Perplexity is an adtech company… maybe.
According to a new report by CNBC, Perplexity, the controversial and fast-growing Gen AI search platform, plans to integrate ads into its search experience in Q4. CNBC also shared some juicy details about the search offering: “CPM prices will be more than $50, the source said,” according to the report.
Why This Matters:
Perplexity’s rapid ascent in search has been marred by controversy as publishers have complained about the SERP essentially plagiarizing articles and cannibalizing potential traffic to their sites. In response, a growing number of publishers have blocked the Perplexity bot crawler to avoid being scraped, although Perplexity seems to have found a way around that by not necessarily honoring the buddy system in place to prevent surreptitious scraping.
This raises an interesting dilemma for would-be advertisers who might want to appear alongside Gen AI search results. Is it brand safe to end up supporting or being alongside a Frankenstein, aped, and plagiarized version of original content? The controversy around scraping and plagiarizing isn’t likely to go away, even after Perplexity launched a fairly ambitious and seemingly positive publisher revenue-sharing program.
Moreover, what does a $50 CPM mean for a search engine? Most search advertising is driven by a CPC model. Even Perplexity seems to be confused:
Experts React:
The ad industry also seems… perplexed. Collin Slattery, founder and CEO of agency Taikun Digital, which offers solutions in search advertising, tweeted, “Nobody [is] paying CPM for search ads.”
Michael Bishop, CTO and co-founder of OpenAds.ai, explains the rationale, saying, “AI search/chat/summarization can be treated as something of a hybrid between search and display.” He adds that it will likely be a “$50 CPM for sponsored… takeovers,” essentially, though he still notes the price seems excessive given the current capabilities and experience.
Our Take:
Perplexity continues to go right after the leader in traditional search, Google. This week, Aravind Srinivas, CEO of Perplexity, released a Google-style ad highlighting very human use cases for the service. Perplexity is emerging as a true competitor. In fact, recent data from Brightedge reveals Perplexity mirrors 60% of Google’s top organic results, offering familiar, Google-like quality, plus the benefits of AI-driven summaries and conversational search. Interestingly, this is all occurring as Google faces growing antitrust scrutiny over its search business.
But will ad dollars follow? Is everything about this simply too experimental to warrant the high cost?
Consider Netflix: they recently slashed their CPMs from a 2023 high of $45 to $35, with the low end dropping from $35 to $29. Generative AI search is still in its infancy, particularly regarding ad integration. Given the variety of emerging models, marketers may hesitate to shift their search budgets. The true potential here is very much a mystery for now.
