Perplexity AI: The startup poised to challenge Google’s search dominance

Perplexity AI, a startup led by Aravind Srinivas, is challenging Google's dominance in search. With $913 million raised and 15 million users, its clean, ad-free results are gaining traction. Srinivas' diplomatic approach and strategic ad pivot could reshape online search, making Perplexity a serious rival to Google's core business..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..By Parmy Olson___STEADY_PAYWALL___.The AI boom of the past two years has largely been a two-horse race. Alphabet Inc.'s Google and Microsoft Corp.-funded OpenAI have duked it out for customers, while Amazon.com Inc. and Meta Platforms Inc. have nibbled at the margins for market share. All told, the boom has consolidated wealth and power among tech's six biggest companies, raising their market valuations by $8 trillion since ChatGPT's launch two years ago. But at least one new company has emerged as an outsider with a chance of challenging their oligopoly..More than 15 million people, according to a spokeswoman, are regularly using Perplexity AI, an "answer engine" that competes with Google's search and advertising business. The website and app shot up in value over the course of 2024, from $1 billion at the start of the year to $9 billion in December when it closed a $500 million funding round. Its founder, Aravind Srinivas, is a consummate negotiator who has plugged himself deeply into Silicon Valley's network while diffusing tension with competitors and critics..Going up against Google has always looked like a suicide mission. Around 90% of online searches globally are conducted on its site. Microsoft's Bing, after incorporating ChatGPT two years ago, has barely made a dent in Google's market share, remaining at just 4%. Yahoo's usage has dwindled. And remember Ask Jeeves? A promising AI startup called Neeva, run by a former Google ad executive, closed down in 2023 after four years of trying to compete with Google. .But Perplexity has raised far more money than Neeva — $913 million compared with $77 million, according to Pitchbook — and its clean, comprehensive answers are drawing users frustrated with Google's ad-clogged results, according to postings about the app on Twitter, Reddit and other social media forums, as well as anecdotes I've heard from users. For now, it's making money from $20-a-month subscriptions, generating $30 million in annual recurring revenue within a year. Srinivas is also shifting into Google's core business: advertising..He's betting that many of those informational queries will lead to purchase decisions, such as asking about the benefits of fish oil or the best TVs to install at home. "Almost 80% of Google searches are not monetizable," he told me. "The most important thing is 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, they will continue to grow." In other words, even if most of Google's searches don't directly generate ad revenue, they're still critical for keeping its position as the go-to search engine. People will come back for the commercial queries on products and services — and see ads — if they already trust Google enough for queries like weather, facts and general knowledge. He's betting the same will happen to Perplexity..Srinivas also believes that in the future, online ads will target AI agents who've been tasked with booking travel or finding the right pair of running shoes online. That spells a potential reshaping of the ad economy as marketers compete for the attention of algorithms, instead of human eyeballs..Publicly, Srinivas doesn't position any of this as a threat to his biggest competitor. "It's not a zero-sum game for us and Google," he says, before noting that "the informational component of Google will decline." If people keep going to Google, it'll be to help them navigate the web. Already, about a third of Google searches are simply the names of other sites like "TikTok" or "Facebook." There's plenty of ad revenue to be skimmed from such queries, but that spells an ignoble future for the company founded to "organize the world's information." .Srinivas' diplomatic approach extends beyond rhetoric. Having worked at both OpenAI and Google, he's built up an impressive roster of Silicon Valley relationships. Elon Musk visited his company in the early days and expressed admiration for Srinivas' hiring restraint (Perplexity has 147 employees today, according to a spokeswoman. Neeva had 74 when it wound down, according to Pitchbook.) He picked up investors including Amazon.com founder Jeff Bezos, leading AI scientist Yann LeCun and legendary Google engineering chief Jeff Dean. Former GitHub Chief Executive Officer and AI investor Nat Friedman provided Perplexity with $380,000 in Microsoft Azure cloud credits through his AI fund, proving critical when access to AI chips was scarce. .When publishers like Forbes raised concerns about content attribution in 2024, Srinivas responded by making author credits more prominent and developing revenue-sharing partnerships with more than a dozen major titles like Time, Fortune and, more recently, the Independent and Los Angeles Times. This came despite lawsuits from Dow Jones and the New York Post, and a cease-and-desist notice from the New York Times..Operating an AI startup in 2024 usually ended with being swallowed by a tech giant. In the past year, three of the most promising new AI firms in Silicon Valley were absorbed by larger companies: Inflection AI's team joined Microsoft, Adept's leaders went to Amazon and Character AI's co-founders joined Google..But Srinivas stands a better chance than most of remaining independent, and his biggest advantage might be his grasp of Silicon Valley's political economy. As a former intern who worked with the creators of the transformer architecture at Google Brain, he understands both the technical foundations of modern AI and the industry's complex web of relationships. His ability to maintain cordial ties with rivals while defusing tensions with publishers suggests he knows how to navigate the long-term challenge of rivaling a tech giant. Google's search business won't crumble overnight, but in Srinivas, the industry finally has a credible outsider who could reshape how we find information online..Read also:.Tesla's sales struggles reveal cracks in its AI-driven promises🔒 The Economist: Why those over 55 are becoming the new 'problem generation'SA's EV revolution: Tax breaks to drive Chinese investment.© 2025 Bloomberg L.P.

Perplexity AI: The startup poised to challenge Google’s search dominance

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