Perplexity abandons advertising in AI search, betting user trust beats ad revenue

Perplexity's Retreat From Ads Signals a Bigger Strategic Shift

Perplexity is abandoning plans to put ads in its AI search product as the industry looks for sustainable business models that won't hurt user trust. The changes are part of a larger strategic shift for the company, which has long focused on disrupting Google Search's business. "Google is changing to be like Perplexity more than Perplexity is trying to take on Google," said a Perplexity executive at a press briefing on Tuesday. Executives spoke to the press on the condition of anonymity. Instead of chasing mass adoption, Perplexity will lean into its subscription business, with a focus on 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 marks a major change for the company, which was one of the first AI firms to start experimenting with ads in 2024. CEO Aravind Srinivas said on a podcast that year that he predicted ads would eventually be the company's core monetization engine. "I think with advertising we could be really really profitable," he added. Now, executives say they're changing course because ads could make people mistrustful of Perplexity's responses. Anthropic offered a similar explanation for not putting ads in its chatbot, Claude, and poked fun at ChatGPT's ads in a Super Bowl commercial earlier this month. But there may be other reasons Perplexity is not pursuing advertising. Early investors in Perplexity once believed the startup could reach hundreds of millions or even billions of users, but the startup's growth hasn't met expectations, according to a source close to the company. When the startup raised its Series B funding in 2024, board member and investor Cack Wilhelm said in a blog post that Perplexity was "capable of bringing the power of AI to billions." Two years later, that goal still seems a long way off. Data from the third-party analytics firm Similarweb suggests Perplexity had just over 60 million monthly active users across its website and mobile app in January. That's more than double the users Perplexity had last year, according to Similarweb. People also now access Perplexity via its AI-powered browser, Comet, which Similarweb doesn't track. Without accounting for Comet, Perplexity's user base on web and mobile 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's starting to become clear to us is that Perplexity isn't for everyone," another Perplexity executive told the press. Advertising has been a strong business for companies like Google and Meta because they have hundreds of millions of free users. Without that scale, ads likely become a less appealing business model. Perplexity says it's making hundreds of millions of dollars in revenue, mainly from consumer subscriptions, but it increasingly expects growth to come from enterprise sales. The AI search startup also seems to be making a more concerted bet on powering other AI services in 2026, with plans to hold its first developer conference later this year. The company's pitch is that Perplexity can be an orchestration 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 get rid of its free tier at this time, despite its pullback from ads. One way the company hopes to keep offering products to free users is through partnerships, like the one it has with Motorola, where Perplexity comes preinstalled on consumer devices. Executives hinted that more device-maker partnerships could be on the horizon. To its credit, Perplexity has consistently been ahead of the curve in developing sticky AI products. Google's take on AI-powered search, AI Mode, feels quite similar to Perplexity's original product. Apple and Meta 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 it doesn't feel like clunky enterprise software."

Perplexity just removed ads to protect trust -- here's why ChatGPT should do the same

The startup pivots with a massive shift in how the AI company makes money In a rare move for Silicon Valley, the $18 billion AI search startup Perplexity has officially walked away from advertising. The company is abandoning the sponsored placements it began testing in 2024, confirming it has no plans to bring them back. This move underscores one of the biggest questions facing AI right now: should answers be funded by ads, or by users? Why Perplexity is walking away from ad revenue Perplexity's core value proposition is a simple one: fast, sourced answers you can trust. Executives realized that introducing paid placements risks blurring the line between objective information and promotion. Even with visible labels, company leaders believe ads could prompt users to second-guess the neutrality of the AI's responses. First reported by The Financial Times, one executive bluntly stated that the challenge with ads is that "a user would just start doubting everything." The company is prioritizing its reputation as an objective "answer engine," noting that they are in the "accuracy business". A completely different path than traditional search For decades, search engines have relied heavily on scrolling past sponsored "blue links." AI search changes the dynamic. Because tools like Perplexity generate direct answers, users expect clear, unbiased results. If users suspect an answer is being steered toward a paying sponsor, the tool's credibility vanishes. Rather than chasing ad dollars, Perplexity is now doubling down on alternative revenue streams including focusing heavily on its paid subscriptions, which range from $20 to $200 per month. Perplexity is aggressively expanding its enterprise sales strategy to target high-powered professionals like CEOs, doctors, and finance experts. Despite dropping ads, the startup's growth has been massive, reportedly reaching $200 million in annual recurring revenue by late 2025, according to the same Financial Times story. Bottom line Perplexity's pivot highlights a growing philosophical divide across the AI industry. OpenAI recently began testing ads for free users in ChatGPT, while Google integrates ads into its AI Overviews in traditional search. Perplexity is aligning itself with Anthropic (the maker of Claude), which has publicly committed to keeping its chatbot free of advertising. With AI-generated answers increasingly used for everything from high-stakes financial research to medical inquiries, credibility is becoming the ultimate competitive advantage. By stepping away from ads, it's proof Perplexity is betting that strict neutrality will drive stronger long-term growth than short-term ad revenue. Follow Tom's Guide on Google News and add us as a preferred source to get our up-to-date news, analysis, and reviews in your feeds.

Look Out, OpenAI: Perplexity Admits AI Adverts Were a Mistake, Is Now Getting Rid of Them

Anthropic aired a spicy ad during this year's Super Bowl, skewering competitor OpenAI's decision to cram ChatGPT with ads for users who don't pay for a subscription. "Ads are coming to AI," the ad's tagline reads. "But not to Claude." The marketing campaign appeared to hit a nerve, sending OpenAI CEO Sam Altman -- who called ads a "last resort" a mere two years ago -- into a tailspin in which he accused Anthropic of "doublespeak." Needless to say, it's a hot-button topic in the AI industry as companies continue to look for new ways to recoup some of their gigantic losses. Just last week, OpenAI researcher Zoë Hitzig announced her resignation in a New York Times essay, warning that the company may use ads to manipulate "users in ways we don't have the tools to understand, let alone prevent." Ads in AI tools have become so controversial that other players in the space are second-guessing as well. As the Financial Times reports, AI startup Perplexity, which became one of the first generative AI companies to introduce ads back in 2024, alongside paid subscriptions, has now abandoned advertising altogether. The company cited fears over eroding user trust, calling it quits on ads after several months of winding them down. "A user needs to believe this is the best possible answer, to keep using the product and be willing to pay for it," an unnamed Perplexity executive toldthe FT, saying that 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." "We are in the accuracy business, and the business is giving the truth, the right answers," another executive added, arguing that ads are "misaligned with what the users want." It's a surprising 180-degree turn. Why the two executives refused to be named in the FT's reporting is unclear, but the decision suggests that the company is treading very carefully. It's also a sobering assessment of the significant potential for user blowback if other AI companies follow suit and introduce ads, like OpenAI or Google. For now, some of the biggest players in the AI space are offering extremely similar chatbots whose capabilities overlap considerably. The fear: ads could easily trigger a user exodus, further undermining AI companies' attempts to differentiate themselves. For now, Perplexity's main source of revenue is paid subscriptions, which range from $20 to $200 a month. Anthropic is similarly relying on subscriptions that range from $20 to $100 a month for regular consumers. But whether either company will be able to convince investors that subscriptions are enough to make up for far bigger expenses remains to be seen. At a valuation of $18 billion, Perplexity lags far behind the AI industry lead. But its latest move highlights a growing rift as companies ponder how to climb out of a gigantic -- and deepening -- financial hole.