PYMNTS MonitorEdge May 2024

AI Startup Perplexity Aims at Google With Personalized Search Engine Subscriptions

In 2024, artificial intelligence (AI) is keen on making web search more intelligent and streamlined. 

But can transformative search experiences that leverage generative AI to help users query and discover insights in new ways actually scale, given the 1,000-pound elephant (Google search) dominating the ecosystem? 

We may soon find out. Google, whose search market share going back as far as 2015 has ranged from a robust 83% to a whopping 91%, is embroiled in a federal antitrust lawsuit with a closing argument date set for early May — and upstart competitors are beginning to nip at its heels. 

AI-powered search engine startup Perplexity announced a Series B funding round Thursday (Jan. 4) valuing it at $520 million. Notably, Amazon founder Jeff Bezos participated in the round. 

Since publicly launching its conversational answer engine a year ago, Perplexity has grown to 10 million monthly active users and answered over half a billion users queries during 2023.

And while Perplexity is gunning for Google’s search crown, Susan Wojcicki, the former YouTube CEO, and Jeff Dean, Alphabet’s chief scientist focusing on AI and an early member of Google Brain, have both personally invested in the startup. 

As PYMNTS reported, when OpenAI first burst onto the scene with its buzzy ChatGPT platform, a “panicked” Google quickly rushed to rebuild its search product.  

That’s because we increasingly stand at an inflection point of a massive behavioral shift in how people access information online — and platforms built by Perplexity, Google, and many other tech companies both large and small are all looking to capitalize on it. 

Read also: AI as OS Will Transform the Future of Connected Devices

Streamlined Access to Information

In a blog post, Perplexity’s said its unique advantage in streamlining search for users comes from using AI to provide direct answers, instead of website links, in response to search queries. 

“The power of good technology is its ability to hide all the complexities and simplify the interface for the user,” i2c CEO and Chairman Amir Wain told PYMNTS in June.

Many firms are betting that AI will upend the way people find information online — but they are also running into problems that stem not from entrenched behaviors, but from the owners of the online content being surfaced by AI systems. 

Generative AI was trained on the internet’s vast historical corpus of data and so has inherited many of its unsolved issues, including those related to bias, misinformation, copyright infringement, and more. 

For example, in The New York Times (NYT) landmark lawsuit against OpenAI, the news publisher specifically points out the fact that OpenAI’s AI systems share news content in response to user queries without sending them to the NYT site, robbing the NYT of traffic and affiliate link data. 

This is the same model that Perplexity is pursuing, within an ecosystem where news organizations and publishers are already alarmed by what AI means for their business. 

Outside of web search, in-platform AI integrations are already being leveraged by some of tech’s biggest names to optimize their own search functions. 

Yelp is integrating AI to help streamline its users’ searches, as is Amazon; while Google has added personalized gift recommendations to its AI capabilities in Search, as well as debuted AI-powered search capabilities designed for health care workers; and eBay launched an image search feature for its mobile app in July that enables users to simply drag and drop images into the search bar. 

Read also: Who Will Power the GenAI Operating System?

Going After Google

OpenAI’s ChatGPT mobile app has been downloaded more than 110 million times and generated $28.6 million in consumer spending worldwide, while Baidu’s Ernie AI chatbot recently amassed 100 million-plus users.

But Google still remains the penultimate search giant. Even its peer tech company Microsoft has struggled for years to dislodge Google’s gargantuan market share in online search, with Bing making no more than a ping in its attempts to dent Google’s dominance.

Another generative AI search startup, Neeva, shut down last year and was acquired by Snowflake after it failed to gain enough traction, underscoring the realities of the search ecosystem. 

Part of the reason Google remains relatively unassailable, beyond its incumbent advantage, is that the sheer cost of operating AI systems makes the unit economics somewhat unfeasible for certain tasks. Certain estimates place the cost of a single ChatGPT query at 1,000 times that of the same question asked of a normal Google search, making the margins for AI applications smaller than other software-as-a-service (SaaS) solutions.

Perplexity itself is not yet profitable and offers a subscription level for access to its most advanced AI search. 

But the appeal, and the process behind the price tag, of AI-powered search is its ability to remove the need for typing, combined with its intuitive conversational interface. 

As Jeremiah Lotz, managing vice president of digital and data at PSCU, told PYMNTS in June: “Generative AI … will give a more unique conversation and get into more of a dialogue” and speed up daily life tasks by providing users with recommendations that are both tailored to their needs and dynamic based on the occasion’s context.

Nearly two-thirds of Americans want an AI Copilot to help them do things like book travel. As revealed in the PYMNTS Intelligence report “Consumer Interest in Artificial Intelligence,” consumers interact with about five AI-enabled technologies every week on average, including browsing the web, using navigation apps and reviewing online product recommendations.