What: Jeff Bezos-backed Perplexity AI develops a new AI-powered advertising model to disrupt the $300 billion digital ads industry, engaging top-tier companies in its implementation.

Why it is important: Department stores might have to change their SEO spending habits very soon to cope up with the new competition to Google.

Perplexity AI, a startup backed by Jeff Bezos and challenging Google, is developing a "sponsored" question system to disrupt the $300 billion digital ads industry. The company is in talks with major brands like Nike and Marriott to launch this new advertising model by year-end. Perplexity's system allows brands to bid for a "sponsored" question featuring an AI-generated answer approved by the advertiser, aiming to provide more relevant and high-quality ads to users.

The startup's ad system will charge marketers on a CPM basis, costing over $50 for every 1,000 impressions, significantly less than Google's estimated $1,100 for the same number. Perplexity has seen remarkable growth, with revenue and usage increasing 700% since the start of the year. The AI-powered search engine answered about 250 million questions in the last month alone.

Despite its success, Perplexity has faced challenges, including accusations of plagiarism from Forbes and Wired. The company has responded by updating its user interface to highlight citations more clearly and adjusting its system to avoid summarizing content from websites that have blocked its crawlers.

IADS Notes:

The retail industry is rapidly embracing AI-driven technologies to enhance customer experiences and revolutionize advertising strategies. Consumer interest in AI-enhanced shopping is growing, with 58% recognizing its positive impact . Major players like LVMH and Amazon are leveraging AI to improve customer interactions and operational efficiencies . This trend aligns with Perplexity AI's approach to challenge traditional digital advertising models. High-profile partnerships, such as LVMH's collaboration with Alibaba , mirror Perplexity's strategy of working with major brands like Nike and Marriott. Retailers across the spectrum, from luxury brands to department stores, are integrating AI into their core strategies , signaling a shift towards more personalized and efficient advertising and customer engagement methods.

Perplexity AI in discussion with Marriott and Nike as it prepares to challenge to Google's dominance