The artificial intelligence (AI) boom of the past two years has been dominated by two key players—Google and Microsoft. These tech giants, alongside a few others such as Amazon and Meta, have seen their fortunes rise, with market valuations soaring by $8 trillion since the launch of OpenAI’s ChatGPT. However, a new contender is emerging as a potential challenger to the dominance of these companies, with the promise to disrupt the search and advertising business: Perplexity AI.
Founded by Aravind Srinivas, a former Google employee, Perplexity AI has rapidly risen in value and influence. It operates as an “answer engine,” providing users with direct and clean answers to their questions, a stark contrast to Google’s ad-heavy search results. According to Srinivas, more than 15 million users regularly engage with Perplexity AI, and the app was valued at $9 billion by December 2024, following a $500 million funding round.
In an industry where Google holds nearly 90% of the global search market, challenging its dominance seemed impossible. Microsoft’s Bing, which integrated ChatGPT into its search engine two years ago, has barely made a dent, maintaining a modest 4% market share. Similarly, other challengers such as Yahoo and the AI startup Neeva have struggled to compete and eventually shut down.
But Perplexity AI is different. With $913 million in funding, the startup has outpaced previous contenders, and its model is appealing to users frustrated with Google’s often cluttered results. The service’s $20-a-month subscription has helped generate $30 million in annual recurring revenue within just a year. Srinivas is now eyeing Google’s core business—advertising—by monetising users’ informational queries, which he believes will eventually lead to purchase decisions.
He points out that 80% of Google searches are not directly monetisable. For example, a user searching for the benefits of fish oil or recommendations for a new TV might not result in an immediate ad click, but the information-seeking behaviour still represents a valuable opportunity for Perplexity. “The most important thing is that people come to your site to ask all sorts of questions. If you keep growing the top of the funnel, all the conversions, even if the rates are small, will continue to grow,” Srinivas explained.
In the future, he predicts a shift in the advertising landscape. Instead of targeting human eyeballs, advertisers will aim at AI agents that help users make decisions, such as booking travel or finding the best running shoes. This could fundamentally change the ad economy, challenging Google’s business model, which currently depends on human interaction with search results.
Despite the potential disruption, Srinivas has refrained from positioning Perplexity as a direct threat to Google. He maintains that the future of search will see a decline in the informational component of Google, with users increasingly turning to the search engine for navigation purposes rather than for answers to specific questions. “A third of Google searches are already for the names of other sites like TikTok or Facebook,” Srinivas observed, emphasising that this shift could have long-term implications for Google’s ability to maintain its monopoly on online information.
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Srinivas’s diplomatic approach extends beyond rhetoric. Having worked at both OpenAI and Google, he has cultivated strong relationships across Silicon Valley, including with Elon Musk, Jeff Bezos, and AI pioneer Yann LeCun. His strategic partnerships have enabled Perplexity to grow without relying solely on Silicon Valley’s major players, which often absorb promising startups. With an employee base of just 147, compared to the 74 employees at Neeva when it shut down, Perplexity is taking a measured approach to scaling its operations.
Furthermore, Srinivas has demonstrated his understanding of the intricacies of the tech industry. After publishers like Forbes raised concerns about content attribution, Perplexity responded by prominently displaying author credits and establishing revenue-sharing partnerships with major titles, including Time, Fortune, and the Independent. This approach has helped mitigate some of the backlash from content creators, who have been vocal about the rise of AI-generated content.
While the path ahead remains challenging, Srinivas’s ability to navigate the political economy of Silicon Valley positions Perplexity AI as a formidable force. Unlike many other AI startups that have been absorbed by tech giants, Perplexity has the potential to remain independent, with a credible chance to reshape how we find information online. While Google’s search business is unlikely to collapse overnight, Perplexity AI’s rise signals the beginning of a shift in the online information and advertising landscape, and perhaps, a long-term competitor to the search giant’s dominance.
