London, UK – In just six months since its ad business debut, AI-powered search engine Perplexity finds itself at a crossroads, grappling with the challenge of proving its worth in a rapidly evolving advertising landscape. Advertisers, eager for effective digital marketing solutions, have approached Perplexity’s fledgling service with both intrigue and skepticism, demanding more robust offerings beyond mere brand awareness.
Perplexity’s venture into advertising commenced in November with early partnerships from brands like Indeed and Whole Foods. Despite the initial interest, media buyers express a desire for Perplexity to expand its offering, integrating more substantial ad opportunities to match the underlying technology’s potential. These ads, which are subtly positioned alongside search results and clearly marked as “sponsored,” have yet to convince advertisers of their efficacy.
The limited scale and scope of Perplexity’s ad opportunities have left media buyers cautious. “Our hesitation stems from a few key concerns: limited scale on the platform, lack of demonstrated ROI, brand safety considerations, and CPM efficiency,” explained Ryan Bopp, SVP of digital strategy at Eden Collective. His sentiment is echoed by Robert Kurtz of Basis Technologies, who noted the platform’s current limitation to brand awareness rather than lower-funnel advertising options, which would drive more direct consumer actions.
Perplexity’s Merchant Program, launched simultaneously with the ad business, offers another avenue for engagement, providing retailers access to users seeking AI-powered shopping guidance. However, interest remains tepid as progress has been slow.
Despite these challenges, Perplexity continues to push forward, finalizing a significant $500 million fundraise, valuing the company at $14 billion. Yet, according to reports, the business is burning through cash, highlighting the urgent need for a more viable advertising model to ensure sustainability.
Industry analysts like Debra Aho Williamson of Sonata Insights recognize the platform’s potential to redefine AI-based advertising but caution that without significant user growth and a shift towards more comprehensive ad solutions, Perplexity risks remaining on the periphery of the digital advertising ecosystem. Comparatively, Perplexity’s user base of 22 million pales in comparison to the likes of ChatGPT and Google’s AI offerings.
Perplexity’s leadership remains optimistic. “We’re trying to redefine this and do it from scratch,” Taz Patel, the company’s head of advertising and shopping, stated at a recent industry event. Dmitry Shevelenko, Perplexity’s chief business officer, emphasized the ongoing experimentations aimed at enhancing user experience and advertiser engagement.
As the AI advertising race intensifies, the stakes for Perplexity could not be higher. While the company awaits broader adoption and deeper engagement from advertisers, it must also contend with the pressing need to establish a stable revenue stream that complements its ambitious product roadmap.
