What Happened
On November 18th, startup Perplexity released a shopping tool for its Pro-level subscribers called “Buy With Pro.” When accessed via their mobile app, the shopping experience integrates with the camera, a feature they call “Snap to Shop.” Similar to Google’s Lens, you can take a picture of something, and then can find it for sale online.
I tried shopping for a replacement for my external microphone. Perplexity identified my Blue Yeti in the image I snapped and 10 seconds later, it gave me a list of options to replace it. I wanted more choices, so I followed up with a second query: “What are comparable microphones?” That gave me five alternative choices. Not bad. For some purchases, they offer free shipping, a nod to Amazon Prime.
The Buy With Pro program is directly tied to a strategic merchant partner program. For select retailers who join, their listings will show up higher on Perplexity’s list of recommendations, and they get access to Perplexity’s API in order to control how their products will appear to shoppers. On the back end, they get their own custom dashboard for insights and analytics.
The shopping experience itself is a little uneven, and forks in at least three directions. When buying from Perplexity’s approved merchants via their “Pro Shop,” you can see taxes, shipping costs, and order progress through the app. For most other vendors, your purchase is either mediated through Shopify’s “Shop Pay” checkout screen, or you are given a “Visit Site” link, where you complete the purchase on the vendor’s site. Oddly, unlike traditional e-commerce, there is no “add to cart” option; the experience seems designed or optimized for quick, single item orders.
In terms of revenue-sharing, Perplexity claims they are not currently taking a cut from their Shop With Pro merchant members, but they are likely getting referral fees.
Why It Happened
In the short-term, Perplexity’s growth and potential profitability is tied to its Pro subscriptions. As their subscription growth slows, there’s a clear shift to monetizing both their free and paid users. They are pursuing two paths concurrently: advertising and integrated e-commerce.
Jeff Bezos is one of Perplexity’s investors. …Who else would you want advising you on e-commerce strategy than the man who build the dominant player in e-commerce?
For some numerical perspective, Perplexity is valued at $3 billion, and is currently out raising a new round of funding. Its annual recurring revenue (ARR) is estimated at $20 million, according to The Information. With a headcount of 104 employees, that’s $192,000 per person. Compare that to AI leader OpenAI, with $4 billion in ARR, and a diversified business model selling both consumer subscriptions and business-to-business services. OpenAI, valued at $157 billion, has already integrated web search, and is rumored to be integrating shopping in January as well. With a rough headcount of 1,700, that’s $235,000 per person in ARR for OpenAI.
Jeff Bezos is one of Perplexity’s investors. Bezos’ involvement is clearly a huge asset to the startup. Who else would you want advising you on e-commerce strategy than the man who build the dominant player in e-commerce?
The long bet here is generational. As reported in RetailDive, GenZ shoppers by 2-to-1 margins say they’re ready to shop with AI. The TikTok generation is being prepped for a very different kind of online shopping.
What Happens Next
If Perplexity can bring more approved partner vendors into their Pro Shop (where they presumably eventually get a cut of transactions), and the dashboards and data-sharing spawn more targeted personalized ads and offers that spark impulse purchases, they may indeed create some network effects for growth. Much will depend on the quality of the experience, and users’ reactions, especially with product returns. If you want to really irritate a consumer, make returning that tacky Christmas cardigan sweater difficult.
Visual search itself — their “Snap to Shop” feature — will likely become a ubiquitous online shopping experience, as many other vendors move away from search interfaces, and instead integrate with the camera, microphones, sensors, and other input devices to get native context that auto-triggers LLM-powered search results. A good example is how Apple Intelligence on the new iPhone lets users snap an image, and Apple’s on-device AI immediately goes into “question and answer” mode for users wanting more information.
Lacking a patent on this clever “Snap to Shop” capability, Perplexity does not have a strong moat with the user experience, and certainly the larger incumbents (Amazon, Google, and Open AI) are learning from the young startup’s experiments and adapting.
The era of marketers SEO-gaming the seach giants is clearly fading. What replaces it appears to be a new era of AI-powered recommendations
Indeed, Amazon has already released in time for this year’s holiday shopping their own AI-powered Shopping Guides available on mobile. Running my same Blue Yeti query on Amazon’s gave me the more trusted and comfortable Prime checkout experience. And for maintaining their grip on merchants, Amazon in September rolled out an AI assistant just for its merchants, called Amelia, that helps their third-party sellers resolve issues more quickly.
Where does this all go for retail online? The era of marketers SEO-gaming the seach giants is clearly fading. What replaces it appears to be a new (and potentially equally game-able) era of AI-powered recommendations. For marketers at companies that partner and share their product data with companies like Perplexity, Amazon, or Google, your product details and metadata will be baked into the LLMs. That means your products are more likely to arise when consumers want “answers.” And if you don’t show up as an answer or option in these new generative AI platforms, you may see a huge dropoff in purchases.
For consumers like me willing to share my personal taste and quirks with these tech companies, I’ll soon be served up irresistable ads and offers. I can easily by next year, I might ask something like, “What are great things to do in Cameroon?” The AI shopping assistant replies, “Waza National Park would be your speed Curtis, because you love zebras. Can I book your flight and hotel right now? And, will Sandrine be joining you?”
