes to the user interface to make citations more visible and altering the format of aggregated answers.
Many experts believe that the AI-based search market is «heating up.» They argue that general web search is becoming redundant due to new ways of matching users with information, products, and services. The risk, however, lies in whether these new methods will be reliable enough for widespread use. «AI stubbornly tends toward confabulation,» says analyst Joseph Teasdale. «At the scale of billions of queries per day, serious errors are inevitable.»