There were a lot of people who called Perplexity the Google killer three years ago.

Fast forward to now, Google search is doing just fine.

The core problem that Perplexity faces is that they built a Ferrari for a world that needs Corollas.

The math, the engine economics, and even Google's antitrust ruling all point to the same thing.

Perplexity still cannot beat Google search. Let's break down why. Episode 7 of my series AI hype versus reality.

Let's go. Just two years ago, Perplexity AI processed 42 million queries per month on average.

And by October of the following year, the number grew to 400 million, a thousand% growth in under a year.

A very solid number, solid, but microscopic compared to Google's 8.5 billion queries per day.

These numbers for a startup that managed to make headlines as a potential Google rival, something nobody has done in decades, is phenomenal.

But there is a fundamental difference, an enormous scale gap between the economics of AI native search and an adfunded search.

This isn't even apples and oranges. This is apples and an entire orchard.

What do we need to know about AI native search and an adfunded search? Let's talk about Google.

Google's advertising revenue reached $237 billion, which is a 6% Y increase, which is the second smallest growth rate in two decades.

Once again, almost $240 billion is their second smallest growth rate in two decades.

In 2025, this ad revenue went up to almost $300 billion.

Ads are a gigantic revenue stream for Google.

It makes up 77% of Alphabet's total revenue and translates to approximately $700 million earned daily from advertising alone.

Combine that with YouTube ads and Google network and you'll realize that search ads aren't a side business for Google. They are the business.

Now, let's talk about Perplexity.

Perplexity doesn't have any of this infrastructure.

Perplexity's annual projected revenue for this year is 147 million.

Compare that to Google's daily revenue of 780 from advertising alone.

It is estimated that the revenue that Perplexity makes per each user is $4.50 annually.

Google's estimated revenue per user per year is $80 globally.

It is higher in North America, but on average is $80.

Now, let's talk about the mechanism of search.

At Google, it's keyword matching.

At Perplexity, it's neural information retrieval plus LLM.

Perplexity's conversational interface requires significantly higher computational costs than Google's traditional keyword matching because for each response, Perplexity's AI search combines LLM with realtime synthesis from multiple sources, whereas Google simply retrieves the link.

Perplexity's conversational interface requires significantly higher computational costs than Google's traditional keyword matching because for each response, Perplexity's AI search combines LLM with realtime synthesis from multiple sources, whereas Google simply retrieves the link.

Now, let's talk about the unit economics of an AI search versus adb-based search.

If we factor in Perplexity's infrastructure costs for processing natural language queries and generating cited responses and pair it up with their clean and beautiful UX, there is little to no room for advertising.

In contrast, Google's seamless ad placement within search results generates a ton of money for them automatically.

Perplexity is currently valued at $18 billion, and that's a double of their valuation since December 2024.

And it does show investor confidence in long-term disruption potential.

But current perplexities revenue would have to grow 2500 times to match Google's advertising revenue alone.

That is the cost of scale for an AI first search versus traditional search.

Chrome's dominance gives Google such a massive distribution advantage that it dictates the search behavior that we as users adopt and it makes it brutally difficult for competitors like Perplexity to win those users.

Chrome's dominance is more than just a market share.

And the browsing experience is such that the address bar doubles as the search interface.

And when you open a new page, you get all of the Google services at once.

They deliberately integrate Chrome with the rest of Google's ecosystem.

So much so that even superior AI search must overcome ingrained user habits.

And as you know, old habits die hard.

Perplexity, on the other hand, is well aware of its weak modes.

Perplexity does not have its own proprietary database of web pages like traditional search engines.

Only about half of its users pay for the pro plan, and 50% of the paid users either come from trials, promotions, referrals, or bundles.

Meaning, Perplexity doesn't get the full revenue out of those subs.

That fragility explains why Perplexity team keeps experimenting.

They introduced this feature called pages. They just launched their own browser extension and they even bid to buy Google Chrome.

Keep watching till the end to find out what happened.

Now, a few words on Perplexity's browser.

On one hand, you may argue that Chrome's dominance is so entrenched that nobody can seriously erode it.

But Perplexities got quite a bit of an advantage. A fairy godmother, if I may, the one and only Chad GPT.

And you guys know why Chad GPT was the product that changed the search behavior.

A shift that nobody was able to pull off in decades.

The thing is that traditional search began as a way to return lists of sites.

Over time, they layered on extensions, widgets, services, shopping, booking, knowledge panels, and all of them were designed to cut down the user's path from query to solution.

But chat GPT has removed the need for the user path entirely.

Large language models began producing answers right away and that opened our eyes on a completely different search behavior.

People realized that they no longer have to look for the information or for the answer. They could get instant answers without clicking at all.

But LLMs come with three unavoidable flaws. They hallucinate. Their stored knowledge capacity is limited. And they're not trained on the most up-to-date information.

So what Perplexity and products like Perplexity did is that they married the relevance of the information on Google to LLM behavior.

What they did is they built a conversational search with beautiful UX.

By the way, they were one of the first AI apps to demonstrate how LLMs do reasoning, which planted that credibility in our eyes because it looked like Perplexity was thinking.

And all of that was paired with very recent news and the most up-to-date information.

Now, Plexity does hallucinate every now and then, but the UX of the app almost made it seem like it doesn't.

So, why didn't the Google killer moment actually happen?

It didn't happen because not all searches are made with the same purpose.

What we love doing in this channel is playing product management 101.

So, let's do it again.

Why do people search in the first place?

There are two primary buckets of search queries.

The first one is to get direct answers.

What's tomorrow's weather? Who won the game? What's the meaning of this word?

For these questions, Google is an obvious choice because it's simply faster.

