Perplexity is set to raise $500 million, its biggest round of funding so far. Backed by leading tech companies and investors, including Nvidia, Amazon, and Softbank, the company is doubling its valuation to $8 billion since its last round in June 2024.
However, amidst its rising popularity, known media platforms advocate against Perplexity, accusing it of copyright infringement and scraping content behind paywalls.
In a recent development, News Corp strongly accused Perplexity of stealing content from the New York Post and Wall Street Journal. A few weeks ago, the New York Times handed Perplexity a cease-and-desist order, demanding it stop scraping content from the website.
Besides, Forbes and Wired accused Perplexity of plagiarism earlier this year. Other accusations include bypassing paywalls, scraping robots.txt files, or producing content uncannily similar to the original published material.
Interestingly, accusations and lawsuits compete with the number of rounds Perplexity is raising funds through. It has already raised $415 million in capital in six rounds of funding, even as prominent investors want to fund Perplexity. The questionable practices, however, do not seem to deter investors from pouring more capital into the search engine startup.
Perplexity Trumps Google
Despite not having a foundational large language model (LLM) of its own, Perplexity stands tall among the giants of the generative AI industry in terms of venture capital investments as it’s killing two birds with a single stone.
First, there’s a massive opportunity to build a search engine, a product availed by every person who uses the Internet. Second, it solves a crucial challenge in AI chatbots: providing citations, sources, and real-time updated information. Solving the latter problem offers users, especially first-timers, confidence while reading AI-generated information.
Moreover, Google has enjoyed a search engine monopoly for nearly two decades. Though DuckDuckGo, a privacy-focused search engine, and Microsoft’s Bing offer some competition, they are nowhere closer to Google. While Perplexity is far from beating Google, it is in the limelight for all the benefits it provides over Google.
Serving 100 million queries every week, Perplexity is perhaps the only search engine in recent times that has impressed not just the people who lurk on the web on a daily basis, but also some of the biggest names in the AI industry. Meta’s chief AI scientist Yann LeCun, who, for the most part, is a proponent of ethical and moral practices in AI, participated in Perplexity’s early funding rounds.
Given NVIDIA’s investment in Perplexity, Jensen Huang is bound to praise the product, but he went all the way and said, “Everybody should have their own tutor. I have mine. It’s called Perplexity”.
Google has also rolled out AI overviews with summarized search results and citations to 100+ countries, but the user experience is a choice overload. For a search query, you receive an AI overview, a snippet that scrapes information from a website that ranks first for the query, a list of what people are also asking, and, finally, a list of blue links. If you’re unlucky, you’ll also see sponsored content on top of AI overviews.
Perplexity trumps Google in the ease of finding information from the web. For many users, direct, concise, and verifiable information seems to be the preferred choice.
While OpenAI isn’t focusing on releasing SearchGPT to the public anytime soon, the GenAI torchbearer had an embarrassing start. Users were quick to find an error during its very first demo.
Perplexity is not flawless, as users have found several bugs and issues on its platform. With consistent updates and fixes, the problems may eventually be fixed, but the fundamental value proposition seems to lie in the overall user experience.
Why I prefer @perplexity_ai over Google:
Google: 3 sites, 2-3 mins of reading, clicking around.
Perplexity: 10 seconds, direct answer pic.twitter.com/vCwvzeRKr2— Elric Legloire | The Outbound Chef👨🍳 (@elriclegloire) October 26, 2024
The company recently went on a spree of adding new features like Perplexity Spaces, a finance analysis tool, an internal file search engine and a reasoning mode. CEO Aravind Srinivas says one can expect more such enhancements in November, indicative of an ambition to deliver a feature-rich product to dig the web.
Legal Heat, Lasting Connections
Perplexity isn’t the only AI product that has been served lawsuits over copyright infringement. OpenAI and Google have also faced similar issues.
As of now, we haven’t seen a thorough test of anyone’s defence in the court. Given generative AI’s impact on the economy and its benefits to the public, it is very likely that several jurisdictions will come into place later, providing a balanced resolution for both the publishers and the founders. An early example is the UK government’s plan to permit AI companies to scrape content from the web.
This is one of the main reasons such lawsuits and infringements aren’t decisive in stopping investments. The other is Perplexity’s attempts to foster a win-win relationship with the media industry.
Srinivas has repeatedly suggested that he deeply cares about publishers and has stressed that the platform provides citations wherever necessary.
In response to News Corps’ lawsuit, Srinivas said, “The lawsuit reflects an adversarial posture between media and tech that is—while depressingly familiar—fundamentally shortsighted, unnecessary, and self-defeating. We should all be working together to offer people amazing new tools and build genuinely pie-expanding businesses.”
We’ll build and debug together the future of how people ask questions and get their answers and solve their problems
— Aravind Srinivas (@AravSrinivas) October 28, 2024
While he isn’t short on words about playing the good guy in public and aggressively promoting his product, he seems to have taken a few actions as well.
He has acknowledged the dent in Perplexity’s public image and started a revenue-sharing program with publishers. Current partners include TIME, Der Spiegel, Fortune, Entrepreneur, The Texas Tribune, and WordPress.com. Contrary to Sam Altman’s plans with ChatGPT, Perplexity also plans to introduce advertising in its platform.
Given the market opportunity in generative AI, it will be increasingly difficult for other leading publishers to avoid joining the revenue-sharing program. The program also sets a precedent for Perplexity’s plans to collaborate with publishers and share their information in its search engine without legal hassles in the future.
Starting to Look a Lot Like Google’s Early Days
Perplexity seems to tread Google’s path for both the right and the wrong reasons. Perplexity’s journey is reminiscent of Google’s early legal battles while revolutionising the way users find information from the depths of the internet.
In 2005, the Author’s Guild sued Google for copyright infringement, accusing the company of scanning millions of books to create a database. Ten years later, in 2015, the court ruled in Google’s favour and asserted that their actions were transformative and greatly helped provide information about books to the public.
In 2004, Blake Field, an attorney and a member of the State Bar Association of Nevada, filed a lawsuit against Google for copying and distributing more than fifty of his works from his website. Eventually, the court ruled in Google’s favour, saying that such practices are necessary to build an effective search engine for the web.
It will be interesting to see how legal verdicts are delivered for accusations in the generative AI space. While investors can hope for a balanced verdict, they aren’t stopping themselves from investing in the ecosystems, maximising their chances for returns despite the risks involved.
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