For years, Google dominated the search market. Could this dominance be starting to waver with disruptors like OpenAI and Perplexity emerging? In recent news, Perplexity launched its ads platform to a small group of users in the United States during the second week of November 2024. A couple of weeks before that major update, OpenAI introduced ChatGPT search (aka SearchGPT) to the world. As more of these new ideas come out, let’s look at one of the interesting changes within Perplexity. Perplexity is a search platform that gives AI-generated, conversational answers to user queries. This makes it different from other search platforms because it focuses on an interactive and complete search experience.
Perplexity Ads: A Promising New Venture
As the digital landscape continues to evolve, platforms are constantly searching for innovative ways to generate revenue while enhancing the user experience. Enter Perplexity, which recently soft-launched advertising within its platform. This initiative began with a testing phase in November, where the company rolled out ads for a subset of users within the United States. Let’s dive deeper into the mechanics and implications of this new offering.
Why Perplexity Ads?
One of the principal motivations behind launching the ad program was revenue generation. Perplexity aims to create a sustainable revenue-sharing model with its growing publisher partners. In the words of the company, “Experience has taught us that Pro subscriptions alone do not generate enough revenue to create a sustainable revenue-sharing program.” Given the rapid growth of its publisher program, leveraging advertising appears to be a practical and scalable approach. The introduction of ads targets 15 distinct industry categories, encompassing technology, health, finance, arts and entertainment, as well as food and beverage.
The Format of Perplexity Ads
Perplexity Ads strives to introduce a seamless integration of paid content while maintaining the platform’s integrity. The ad formats include:
Video Ads: Positioned at the top of related questions, these ads aim to capture users’ attention right from the outset.
Sponsored Questions: These will appear alongside organic results and will typically feature branded keywords, clearly labeled as “sponsored.”
Display Ads: To ensure visibility across devices, display ads will be present both on desktop side screens and mobile interfaces.
When users interact with a sponsored question, they will find it triggers an AI-generated answer—similar to organic inquiries. Contrary to how it was earlier announced that all responses to sponsored questions are pre-defined and approved by brands / advertisers in advance, it will be interesting to observe how AI-generated answers to sponsored questions will protect both brand safety and the integrity of brand messaging. Perplexity claims that AI-generated responses will help protect the utility, accuracy, and objectivity of answers, thereby making them less biased.
Advertising Control and Brand Safety
Advertisers are granted the flexibility to select specific keywords or terms that they prefer not to associate with their sponsored content. This gives brands a strategic advantage in aligning themselves closely with relevant user questions without compromising on brand safety. In a departure from traditional platforms where ads appear at the top of search results, Perplexity is said to take a different approach that prioritizes user inquiry as the core utility of the platform. Screenshots disclosed by Perplexity indicate that sponsored questions may appear at the top of related questions; however, they display after the responses to the original question.
Perplexity is expected to employ a CPM (cost per thousand impressions) pricing model, which diverges from the commonly used CPC (cost per click) model in search advertising. Early estimates suggest that brands may need to budget approximately $50+ per 1,000 impressions. It’s also crucial to note that advertisers cannot manipulate the system for artificially favorable responses or gain access to users’ personal information.
Collaborations and Industry Insights
The ad program has already attracted notable brands and agency partners, including Indeed, Whole Foods, Universal McCann, and PMG. However, the backdrop of a lawsuit from News Corp against Perplexity casts a shadow over these developments, causing brands to exercise caution in associating with the platform. There are ongoing discussions among advertisers and industry analysts about the platform’s scalability and long-term viability.
In addition to ads, Perplexity has been testing an additional feature, Buy with Pro, allowing users to make direct purchases through the platform, a move designed to boost user acquisition. Users can experience an easy checkout process without leaving the Perplexity platform, a bold strategy compared to competitors. It provides zero shipping charges for eligible products as well as uses saved shipping and billing information, enabling one-click checkout.
In a similar vein, the “Snap to Shop” feature lets users upload images of items to inquire about purchasing options—echoing functionalities similar to Google Lens. These features place Perplexity in a competitive landscape, striving for user engagement and retention.
Partnerships and Future Prospects
Perplexity is actively expanding its network of media and publisher partners, ensuring they are well-integrated into a revenue-sharing framework. Recent collaborations have included organizations like The Los Angeles Times, Adweek, and The Independent. These partnerships allow revenue share from advertisements, access to advanced search technology via APIs, access to performance insights (powered by other partners like scalepost.ai), and unique features with the support of a newly appointed Head of Publisher Partnerships dedicated to nurturing these relationships. As brands consider entering Perplexity’s advertising landscape, they are prioritizing critical factors such as content relevance, accurate ad display, and the quality of landing pages.
Conclusion: A Platform to Watch
While the launch of Perplexity Ads is certainly ambitious, the platform is still in its nascent stages. The opportunity for growth is immense, but Perplexity must navigate various challenges, including navigating legal scrutiny and ensuring brand safety. Whether it can truly offer a premium alternative (targeting higher-net-worth individuals) to established giants like Google remains to be seen. As Perplexity continues to refine its advertising program and reach out to more advertisers, it stands to potentially reshape the digital advertising landscape. For brands interested in staying ahead, keeping a close eye on Perplexity’s evolution may provide valuable insights into the future of online marketing.
