AI search engine Perplexity plans to integrate ads by Q4 2024, sparking industry debate

In the fast-evolving landscape of AI-driven search engines, Perplexity has emerged as a notable contender, positioning itself as a direct competitor to Google’s AI efforts. This week, Perplexity circulated a pitch deck that has caught the attention of industry insiders and the press alike, revealing their ambitious plans to integrate ads into their platform by the fourth quarter of 2024.

While the deck itself remains elusive, Digiday provided a detailed analysis of the company’s advertising strategy. According to the report, Perplexity aims to help brands reach, educate, and spark curiosity among potential customers at critical moments — an ambitious goal that, while appealing, raises questions about execution.

Perplexity’s plan for advertisements

One of the key takeaways from the deck is Perplexity’s target of achieving effective cost per thousand impressions (eCPMs) north of $50. However, industry experts have expressed skepticism about this figure, pointing out that such high eCPMs are difficult to achieve without significantly compromising the user experience. Perplexity has assured that paid responses will not be ranked over organic ones, positioning this as a differentiator from Google. However, many remain doubtful that this balance can be maintained without impacting ad performance.

Perplexity has reported significant growth, with 230 million queries in the U.S. so far this year — an 8x increase from the previous year. The company plans to introduce several ad formats, including sponsored questions, video ads in prominent positions, and display ads on third-party publishing sites. Additionally, Perplexity intends to integrate ads directly into user queries and answers, a move that has been met with mixed reactions.

Is Perplexity making impossible promises?

Warren Woodward, CGO at games growth agency Upptic, voiced concerns about Perplexity’s approach, comparing it to a politician making grand promises without a clear plan to deliver. He pointed out the inherent conflict in aiming for high eCPMs while also claiming that ads will not disrupt the user experience. “People will not pay a high price for a low-converting ad unless they’re morons,” Woodward remarked, expressing skepticism about the platform’s long-term viability.

The debate surrounding Perplexity’s strategy also touched on their plan to offer revenue splits to publishers whose content is used to generate search results. While this approach could address concerns about AI’s impact on content creators, many believe that Perplexity’s current business model will not generate sufficient revenue to sustain such partnerships in the near term.

The coming year will be crucial for Perplexity and advertisers

As the industry watches closely, it is clear that the introduction of AI-driven advertising will have far-reaching implications for both marketers and consumers. While Perplexity’s efforts represent a bold step forward, it remains to be seen whether they can deliver on their promises without compromising the delicate balance between monetization and user experience.

For now, Perplexity’s foray into the advertising world is in its infancy, and the coming year will be crucial in determining whether AI search engines can truly revolutionize the advertising landscape.