Can Perplexity really compete with Google on search?

Since its founding in mid 2022 Perplexity AI has become an AI unicorn. Nearly $1 billion has been raised so far, at a dizzying valuation of $9 billion, with another rumoured funding round set to double that. It’s an astonishing backing.

It’s doubly astonishing when we consider the user base. Perplexity’s AI ‘Answer Engine’ platform has 15 million regular monthly users and receives 100 million searches a month. 

These figures are easy to state in hype filled social media posts, but are in fact remarkably small. To put into perspective, Perplexity.ai has roughly ⅓ of the monthly sessions as theguardian.com, yet if its raises at an $18 billion valuation, it is worth roughly 30x more. This is an eye watering gulf in utility vs perceived value. 

How can anyone be investing in a company with this gulf? Some of them certainly have deep pockets. Perplexity’s backers include NVIDIA, SoftBank and Jeff Bezos. Meanwhile, CEO Aravind Srinivas has quite the AI CV. He previously worked as a research scientist at OpenAI, Google and DeepMind.

Key is that Internet search is clearly in for a shakeup. Google has long held a monopoly on sorting the web’s information, but now times are changing. AI is set to rip up the rulebook on the long established lists of links in Google’s index.

New methods of presentation, like Google’s AI Overviews, are appearing as a partially forced reaction to new forms of competition. If Perplexity can establish a beachhead - no matter how small for now - it could battle on to be a very successful business. Taking just 5% of the search market would be rich reward for Perplexity’s early investors. But we still see a long fight to achieving that.

Perplexity certainly looks great. Its ‘Answer Engine’ has always served up neat looking results, with almost academic looking citations. It looks like a place where a discerning web user would want to get their information from.

But in the here and now it’s debatable whether this fine looking product is really enough to grow a significant user base. It needs to do so against deeply ingrained search behaviour where Google has a dominant 90% share.

There is an added force multiplier with Google’s 60%+ of the browser market. But it must be said, Google’s overbearing share of supply and demand could lead to its breakup. That leaves another potential opportunity.

Of course, Perplexity does have potential. But in the present it has an unnervingly slow growth rate.

Its user base only grew some 50% during 2024, while there were signs that the number of searches per day were flatlining over the winter of 24/25. 

This is concerning for a company banking on an accelerated paradigm shift in the way people search. So far, Google has been cautious in rolling out generative search, but the visibility of its AI Overviews are increasing. 

Imagining that Perplexity can begin to mount a meaningful challenge requires a reinvention of search behavior that somehow undermines Google’s seemingly insurmountable infrastructural advantage. 

The race to achieve fast, accurate and trustworthy AI native search is significant and if users begin to view AI agents not just as assistants but as primary information tools - essentially shifting from ‘search engine’ to ‘information concierge’, habits could start to shift. 

Perplexity has grown a user base amongst discerning web users who want an enhanced experience to what Google offers. For this reason, it could be best to focus on a subscription model, as ChatGPT does. Unfortunately, its sky high valuation doesn’t really allow it to in search - it has to try and compete with one of the most powerful companies in history. 

It’s clear that Perplexity is following that strategy. During the Superbowl, it ran an ad offering a $1 million prize to a user who asked at least five questions on the app during the game, resulting in a 50% surge in app downloads. This almost certainly changed the flatlining trend on the graph shown above, which ended in January. But a sudden surge in downloads based on a competition is not a sustainable growth strategy on its own. 

In March, Perplexity AI launched an advertising campaign featuring Squid Game star Lee Jung-jae. 

It’s a great ad to be fair, and we saw it shared widely on social media. Not only does it signal Perplexity’s readiness to position itself as a mainstream brand, it also features a less than subtle dig at Google: confronted by a Squid Game style challenge, Jung-Jae reaches for his phone and searches ‘Poogle’ for an answer, only to be presented with a page of impenetrable links.

As time ticks down, he switches to Perplexity, which delivers a clear answer by voice. It’s a not-so-subtle jab at Google - and a very overt pitch to the mainstream.

Looking ahead, Perplexity is also set to launch a web browser - Comet. Details are scarce but a spokesperson told TechCrunch that it would  ‘reinvent the browser’. Entering the already crowded web browser market is another ambitious move but it makes sense as part of an effort to shift behavioral habits. Again, this a market where Google maintains a 60%+ share.

We can’t help but wonder if Perplexity might have a better chance of achieving such an aim by integrating into a browser that already has a large user base. Even so, in the long run, more people could turn away from cluttered SERPs if they’re offered a persuasive alternative. The release of an AI first browser could be an effective way to make that happen.

All of this signals that Perplexity and its investors are betting on an AI reshaped search market. The company is certainly well placed technologically, but its chances of becoming a genuine market challenger will surely depend on its ability to build an effective monetization model that can begin to compete with Google’s highly profitable advertising business, which generated over $260 billion from ads in 2024 out of a total $350 billion of revenue.

It’s a challenge that Perplexity is honing in on. The company is working with major brands to develop a new advertising system that allows advertisers to bid for ‘sponsored questions’, leading to AI-generated answers. Perplexity claims the model is designed to enhance ad relevance and user engagement, potentially disrupting the traditional auction-based advertising systems dominated by Google. 

Perplexity is approaching the move with caution, making clear that these ‘sponsored questions’ will still be generated by its AI without any intervention from sponsors. The model also stands in marked contrast to OpenAI’s decision not to include ads in its search offering. 

While there’s a risk that sponsored content might be perceived as a corruption of Perplexity’s trustworthiness, it also looks like a pragmatic decision designed to bolster its commercial aspirations, as a post on its blog makes clear: 

For us, we see Perplexity’s position as… perplexing, even contradictory. Well funded, yes. Big user base, no. Its focus on an advertising product and consumer strategy may be the antithesis of why it has gained popularity in the first place. 

This newsletter was edited from our latest white paper: AI in SEO Part Three: New Forms of Competition.