Google, Perplexity and OpenAI seek to mould Changing Consumer Behaviors
🔎 The Future of Search will be decided in the next five years.
Image: the geeks at Perplexity. Is the internet willing to change their repetitive behaviors?
Hello Everyone,
As OpenAI prepares to launch a search product that will utilize Bing and GPT-5 to directly compete with Google, something significant is about to happen. That is, in the next five years consumers will continue a trend of starting to behave differently on the internet. This change in consumer behavior will determine the next phase of the internet itself.
Google search boss Prabhakar Raghavan told employees in a significant internal meeting to prepare for a different market reality, because “things are not like they were 15-20 years ago.”
With Meta adding “Google search results” on their apps, Meta AI will point users to web search results of Google or Microsoft Bing for queries that require the most up-to-date answers. Meta’s AI Assistant in search, also appears to be a clone of Perplexity. Aravind Srinivas, the founder and CEO of Perplexity AI posted on X a screenshot of the chatbot which looks a lot like Perplexity’s UI design. So what’s going on here?
It’s the battle for the next internet in Search, advertising and the next wave of consumer AI apps. Here we will discuss Google, SGE, Perplexity's move into Enterprise Search, and the likelihood of OpenAI releasing their web-search product soon. And of course, what it all means for the future of Google and its monopoly on Search and the internet itself.
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Google has long been a dominant force in search engine technology, accounting for nearly 90% of global searches. But there is a sense that consumer preferences are changing and even how we search the internet in the next five years, might be drastically different from what it was in previous years and decades.
At a recent all-hands meeting at Google, Raghavan said user behavior is changing, competition is heating up and regulation is becoming a bigger challenge. He was addressing Google’s knowledge and information organization, which consists of more than 25,000 full-time employees.
Meanwhile, Microsoft is now blocking employee access to Perplexity AI, a massive client of its Azure OpenAI service. Why do you suppose that is? Microsoft Bing hasn’t exactly taken over, no matter where Microsoft tries to put Copilots and Ads in Windows, forcing us to adopt. Like the web browser Edge, we want no part of it.
Meanwhile Google Gemini keeps getting better. Meanwhile Google is not sure exactly how to launch or how to monetize SGE, that is Google Search Generative Experience. But with rumors of OpenAI building its own Perplexity, consumer internet search is in the crucible of the Generative AI apps movement. We cannot assume it will come out unscathed.
Those who swear by productivity enhancements of Generative AI, report using Google far less than they once did even a couple of years ago. Consumers have been leaving social media for years and now they might be starting to leave Google search for a range of more specialized search tools, options and new search experiences.
Perplexity is a case in point. As users leave ChatGPT Plus and realize that ChatGPT Enterprise doesn’t really serve their needs, new possibilities come into play. As enterprise customers realize Microsoft’s legion of Copilots aren’t mature, they find tools that are a better fit. This sorting out period will mean the next five years, roughly 2024 to 2029 will change how consumers use the internet as we know it and set the new default.
In the confusion OpenAI must release a web-search product. As enthusiasm and real usage of ChatGPT wanes, it badly needs products that are actually useful for bigger groups of humans. Just as Google is frantically trying to defend its Search Ads kingdom. As Jennifer Elias reports:
“I think we can agree that things are not like they were 15-20 years ago, things have changed,” Raghavan said, according to audio of the event.
As Meta’s AI Assistant trained on Llama-3 tries to bring better Search experiences into apps like WhatsApp there is a feeling that consumer behavior patterns for once in the last 20 years are becoming more mutable. Generative AI is slowly giving consumers hope that a better internet might be just around the corner.
Just like Neeva before it, Perplexity has its hard-core fans. Now with more funding, the threat to Bing, OpenAI’s forthcoming product and even Google appears a bit more tangible. Perplexity has joined the Unicorn club. The company has raised another $62.7 million in its fourth round of funding, at a $1.04 billion valuation. The company’s total is now $165 million.
