The decline in advertising confusion signals a larger strategic shift

Confusion is abandonment It plans to place ads in its AI search product as the industry looks for sustainable business models that don’t damage user trust. The changes are part of a larger strategic shift for the company, which has long focused on disrupting Google’s search business.

“Google is changing to be more like Perplexity than Perplexity is trying to beat Google,” a Perplexity executive said in a press conference on Tuesday. The executives spoke to the press on condition of anonymity.

Instead of chasing mass adoption, Perplexity will focus on its subscription business, with an eye toward becoming the most accurate AI service for developers, enterprises, and consumers willing to pay a monthly fee. The company also plans to make partnerships with device makers a bigger part of its business moving forward.

The move represents a big change for the company, which was one of the first AI companies to start experimenting with ads in 2024. Aravind Srinivas, the company’s CEO, said on Podcast That year he predicted that advertising would eventually be the company’s primary revenue driver. “I believe that through advertising, we can make real profits,” he added.

Now, executives say they are changing course because the ads may make people distrust Perplexity’s responses. Similar anthropology offered clarification for not placing ads in its chatbot, Cloud, and parodying ChatGPT ads in a Super Bowl commercial earlier this month.

But there may be other reasons why Perplexity does not pursue advertising.

Early investors in Perplexity once believed the startup could reach hundreds of millions or even billions of users, but the startup’s growth has not met expectations, according to a source close to the company. When the startup raises Series B funding in 2024, board member and investor Cack Wilhelm said in a Blog post That confusion was “capable of bringing the power of artificial intelligence to billions.” Two years later, this goal still seems out of reach.

Data from third-party analytics firm Sameweb indicates that Perplexity had just over 60 million monthly active users across its website and mobile app in January. That’s more than double the number of Perplexity users last year, according to Sameweb. People can now also access Perplexity via the AI-powered Comet Browser, which Sameweb does not track.

Without accounting for Comet, Perplexity’s web and mobile user base is less than 10 percent of OpenAI’s ChatGPT and Google’s Gemini, which have 800 million weekly active users and 750 million monthly active users, respectively.

“One of the things that is starting to become clear to us is that confusion is not for everyone,” another Perplexity executive told the press.

Advertising has been a powerful business for companies like Google and Meta because they have hundreds of millions of free users. Without this scale, advertising would likely become a less attractive business model.

Perplexity says it generates hundreds of millions of dollars in revenue, mostly from consumer subscriptions, but it increasingly expects growth to come from business sales.

The AI ​​research startup also appears to be making a more coordinated bet on running other AI services in 2026, with plans to hold its first developer conference later this year. The company’s idea is that Perplexity can be a coordination layer on top of AI models from OpenAI, Google, and Anthropic, directing user queries to the best model for a given question.

Perplexity said it has no plans to eliminate the free tier at this time, although it is withdrawing from advertising. One way the company hopes to continue offering products to users for free is through partnerships, like the one it has with Motorola, where Perplexity comes pre-installed on consumer devices. Executives hinted that more partnerships with device makers may be on the horizon.

To its credit, Perplexity has always been ahead of the curve in developing sticky AI products. Google’s approach to AI-powered search, AI Mode, looks quite similar to the original Perplexity product. apple and dead It reportedly expressed interest in acquiring Perplexity last year.

“We are very much a consumer DNA company,” said a third executive. “That’s why enterprise users love our products, because they don’t feel like old enterprise software.”

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