Generative AI search engine Perplexity said it will launch ads in Q4, but the platform will need to win over advertisers and convince them their search ad spend will go further than it does on Google.

Perplexity’s new ads will be video ads and sponsored questions, per Search Engine Land reporting. With just 15 million active users as of March, Perplexity’s ads will reach a small user base. A slide deck shared with CNBC indicates the platform is emphasizing its capacity to reach educated, high-income professionals who may be in senior leadership at their companies.

This “educated, niche, and discerning” audience could allow Perplexity to differentiate itself from Google entirely, Gareth Cleevely, executive vice president of business strategy at dentsu, wrote on LinkedIn. At the same time, positioning Perplexity ads as a premium alternative to Google could limit scalability and long-term sustainability, Cleevely wrote.

Advertisers aren’t eager to test the new platform just yet, according to Zac Woolfolk, associate director of paid search at VML. “While we proactively present new ad formats to our clients, many tend to approach change cautiously and are slower to embrace new platforms like Perplexity,” he said. “With privacy being a major concern, clients need assurance that platforms like Perplexity are delivering the right content, accurately displaying ads, and driving users to relevant landing pages.”

To attract these cautious advertisers, Perplexity needs to demonstrate success with early movers who do take a chance on the ad platform. It will also need to build advertiser trust. Perplexity has faced allegations of plagiarism, which presents brand safety concerns for advertisers. “Balancing trust and transparency with an ad-driven model is no small feat,” Woolfolk said.

If it can win that trust, the search ad opportunity is massive.

• US search ad spend will reach $124.59 billion this year, per our forecast.
• Google ad revenues make up about half of that search spend (50.5%), and retail media platforms make up another sizable chunk at 27.2%.

Google’s share of US traditional search ad spend will grow in the genAI era, according to our forecast. Google’s own AI investments will allow it to evolve alongside innovations from challengers like Perplexity, as noted in our Tech Trends H1 2024 report.

Google will “absolutely” react to Perplexity’s ad announcement, Woolfolk said. “I believe that nearly every AI-powered search platform is working to incorporate ads into their business model. Over the next year, we’re likely to see a rapid acceleration in the development of these capabilities as companies like Google adjust and innovate to maintain their leadership,” he said.

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