Some of the new funders include Jeff Bezos. But Perplexity is doing multiple funding rounds in a shorter span than has been reported. TechCrunch has learned that the company is currently raising at least $250 million more at a valuation of between $2.5 billion and $3 billion.
Consumers are More Open to Change in the AI Era
As we begin to trust Google less and realize OpenAI isn’t very customer experience orientated, many of us are waiting for the next best thing. Raghavan said Google’s digital ad business had become “the envy of the world.” He noted that over the last three years, annual revenue has grown by more than $100 billion, exceeding Starbucks, Mazda and TikTok combined. Behind Google’s rally cries and arrogance, is sheer panic. We know Google Search is the cash-cow of the internet, that’s why in the next five years, it’s will be legitimately under threat.
The new “AI Stack” of apps will only get better and keep on challenging the monopoly apps Silicon Valley has been reduced to. The American internet is at such a crossroads consumers are getting fed up with the same few companies seemingly everywhere. We might witness a consumer revolut in how they are shaping the AI trends of tomorrow as well. In short, there may be some unlikely new winners.
Perplexity is raising a further round of at least $250 million to capitalize on the attention it’s getting in the market. It’s such a name that we have to take a bit more seriously as its valuation increases faster in 2024. The core of Perplexity’s product is a generative AI-based search engine that provides results using a chatbot-style interface. I find myself using it in tandem with products like You.com or Claude 3. Gone are the days where a Google search will suffice for an increasing number of searches. For certain things we might use Amazon’s search, heck we might even use TikTok’s search for others.
Perplexity says many of its previous investors also participated, including Jeff Bezos, Nvidia, Tobi Lutke, Elad Gil, Nat Friedman, IVP, and NEA. As it currently stands I cannot imagine Microsoft’s Bing or Copilot or ChatGPT as it is today has a future here. OpenAI needs to realize their own version of Perplexity’s approach to new search experiences and they will, sooner rather than later.
Regarding consumer changes in search behavior there’s a lot going on:
Perplexity becoming a real mainstream product
OpenAI releasing its web-search product
Google’s evolution with SGE and Google Gemini improvements
Microsoft’s Copilot evolution and Bing with GPT-5
Meta’s AI Assistant improving Search in its Apps
TikTok being possibly banned, leading to more changes in consumer behavior (many young people actually search on TikTok, YouTube or Instagram now)
ByteDance producing a search AI or any significant Generative AI apps didn’t seem to in the cards before TikTok enters an American crisis period yet again.
Microsoft may be the odd man out given how it’s failed with Bing AI, and its Copilot that’s it’s tried to gain more Search advertising with.
So we really need to ponder Google’s upgrades, what OpenAI will do and Perplexity’s own evolution. We also have to pay attention to how Siri, Alexa and Google assistant are upgraded themselves with Generative AI capabilities. That trending consumer AI hardware devices like the Rabbit r1 uses Perplexity for search is not lost on me. Perplexity certainly appears to have some real-world momentum.
The way Silicon Valley vets are piling into Perplexity’s funding means they see an opening in changing consumer behavior as well. Think about it, in addition to IVP and NEA, other recent backers of Perplexity includes other notable VCs such as Sequoia, Bessemer and Kindred; strategic backers like Nvidia, Databricks and Bezos Expeditions; and many recognizable individuals such as Jeff Bezos, Meta’s chief AI scientist Yann LeCun, Naval Ravikant, Susan Wojcicki, Elad Gil, Nat Friedman and Clément Delangue from Hugging Face. A newer backer, Daniel Gross, led the $56 million round from March with other new backers Stanley Druckenmiller, Y Combinator head Garry Tan and Figma’s CEO Dylan Field also participating, among others.
Perplexity is now either a stunning success, or it gets acquired and continues to grow fairly well.
