Perplexity drops advertising as it warns it will hurt trust in AI

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AI start-up Perplexity has abandoned advertising over fears that it will erode user trust, despite rivals pushing ahead with introducing ads as they seek strategies to make money from the technology.

San Francisco-based Perplexity was one of the first generative AI companies to introduce ads in 2024, running tests in which sponsored answers were displayed under the chatbot’s answers.

However, the company — which also offers paid subscriptions — began phasing out the ads late last year. On Tuesday, executives at the company said it had no plans to pursue advertising further.

“A user needs to believe this is the best possible answer, to keep using the product and be willing to pay for it,” a Perplexity executive said.

Perplexity’s ads were labelled and the company said they had no bearing on the chatbot’s responses.

But the executive said in general “the challenge with ads is that a user would just start doubting everything . . . which is why we don’t see it as a fruitful thing to focus on right now”.

It comes as leading AI groups have followed Perplexity in introducing advertising to start making money from free users and appease investors as they burn through cash to train and sustain the large language models that underpin popular products.

OpenAI last week began testing advertising on its core product, ChatGPT, for users who do not pay for a subscription. It has a similar model, where labelled ads appear below answers. It has emphasised that ChatGPT’s answers are not influenced by these sponsors.

Google has advertising in AI mode, as well as in its AI Overviews summaries on traditional search. But the search giant has so far held off introducing ads into its Gemini chatbot.

In contrast, Anthropic this month committed to keeping its chatbot Claude free from ads.

Perplexity was also one of the first to introduce shopping features on its platform, followed by Google and OpenAI. Unlike its competitors, however, executives said Perplexity did not make money from this feature or a cut of sales.

Valued at $18bn, with a reported $200mn in annualised revenues, Perplexity makes the majority of its money from subscriptions. It offers free services, as well as tiers ranging from $20 to $200 a month. It has more than 100mn users, according to executives.

Ads on Perplexity have been wound down, and executives said it is primarily focused on ensuring answers are accurate.

“We are in the accuracy business, and the business is giving the truth, the right answers,” said another Perplexity executive. Although it could revisit advertising in the future, the executive said it was “misaligned with what the users want” and it might “never ever need to do ads”.