Gagan Ghotra

Ads are coming to Perplexity and users in US soon will start to see SPONSORED labelled “Related” questions at the bottom of an answer. For example – if a user is asking something to Perplexity then it generates the answer and after it usually show the “Related” questions which can be clicked by user to continue the conversation with Perplexity.

Now these “Related” questions may be SPONSORED too – businesses will be able to pay for being shown there.

Here is how its going to look like

Why Perplexity taking this approach? They explained it in the annoucement blog post.

Ad programs like this help us generate revenue to share with our publisher partners. Experience has taught us that subscriptions alone do not generate enough revenue to create a sustainable revenue-sharing program. Especially given how rapidly our publisher program is growing, advertising is the best way to ensure a steady and scalable revenue stream. 

Also Perplexity said it’s an experiment for now and format of displaying the ads may evolve over time.

This is an experiment and formats may evolve, but two principles will always remain true: (1) These ads will not change our commitment to maintaining a trusted service that provides you with direct, unbiased answers to your questions, and (2) we will never share your personal information with advertisers. Our advertising approach is designed to complement the Perplexity experience. 

This way of showing ads is different compared to what other search engines use like for Google its mostly links sometimes at top of search results or in between the organic results too. Similar to Perplexity Google in its search results also show related questions which are marked as “People also ask” but there is no option for any business to pay Google to be featured as a question.

Perhaps after seeing this with Perplexity, Google might also consider launching paid questions in “People also ask” because I think that for Google it would be super easy to just get this going given their network Google Ads which are used by millions of businesses across the world.

Also this approach of showing “Related” question as an ad was explained by Perplexity CEO Aravind Srinivas in a recent podcast with Peter Yang.

They discussed this at 27:50 in this video.

Here is a transcript of what they talked about.

Peter: Let’s talk about advertising. As a user, you know that Google search has devolved a lot. There are so many sponsored links, and mobile websites are just a terrible experience with ads all over the place.

Aravind: Yeah, how are you thinking about delivering these ads better than what exists right now?

Peter: By the way, 60 to 65% of Google’s ad revenue comes from mobile. They’ve optimized their indexing more for mobile than for web, which is why the web experience feels bad sometimes. You’re seeing so many other things.

Aravind: So how do you approach it?

Peter: All this confusion comes from making the ad unit a link. When the ad unit is a link and the UI is ranked order of links, there’s no argument that helps you win here. You have to corrupt the rank order; you have to show sponsored ads at the top or in between or at the bottom. When you show sponsored ads in between or at the bottom, nobody clicks on them, which means low click-through rates and ultimately low ad revenue.

Aravind: That makes sense. So if user growth trends aren’t increasing, you have to put more ads at the top to maintain revenue.

Peter: Exactly. If we avoid that trap, we can make the ad unit a question at the bottom of an answer, incentivizing users to ask the next question. For example, if there’s a question about the best running shoes, different brands can advertise as a sponsored question at the bottom of an answer.

Aravind: So you’re saying that after providing an unbiased answer, brands can pose relevant questions that might interest users?

Peter: Right! If users see questions like “What makes Nike shoes comfortable?” they might click on them and learn more about a brand. If they can transact directly through answers that include product catalogs, we’ve generated demand through questions and fulfilled it through answers.

Aravind: That sounds more efficient than traditional advertising methods.

Peter: Yes! We can get hyper-targeted without corrupting user experience while ensuring return on investment for advertisers.

Aravind: But how do you prove this works?

Peter: It remains to be proven, but many users click on follow-up questions. There’s significant interest in this approach, and we believe it could be effective.

Aravind: What about other ad surfaces?

Peter: There are other areas for ads too. For instance, blank spaces on platforms like Perplexity could host sponsored images or videos that enhance answers. Influencers could also advertise products in relevant contexts.

Aravind: That could create less friction for users compared to traditional methods.

Peter: Exactly! If users discover brands through platforms and can transact there directly, it streamlines their experience.

Aravind: It seems like Google has a lot of bureaucracy that might hinder such changes.

Peter: Definitely! They have over 100,000 employees and won’t change their ad business model overnight. They spend significantly more on ads than on improving core products.

Aravind: That’s an insightful point.

Peter: Yes, always follow the money to understand intent—especially in advertising and product development.

Aravind: Good point! But let’s steer clear of discussing elections now.