Will AI Ads Ruin Perplexity’s Simple Charm?
Originally posted at https://www.cmswire.com/digital-marketing/will-ai-ads-ruin-perplexitys-simple-charm/
May 6, 2024
Perplexity AI integrates ads in responses. Does it mean people are adopting recommendation engines as the search engine of choice?
The Gist
Advertising first. Perplexity.ai is introducing ads to its results — the first advertising deployment among generative AI solutions.
Strategic placement. Perplexity has been prominently marketed as a search engine competitor offering simpler responses — strategically adding ads is crucial to preserve this benefit.
Expert insights. Industry experts are observing the potential benefits and risks of integrating ads with AI prompt responses.
Tech success hinges on timing, particularly in crafting an AI advertising strategy that distinguishes it from the competition. The generative AI solution, Perplexity, aims to carve its path to success using an increasingly familiar revenue strategy.
Perplexity.ai has introduced a new feature in its prompt results: The platform will now display ads alongside its answers to user prompts as a means of monetization.
Nearly everyone is familiar with search ads, making the AI advertising strategy of displaying ads well-known. However, is now the right time to introduce digital advertising into a solution prized for its simplicity?
Perplexity.ai has introduced a new feature in its prompt results: The platform will now display ads alongside its answers to user prompts as a means of monetization.
What Is Perplexity.ai?
Perplexity, alongside competitors like Google Gemini and ChatGPT, is a generative-AI-powered assistant that delivers AI-generated responses to prompts. Users can expand on their queries with follow-up questions and information, positioning generative AI as a conversational search engine. It uses natural language predictive text to craft textual answers, rather than relying solely on search links and metadata typically found in search engine query responses.
Perplexity distinguishes itself from competitors by incorporating videos and images in its responses. Additionally, it displays numeric indicators alongside the results, allowing users to note sources they may want to verify for accuracy in relation to their queries.
Perplexity distinguishes itself from competitors by incorporating videos and images in its responses.
Perplexity Pro is also available, comparable to the pro versions of Gemini and ChatGPT. This premium account enhances search capabilities, allowing users to select from the latest AI models such as GPT-4, Claude 3 and Perplexity. These models improve answers and manage prompts with extended context.
What Is the Significance of Perplexity’s Ad Play?
Perplexity is the first among generative AI assistants to incorporate advertising in its results. Starting in July, Perplexity will display ads within its answers to user queries, specifically in the related questions section at the bottom of its response.
The Clean Interface Advantage
The decision to introduce ads is eye-opening due to its implications for generative AI's primary benefit. Generative AI's advantage lies in delivering consolidated answers through a straightforward, clean interface. Introducing ads adds another element to the interface — one that benefits Perplexity but does not enhance the main benefit for users: a clean interface.
Monetization
The decision to insert ads also mirrors a prevalent trend among online startups. Many startups adopt advertising as a revenue model, following the successes of search engines and later, social media platforms. Google and Meta, through Facebook and Instagram, have successfully built an ad market within their user bases. This success is partly due to their ability to establish a community that can be monetized.
A Familiar Revenue Strategy
However, marketers have a plethora of options for reaching an audience. They are not limited to placing ads solely on Google and Facebook. Other social media platforms are refining their ecommerce strategies, and both Amazon and Walmart have developed advertising networks for their online platforms. Increasingly, businesses are adopting advertising as part of a revenue strategy that supports the community they have fostered.
Retaining a Scaled Audience
By adopting advertising, Perplexity takes on the same risks facing other startups — its success will hinge on its ability to retain a scaled audience, offer brand safety assurances to marketers that their ads will not appear alongside inappropriate content, and provide analytics that accurately capture and share insights on audience behavior and ad targeting effectiveness.
Avoiding Being a Tech 'Also Ran'
The first goal may be achievable given the high interest in AI, but currently, ChatGPT and Gemini hold the top spots in public interest. To avoid becoming another "also ran" in tech history, Perplexity will need to work hard to differentiate itself and capture significant market attention.
Impact on Adoption
Additionally, the AI advertising strategy may contradict efforts to accelerate adoption rates among the target audience, an essential part of community-building tactics. For instance, Google is set to integrate Gemini into Google Ads. This integration will enable digital advertisers to benefit from Gemini's performance and consider it when planning to use a large language model of their own.
The View From Other Experts on AI Advertising Strategy
Industry experts currently exploring AI features are noticing the potential impact.
An 'Interesting Move'
John “Colder ICE” Lawson, CEO at ColderICE Media and an ecommerce/AI business expert views Perplexity's decision to display ads as “an interesting move for monetization, aligning with strategies used by other attention-grabbing tools. As a search tool intertwined with AI, Perplexity represents the next generation of information retrieval, providing not only answers but also references and footnotes for credibility.
“I don't see a significant risk in adding ads if implemented properly. Platforms like Google, Facebook and Amazon have successfully maintained clean ad integrations within their user experiences, so I believe Perplexity can navigate this challenge effectively as well."
The Challenges of Digital Ad Models
Brent Leary, owner of CRM Essentials and Playas Productions Network, which produces several tech panels and live streams, including a weekly tech news recap hosted by Leary and Lawson, has observed the challenges marketers face with digital ad models. He noted, “Ad-based business models are under pressure as people switch at least some of their activities away from search engines to GenAI assistants to find answers to their questions. But most of these newer AI-based services still don’t have a monetization model that will support them, so they have to leverage and integrate at least some pieces of the tried-and-true ad-based models into their current plans until they can completely move away from them.”
The Importance of Simplicity
Debra Dixon-Anderson, founder & CEO of Light of Gold PR, Marketing, and Consulting LLC, emphasized the importance of Perplexity's simplicity. She stated, "If Perplexity.ai is appreciated for its simplicity, then integrating digital ads sounds like a recipe for hurting their overall brand. It would diminish their simplicity along with diminishing their audience's favorable view of the platform. It would open opportunity for Perplexity.ai competitors to gain traction."
The Impact on Search Behavior
Tim Shea, founder and CEO of LatticeWorks Insights and member of WeAreTheBoard, a community of high-level multi-discipline industry experts, recognized the impact of AI tools on search behavior. He pointed out, “A quarter of all ads are paid search,” and explained, ”so there is a business segment that is finding ads beneficial. If you don’t believe they are valuable, turn off your marketing — having relevant ads is the issue. No hard sales should exist, either. If Perplexity offers ads for something that serves me, then I have no issue with it.
"When I search online, I am looking for someone with an answer to my question. Google provided it as a search engine looking at the answers people provide via websites. AI has changed how that information is arranged, with Perplexity squarely aimed at the search model. I, the user, want a summary with links and PDFs. AI tools like ChatGPT, Gemini, and Perplexity offer that vital summary with any additional information organized.”
Final Thoughts
The world will have to wait to see how successful Perplexity actually becomes. In the meantime, startups, whether SaaS or AI-based, should consider what can be learned from ad-based revenue models and whether these models are nearing a tipping point as they design their customer experiences, integrating an AI advertising strategy.
About the Author
Pierre DeBois is the founder and CEO of Zimana, an analytics services firm that helps organizations achieve improvements in marketing, website development, and business operations. Zimana has provided analysis services using Google Analytics, R Programming, Python, JavaScript and other technologies where data and metrics abide.