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Perplexity, an AI search startup that became one of the first popular consumer products in the generative AI era, announced a new revenue sharing agreement Tuesday with major media brands, including Fortune, Der Spiegel, and Time.
The Perplexity Publishers Program will distribute revenue to media outlets when their content appears next to ads that the San Francisco startup says it plans to launch in the coming months.
The publisher program was first reported by Semafor last month, when the company was under intense scrutiny for the way it credited publications for content displayed in Perplexity search results.
Forbes accused Perplexity of failing to provide proper citations in a summary of its investigative article about former Google CEO Eric Schmidt. Later, Wired alleged that Perplexity had surreptitiously scraped content from news sites using alternative IP addresses.
Wired reported that Amazon, which hosted the allegedly nefarious IP addresses, was investigating whether the startup violated its policies. Perplexity says the Amazon investigation found it did nothing wrong. An Amazon spokesman did not respond to a request for comment. Amazon founder Jeff Bezos is an investor in Perplexity. Wired declined to comment.
After the original allegations from Forbes, Perplexity engineers worked around the clock to change the way its pages are laid out, displaying more prominent citations from publishers, Semafor reported earlier.
Those changes did little to quell a wave of intense criticism from media companies and reporters, many of whom took to X to express their displeasure with the startup.
Dmitry Shevelenko, Perplexity’s chief business officer, told Semafor that some publishers dropped out of the partnership program after the reporting from Forbes and Wired. Those firms, he said, were particularly concerned about internal revolts from staff who might disagree with the strategy.
“We were basically a month away from announcing the program before the Forbes and Wired stuff hit. And so there were four or five that were almost there and decided to just wait for the second wave,” he said.
Shevelenko said that Perplexity had to convince publishers like Time, Fortune and Der Spiegel that it was a good faith actor, and that the allegations against it came down to a misunderstanding.
He also said that Amazon Web Services opened up a ticket after Wired’s allegations, but quickly found that Perplexity had not crawled any websites without permission.
Wired’s article found two main issues: First, pasting headlines of its articles into Perplexity sometimes yielded information about those stories, despite the fact that Perplexity wasn’t supposed to have access to Wired.com.
One explanation, alluded to in the Wired article, is that stories from Wired and other publishers get aggregated and quoted all over the internet and sites like Reddit, so Perplexity’s crawlers can get snippets of them without ever visiting Wired.
The second issue Wired found was that Perplexity used a “secret IP address” to visit a website it wasn’t supposed to access when that URL was pasted directly into the search engine with a prompt like “summarize this web page.”
Shevelenko said the company used one IP address for proactively crawling the web. But when users pasted an IP address directly into Perplexity’s search engine and asked it to go find that web page, it was an entirely different process that the company says does not fall under the definition of “crawling.” In those circumstances, other IP addresses were used.
After the Wired story, Perplexity voluntarily disabled that functionality, so even if a user pastes a specific URL into the search window, Perplexity will not visit the site if it has a “do not crawl” request.
Last week, ChatGPT creator OpenAI announced its own search experiment, dubbed SearchGPT. The company inked partnerships with big media brands ahead of the launch, saying that it hoped to drive traffic back to publishers’ web sites with prominent citations for source content that appears in search results.
Those partnerships do not appear to include revenue sharing agreements, however. An OpenAI spokeswoman did not respond to a request for comment.
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The Perplexity Publisher Program hinges around a new planned advertising unit that will run inside its “Pages” feature, where users can turn search results into publicly-available documents that have some similarities to Wikipedia entries.
Brands will be able to buy advertisements in the form of suggested follow-up questions. For instance, in a Pages article about how to make lasagna, consumer packaged goods companies might pay for a follow-up question like “What are the top pasta brands.”
The company also plans to include ads in its its answer engine.
Perplexity didn’t say how the ads would be priced but said the percentage of the advertising revenue the initial batch of publishers will receive is in the double-digits. Those publishers are grandfathered in at the initial rate, should the rates decrease in the future.
At first, the advertisements will be limited to a group of brands in specific topic areas, but will likely expand over time to include programmatic advertising, the company said.
Shevelenko said that it plans to allow publishers to use their own ad sales teams to sell Perplexity’s ad inventory, offering an additional revenue opportunity. He said Time is considering the offer.
The new ad units offer a glimpse into what the internet economy might look like in the AI era, as tech companies grapple with how to monetize chatbots, AI search engines and other consumer-facing products.
Perplexity and now OpenAI put pressure on Google to modify its search engine. The company is experimenting with new products that leverage generative AI to provide complete answers to queries, rather than a list of blue links. It’s unclear whether the answer format will drive as much advertising revenue, which represents the majority of Google’s earnings.
Reed’s view
Getting a handful of major publishers on board for the launch of its revenue sharing program is a win for Perplexity’s image. Time, Der Spiegel and Fortune are brand names in the media industry and the company told me there are more in the works.
But it’s impossible to say whether this will be a big revenue generator for media companies when the advertising product hasn’t launched yet and Perplexity is still a relatively new startup that now faces stiff competition from OpenAI and, of course, Google.
There’s also a question around consumer behavior. It’s unclear whether visiting an AI search engine to get news will become a “thing.”
It may be that the value proposition of an AI search engine is something entirely different. My searches on Perplexity rarely relate to news content.
Max’s view
It’s difficult to say definitively whether these are worthwhile deals in the long run for news media companies. Neither Perplexity nor its new partners disclosed the financial terms of Tuesday’s revenue-sharing partnership. What is clear is that there are disagreements among competitors about whether to take money from AI companies. Some of the biggest players in media like CNN and Conde Nast continue to hold out for better terms (the New York Times’ lawsuit against OpenAI is its own signal that it doesn’t believe the AI companies are adequately compensating the company for how the machine uses its content).
Still, for some smaller reputable publishers, at the moment the deals seem more low risk than doing nothing. Media companies have watched with alarm as Google has begun rolling out its AI search summaries, threatening traffic to publishers and revenue models built around search like e-commerce. Deals with AI companies at least theoretically introduce new revenue if AI is going to cannibalize search anyway. Perplexity told Semafor it is limiting the topic areas with revenue share ads. The agreements also present an opportunity to see whether the AI companies are better partners to media than the previous generation of tech and social media platforms (some of the players are the same).