Despite many consumers having experimented with these products, they have yet to reliably change their consumption habits.
The emerging category of generative AI search engines, including ChatGPT, Google’s Gemini and Microsoft Copilot, are slow-rolling their ad businesses as they focus more on general adoption and subscription licenses. They must also balance their preexisting ad businesses and relationships with web publishers, which is especially true for Google.
“Maybe there’s a tasteful way we can do ads, but I don’t know. I kind of just don’t like ads that much,” OpenAI’s co-founder and CEO Sam Altman told Ben Thompson at Stratechery during an interview last month.
But as those very large players zig in one direction, Perplexity AI is zagging toward advertising and commerce applications.
In December, Perplexity hired Taz Patel, co-founder and CRO of influencer marketing platform Captiv8, to lead its advertising business. (Fun fact: Patel also has ad tech chops. Back in 2013, he was a sales leader in charge of business development at Sizmek.)
Now, just a few months into his new job at Perplexity, shopping has been added to his purview.
“Over the past few months, we started noticing many of our advertisers are merchants themselves,” Patel told AdExchanger.
Which led Perplexity to a partnership last week with firmly.ai, a startup that creates checkout integrations for retailers and online platforms.
The shopper mode
Perplexity is developing what it refers to as different “answer modes,” according to Patel.
One such mode is for travel queries. In January, for example, Perplexity announced a partnership with Tripadvisor to license its data and content, including hotel and tourism reviews.
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Other modes include sports questions and finance queries that generate a stock ticker display.
The new integration with firmly.ai is for the shopping answer mode, which requires responses to have a very visual appearance than other types of answers. To respond to a shopping-related question, Perplexity must serve up prices from around the web, as well as rich media, including special cards that display product information.
Before Thanksgiving last year, Perplexity quickly rolled out its own shopping product, because there’s always a huge spike in product review and shopping queries around that time. The experience confirmed Perplexity’s belief that there is clear demand for shopping-related responses – as well as the fact that to meet that demand, it needed to work with a third-party vendor with experience in ecommerce to manage relationships with merchants.
Although Perplexity’s shopping product has now been combined with the company’s ad business under Patel’s remit, they operate under different business models. The firmly.ai integration, for instance, allows merchants to access the add-to-cart feature with one click. But there’s still no way for advertisers to guarantee or improve the ranking of their own products within a response.
Patel said Perplexity also makes no affiliate revenue and doesn’t charge performance fees based on sales generated through firmly or via its search engine. Firmly also has no conversion or performance incentives; Perplexity simply licenses its tech.
The benefit for Perplexity comes from getting users comfortable doing shopping research and making purchases on the platform, Patel said. Once that happens, he said, he expects the average cart size to grow and for people to expand the types of products they buy via Perplexity, which will be a boon for the ad business.
Perplexity also offers its merchants more control than they typically get on other platforms. For example, a product search followed by an add-to-cart on Amazon may generate a sale, but that customer belongs to Amazon. In the setup with firmly, merchants retain the data and the direct customer relationship.
Telling clients “no”
But despite leaning into paid media as other AI-generated answer machines eschew ads, Perplexity must disappoint clients more than most media sellers with advertising businesses.
For instance, within the new shopping mode with firmly, a Shopify merchant who makes its own lip balm, say, might also sell on Amazon or in convenience store chains. It may have different purchase types, such as a subscription box or one-off sales. Working with Perplexity’s ad team or integrating via firmly does not mean merchants can influence how Perplexity crafts its answers.
If a user expresses a preference for speedy shipping or pickup nearby, Perplexity will return the outbound links or add-to-cart options that best match the search, even if that merchant is an advertiser and would prefer that the links all go to its own site.
Advertisers often ask Perplexity’s ads team if they can tweak the way their brand or products appear in generated responses and sometimes whether they appear at all, Patel said.
“When brands or merchants ping us to say, ‘Hey, how do I show up in your answers?’, the answer is, ‘We don’t disclose that,’” he said.
Perplexity also hasn’t worked with any retail media networks or retail ad tech businesses, according to Patel, despite the fact that its click-to-cart shopping feature seems purpose-built for RMNs that specialize in sponsored product ads, such as Home Depot, Best Buy, Marriott or Expedia.
“I mean, we probably have inbound, but it’s not something that we’ve necessarily needed to engage with thus far,” Patel said.
In short, while Perplexity is embracing ads and direct shopping monetization, it understands that leaning in too far could upset a careful balance.
“But at same time,” Patel said, “[this is] very much an opportunistic time for us to figure out how this works.”
