Perplexity Will Change Search Advertising

Perplexity, the AI search startup, is making strides in the digital advertising landscape with plans to introduce a novel ad integration model. According to a recently leaked pitch deck, the company aims to embed advertisements within user queries and responses, potentially launching as early as Q4 2024.

A New Approach to Search Advertising

Perplexity's strategy diverges from the traditional "ten blue links" model that has dominated search engines for nearly two decades. Instead, the company proposes a more conversational and integrated advertising experience, leveraging its AI capabilities to synthesize information from across the web.

The pitch deck outlines several key features of Perplexity's advertising model:

• Contextual Integration: Ads will appear alongside relevant user queries, with examples including Nike sponsoring basketball shoe-related questions or Marriott Bonvoy video ads accompanying travel destination inquiries.

• Branded Explanatory Text: A new format allowing advertisers to provide informative content above sponsored and organic related questions.

• High-Value Targeting: Perplexity is positioning itself to attract premium advertisers, with unofficial sources suggesting CPMs "north of $50."

• Diverse Ad Categories: The initial launch will focus on over a dozen key advertising categories, including technology, health, finance, and travel.

Growth and User Base

Perplexity reports significant growth, with monthly U.S. queries reaching 230 million—an eightfold increase from the previous year. The company is promoting its user base as educated, affluent, and highly engaged, appealing to advertisers seeking quality audiences.

Differentiating from Competitors

A key aspect of Perplexity's pitch is its differentiation from established players like Google. The company emphasizes its commitment to maintaining the integrity of search results, stating that sponsored content will not receive preferential treatment in rankings.

Implications for E-commerce

For e-commerce businesses, Perplexity's approach could offer new opportunities to engage with consumers at critical decision-making moments. The integration of ads within AI-generated responses may provide a more seamless transition from product discovery to purchase consideration.

However, the effectiveness of this model in driving conversions and delivering ROI remains to be seen. E-commerce marketers should closely monitor Perplexity's rollout and early advertiser experiences to assess its potential as a new channel for customer acquisition and brand building.

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