Perplexity AI is set to introduce advertising on its platform by the fourth quarter of 2024. 

According to a pitch deck promoting its reach and app downloads, the company doubled its valuation to over $1 billion in April, with a recent funding round raising $62.7 million from investors including Nvidia and Garry Tan of Y Combinator. The company also drove strong user engagement with 230 million monthly queries and two million app downloads. 

Perplexity AI aims to leverage its growing popularity to attract advertisers and integrate ads into its AI-powered search app.

How Perplexity AI plans to launch its advertising program

Perplexity AI is launching its advertising program that will allow brands to target ads in specific categories such as arts, food, technology, health, and finance. 

Advertisers can sponsor related questions and place display ads next to answers generated by Perplexity AI. This means their ads will appear alongside answers to questions relevant to their business. 

Tech Entrepreneur, Ionut Ciobotaru, in a LinkedIn post, explained that Perplexity's new ad offering might follow a two-phase approach, similar to Netflix's strategy. First, they will "test the waters" with high prices and experimental ad placements to gather feedback and refine their strategy. Next, they will "build the thing" starting with third-party solutions and developing in-house capabilities to offer diverse ad placements and programmatic options.

Perplexity’s ads are said to be priced on a CPM model, with rates of $50+. Ciobotaru mentioned that the cost for ads in high-demand areas like tech, pharma, and automotive might be much higher than the average rates, reaching $80-$100 due to “auction dynamics.”

Addressing previous criticisms and content concerns

The startup has faced criticism for its content management, including plagiarism accusations from prominent media outlets such as Forbes and Wired. In response, Perplexity plans to revamp its citation practices to improve transparency and give due credit to sources with its ‘Publishers Program.’

The company announced a revenue-sharing model with publishers including TIME, Der Spiegel, and Fortune.

Industry impact and competition

The launch of this advertising model aligns with the trend of integrating AI into search technologies. 

Since ChatGPT's launch in November 2022, the search industry has experienced changes, with AI-driven search engines beginning to rival Google’s dominance. OpenAI has enhanced its offerings with the release of ChatGPT-4o and has recently started testing its new search prototype, SearchGPT.

Companies like Microsoft and Google have also embraced AI, with Microsoft incorporating OpenAI’s technology into Bing and Google enhancing its search summaries with AI.