In the case of Perplexity, the startup is standing out in the market because nobody really dared to take on Google with Generative AI with a new vision for what Ads and monetization might look like. The passive Ads on Perplexity could feel much less intrusive. Perplexity’s chief business officer Dmitry Shevelenko told Adweek a few weeks back, the company is considering adding sponsored suggested questions to its platform. If users continue to search for more information on the same topic, Perplexity could start serving up suggested queries from brands.
Now Perplexity has rolled out Enterprise Pro.
There’s a slim but plausible path now for Perplexity to do to Google, what Microsoft did to IBM back in the day. Aravind Srinivas might be showing that just what an Indian kid from Berkley can do. He’s also unique in that he interned at both Google and OpenAI.
Perplexity vs. Google is the shaping up to be the David vs. Goliath story of Generative AI Search, and consumer behavior is pointing to a more diversified search experiences for the next major phase of the global consumer internet. In this light for some of us, Perplexity is even more appealing than OpenAI swooping in with a Bing aided GPT-5 web-search product and stealing marketshare from both Bing itself and Google.
Many Perplexity users were telling Perplexity that their companies don't let them use it at work due to data and security concerns, but they really want to. To address this, they literally are launching Perplexity Enterprise Pro: a Perplexity Pro that comes with SOC2, SSO, user management, enterprise-grade data retention, and security warnings.
Perplexity is still a very small fish in a large pond, that few startups dare to tread. In the case of Perplexity, the startup offers its tools on free and enterprise, paid tiers, and so far it has processed 75 million queries this year and is currently on ARR of $20 million, according to Bloomberg.
In 2024 as Enterprise AI is the better realm for monetization, Perplexity is taking flight. With a small but loyal user base, they are ready to take their next steps.
The startup is announcing a new enterprise version of its chatbot, priced at $40 a month, with added features including stronger security and data protection measures.
The entire consumer AI realm saw how OpenAI monetized via ChatGPT for Enterprise with their significant Microsoft connections, and are following suite.
Even how Meta is pivoting Search in its suite of apps is really notable in 2024. Meta AI answers now may include Google Search results, making this the first AI assistant to include search results from both Google and Microsoft.
Google’s own SGE, Meta AI Assistant and Microsoft Copilot along with ChatGPT powered by GPT-5 will already continue to change consumer behaviors even without Perplexity or an OpenAI web-search product even existing. But the next five years are critical for Google.
Google’s Frantic Rally Cries
Going back to the bizarre meeting at Google HQ, Raghavan’s comments serve as the latest warning to employees that growth for Google is getting harder.
“It’s not like life is going to be hunky-dory, forever,” he said.
Over roughly 35 minutes, Raghavan peppered his reality check address with sports metaphors and rallying cries, as reported by CNBC. Google must also must be seeing these “changes in consumer behaviors” that signal a major shift in how we use the internet and our apps.
Perplexity AI says it’s serving 169 million queries per month and cementing its position as a leading AI-native answer engine. Google was already fairly “AI-native” before even SGE, but it’s we sometimes forget that Google is just a glorified digital Ads monopoly, and its core AI engineers and talent level has been getting worse for a number of years in succession. Google’s talent is going elsewhere and has been for quite some time.
Google is No Longer Feeling Lucky
Google relies too much on Search Advertising for its entire base of revenue. One trick ponies are a lot easier to disrupt, even when they helped shaped the American internet searing Google in the the minds and repetitive behaviors of consumers for a number of fairly boring decades.
Google has not done a great job of introducing the world to Google SGE or Google Gemini products. In fact Google’s brand has likely declined in trustworthiness during this Generative AI period. That does bode fairly well for Google’s luck running out sometime in the next decade, likely even sooner.
Consumer changes in behavior once they reach a critical mass, can feel sudden, even if they have been a long time coming.
An OpenAI web-search product, Perplexity and other Enterprise Search upstarts come be enough to give Google a hard time. That could also be some surprises here from Amazon or Apple even.