Now, if you plug any of those questions into Perplexity, it'll start fetching data, comparing sources, giving you pros and cons, summarizing trade-offs, etc.

Whereas, Google just serves the result.

And the second bucket is when people are working on a task or on a question that has causal relationship when they're doing research.

In other words, when the question isn't a yes or no.

In this case, a user wants a completely opposite behavior.

They don't want generic summarization or a one-word answer.

If anything, they get irritated when a complex question gets answered with one word.

And the problem is that perplexity covers only one of these use cases, the second one.

It also doesn't support any of the service requests.

It can't make a reservation. It can't make a call. It can't book a service.

Sequia was blunt about this.

The Genai agent market is effectively a services market.

And if you want to beat Google, you can't stop at information.

You must provide a full service of a search engine, quick answers, and research and services.

Perplexity's native browser removes a reliance on someone else's platform and gives them a competitive edge that it lacks.

Because users are already logged in, the experience is personalized.

And most importantly, the browser becomes the single front door for every type of query from a basic question to complex tasks.

That is something Google is boxed out of.

Chrome is structured around the search bar which is structured around the search ads.

Building an AI first browser that simply provides answers would cannibalize the very revenue stream that Chrome is designed to protect.

Perplexity comment browser just came out recently.

And if you've had a chance to test it out, please do let me know what you guys think about it in the comments.

I'm really looking forward to seeing Perplexity's end ofear results after this launch.

But nevertheless, on pure economics, Perplexity doesn't stand a chance against Google.

But business isn't just about economics. It's also about politics and law.

And who doesn't love a good old plot twist.

Let's talk about what's hot off the press. Google's antitrust ruling.

The US Department of Justice has been pursuing antitrust lawsuits against Google.

As a quick side note, antitrust laws are meant to protect competition and commerce.

In the US, it is not illegal to be big and powerful.

There is absolutely nothing wrong with gaining monopoly position from superior products or services.

However, what is illegal is when a monopoly takes predatory steps to stop its rivals.

The antitrust lawsuit against Google is focused on two main areas.

The first one being that Google has an illegal monopoly in the general search and search advertising market.

The second one around Google being a monopoly in online advertising technology.

In 2024, Google lost the biggest antitrust challenge when the judge Amit Makda found that it illegally monopolized the search market.

And this month, the US government has ordered Google to sell its Chrome web browser and license search data to competitors.

And by the way, this would mark the biggest forced breakup of a US company since AT&T was dismantled in 1984.

So, who do you think expressed interest in purchasing Google Chrome?

You guessed it, Perplexity and OpenAI.

The Justice Department said that Google, whose search engine controls nearly 90% of online queries, has paid around $26 billion to maintain a monopoly over the search market by agreements with tech rivals, smartphone manufacturers, and wireless providers.

In exchange for a cut of advertising revenue, those companies, including Apple and Samsung, agreed to set Google as the default on browser and mobile devices.

Google illegally monopolized the market for general search and search text advertising. the ads that appear at the top of the search results page.

So, what happens now?

The judge proposed the following. A forced sale of Google Chrome, like I mentioned before, prohibit Google from entering into any kind of exclusive deals.

And for its existing agreements, Google would be required to offer smartphone makers and wireless carriers the option to display a choice screens to users.

Now, how did Google respond?

Google said that it intends to appeal the judge's ruling that it has illegally monopolized the search market, which could delay a remedy for months or even years.

Google also said that it plans to challenge any ruling that calls for Chrome to be divested and also proposed a counter set of remedies that would modify its default search agreements with Apple and Mozilla.

It also said that it would make it easier for phone makers such as Samsung to use its Android operating system without having to make Google search the default on the devices.

Now, what did Perplexity offer Google?

Perplexity made an audacious 34.5 billion allcash offer, which is their first big acquisition move.

Now, personally, I don't think it'll happen.

But now, did I think there would be an M&A situation around Perplexity? Yes.

And I was hoping that it would be an A acquisition by, for example, Apple, and they have good reasons for it.

But did I think Perplexity would be offered by Google Chrome? No, that wasn't in my wildest dreams.

Perplexity's bid was made through a letter to Alphabet CEO and it promises to contain Chrome as open source, invest $3 billion after 2 years, and drum roll, keep Google as the default search engine.

This offer would essentially allow Perplexity to access Chrome's user base, 3 million, and transform Perplexity's engine economics without displacing Google's core search monopoly.

This would also allow Perplexity to gradually introduce its AI powered search through the browser while avoiding the direct confrontation that has limited other Google competitors.

The industry analysts are very skeptical about this offer and deem it as a stunt that significantly undervalues Chrome's true worth.

Many suggest that the browser could be worth upwards of $50 billion because of its unmatched data collection and user reach.

Now, even if there is a universe where Perplexity can pull this off, I really don't know where they're going to get $34.5 billion in cash.

Perplexity's valuation is $18 billion, which is why this whole move has raised serious question about financial ability of Perplexity to pull this off.

And at the same time, Google has shown no intention to sell Chrome.

Now, the interesting thing is that OpenAI and Yahoo have also expressed interest in Chrome, which could potentially trigger a bidding war that can push valuations far beyond Perplexity's resources.

But let's see what happens.

Conclusion: Building a better search engine isn't the hardest part. Building a profitable one is.

Perplexity has created a beautiful and extremely highquality product, but their own unit economics plays against them.

Every AI powered response costs exponentially more than a keyword match.

And no amount of venture capital funding changes that math.

Google's monopoly isn't only about distribution and data. It's about the fact that they discovered a search model that actually makes more money at scale.

And this is why Perplexity cannot beat Google search.

At least not today.

I hope you found this video helpful.

Let us know what you think in the comments.

Till next time. Bye.