Perplexity is preparing to introduce ads. Will brands jump on board?

The launch of ChatGPT in late 2022 kicked off a race within the online search industry to incorporate generative AI. Microsoft was ahead of the curve with its multibillion-dollar investment in OpenAI and its subsequent launch of a GPT-4-infused Bing. Google soon followed up with its own feature, called Search Generative Experience, which provides summarized responses to user queries. And OpenAI recently unveiled a prototype of its own search tool, dubbed SearchGPT.

Perplexity, meanwhile, has been enjoying a fairly meteoric rise since its founding three years ago. It received almost $74m in funding from high-profile investors including Amazon founder Jeff Bezos and Nvidia earlier this year. Japanese investment holding company SoftBank Group has also invested in the company, bringing its total valuation as of June up to $3bn, according to a report from Bloomberg. It’s been commonly positioned in the press as a competitor – and potential supplanter – to Google.

The platform leverages multiple large language models to generate summarized responses to user queries, while also providing follow-up questions designed to help users go deeper into their searches. To date, it has not allowed on-platform advertising, but it has courted the idea for some time.

In April, Perplexity chief business officer Dmitry Shevelenko told The Drum in an interview that the company wasn’t interested in creating a copycat of Google’s model, which often places ads above responses to queries. “If you’re coming to us as a question, our first responsibility is to give you an answer — not to try to redirect you somewhere else,” he said.

The inclusion of sponsored follow-up questions, Shevelenko noted at the time, could be “very fertile ground for a native advertising unit” — one that would be “interesting for the user and very powerful for the brand.” Now, the company is bringing that vision to life.

In a pitch deck shared with The Drum by a source familiar with the matter, Perplexity gave prospective brand partners a glimpse of what ads on the platform will look like. One slide shows a screenshot of a query asking what sort of qualities make for a good basketball shoe, followed by a Nike-sponsored follow-up question, which simply reads: “What are the best Nike Basketball shoes?” (The question is set beside a Nike logo and is clearly labeled as being sponsored.) Another slide teased what appeared to be a Nike video spot appearing next to the same query on a laptop.

Perplexity launched a program last month which enables publishers to earn revenue any time they’re cited in a follow-up question.

The pitch deck also states that responses to sponsored follow-up questions “are approved ahead of time, and can be locked, giving you comfort in how your brand will be portrayed in an answer.” Brands can also prevent their sponsored content from appearing alongside responses to search queries that contain preselected words or phrases.

A source at Perplexity told The Drum today that advertisers can expect to pay more than $50 per every thousand impressions.

Perplexity has witnessed an eightfold growth in its number of monthly queries from users in the US since the beginning of last year, according to the pitch deck. (Globally, the company is currently processing around 230m queries per month.) Such rapid and steady growth is likely to appeal to brands looking for new channels of audience engagement, says Scott Shrum, president and chief operations officer of marketing agency Hennessey Digital. “As long as Perplexity is able to get the users, the advertisers will follow,” he says. “The idea of Amazon selling advertising seemed odd a decade ago, and now Amazon users are very used to sponsored listings.”

The introduction of Perplexity Ads – as the new feature is called in the pitch deck – could raise certain questions around conflicts of interest for the company. Shevelenko told The Drum in his April interview that the company would not allow advertisers to pay for the system to generate flattering responses about them. Still, users could be skeptical of the information they’re seeing on the platform when it’s being interspersed with ads.

The company has long tied its credibility to the fact that it includes prominent links to source material in each of its responses. If its new ad model is to be successful, it must be deployed in a manner which preserves and continues to prioritize that same level of transparency and attribution, says Caitlin Halpert, vice president of growth at marketing agency Journey Further.

“While this focus on quality makes answers feel authoritative, the introduction of advertising risks eroding user trust over time,” she says. “It will be a challenge for Perplexity to find the balance between providing direct, conversational answers and promoting paid ads.”

Despite Perplexity's significant growth over the past eighteen months, it will take some time before its new ad program presents a viable challenge to Google's near-hegemony in the online search sector. "Although Perplexity Ads offer potential as a niche alternative," says Elsie Opondo, director of paid media at marketing agency Reactionpower, "it is highly unlikely to disrupt Google's dominance in the near-term, especially given the high barriers to entry and the need for widespread adoption among both advertisers and users."

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