There is a great deal of uncertainty that Google’s search traffic dominance is forever, even as Instagram is doing fairly well compared to YouTube in Ad monetization. If TikTok is no longer allowed in the United States, things can change drastically in a sudden period.
This is not the Time to Sit on the Sidelines
This crucial period where consumers are open to alternatives mean the next five years could usher in the future of search. This includes voice-search capabilities and more ambient computing all around us.
OpenAI’s entrance into the web-search consumer marketplace could also usher in new events in this lucrative Ads sector. Everyone says they don’t like Ads, at the beginning. Sam Altman explicitly said that he was biased against search and expressed confidence that there is a path toward an AI-based information retrieval system that is profitable without having to serve advertising. Jeff Bezos was anti-Ads once upon a time too, and now Amazon is the fastest growing Ads machine around. In 2023, Amazon reported 46.9 billion U.S. dollars in revenue generated through advertising sales worldwide.
If you want to make money online, Ads are the way to go. But Google places Ads too aggressively in its search product, that as a legacy interface isn’t even that good any longer. Ambitious companies need to be going after Search and Search advertising in the 2024 to 2029 period, because the window of opportunity and low hanging fruit is just huge. This is also what makes the courage of Perplexity all the more impressive.
This interview is one month before the big funding: (March, 2024):
Fact-Checking Truth in the Age of AI
ChatGPT Enterprise is probably not a great search product. Perplexity Enterprise Pro, is not only its first B2B product, the product has already been adopted by a diverse range of companies, including Stripe, Zoom, Bridgewater, and the Cleveland Cavaliers, with use cases spanning from supporting cancer researchers to assisting developers with coding questions.
The Productivity Clone Wars
Since Perplexity has citations and is more of a chatbot, it feels more transparent and trustworthy in finding more human answers with less Ad-spam. The future of answer bots and specialized Enterprise Search apps is likely already out-performing Google for many queries.
It’s less productive to keep using Google for many of us in our professional circumstances. Generative AI in this sense is changing the habits of consumers due to the pressure to use the right tools to do more with less stress and anxiety.
Furthermore you could make the case that people and top talent just don’t see Google as an attractive employer any longer. Google's idyllic campus image shattered by protester firings in recent days. Google has fired 50 employees after protests over Israel cloud deal and it makes you wonder about its corporate culture.
Silicon Valley's leading firms have long told talented employees to think of the office like a campus, "bring their whole selves" to work, well not if you going to protest about how evil your employer is of course. If Google’s reputation is on the decline and its search product appears subjectively worse while others are getting significantly better, you don’t need to the math to see what is likely to happen in the next few years.
If techies like Snowflake and Zoom are early users of Perplexity’s Enterprise Pro, how far behind can the finance folk be and other white collar professionals?
Ali Ghodsi, CEO of Databricks, praised the impact of Perplexity Enterprise Pro, saying, "Perplexity Enterprise Pro has allowed Databricks to substantially accelerate R&D, making it easier for our engineering, marketing, and sales teams to execute faster. We estimate it helps our team save 5k working hours monthly."
While companies like Google, Amazon and Meta have been doing rounds of layoffs and cost-cutting, they may be already losing the battle for the future of Search. All frantically trying to invest even more R&D and Billions into Generative AI. Perplexity is small and agile, not racing and growing like OpenAI has been doing in recent times:
Perplexity’s trajectory might surprise some people in tech. As Mistral, Cohere, x.AI, Softbank and OpenAI itself and others race for more funding, it isn’t just about how much funding you can get, but what consumers actually want for the next version of the internet. Hopefully a better version.
It’s confusing to imagine Google might be under threat, many of us don’t remember clearly a world before Google. Since by the end of 1999, it had become the leading search engine on the internet, with a market share of around 60%. Now 25 years later, Alphabet doesn’t even know the ABCs of what is to come.