Zeed Feature: Perplexity's New Browser is Exactly Why Apple Should Acquire It
How the Browser Wars could lead to Apple catching up to the competition
Welcome to ZeedRound, the newsletter about startups and markets that doesn’t wear a Columbia vest or penny loafers. In today’s Zeed Feature, we’re talking about Perplexity, Apple, and the Browser Wars. Enjoy!
Traditionally, to beat your competition, it’s advised that you find something that you do differently (and, crucially, better) than everyone else in your space. For Walmart, Sam Walton pioneered the discounting model and built the company’s backend infrastructure, which successfully helped the company triumph over Kmart, Sears, and other big dogs of the industry. For TSMC, it’s come through having a Grand Canyon-sized gap between its level of innovation and other chip manufacturers, as well as having a very close relationship with lithography equipment maker ASML. And for Duolingo, it’s about building one of the closest relationships possible with its customers on social media—actually, scratch that.
And yet, amidst an AI craze/possible bubble, search startup Perplexity seems to be betting on an old model to get itself some market share.
Late last week, it was reported by Reuters that Perplexity was in talks with mobile device makers to pre-install its new AI-powered browser, Comet, onto phones directly. This seems to have gone ever so slightly under the radar due to outlets also announcing that they’re seeking funding that values the company at $18 billion, but the strategy seems like one of the bigger surprises to come out of the startup.
Instead of going against Google, Microsoft, and Apple with a new browser adoption strategy, they’re going at them with an old one; one that those Big Tech firms themselves pioneered. And one of those companies might want to start putting together an offer to simply acquire Perplexity outright.
First, it’s worth talking about what Perplexity’s browser is in the first place. Comet, released publicly a week and a bit ago—and I quote Perplexity’s press release here—”transforms any webpage into a portal of curiosity,” which is pretty much startup technobabble. In reality, it does do some pretty cool and useful things, such as summarizing articles succinctly (you could even do it with the one you’re reading right now), answer questions about anything on your screen (including YouTube videos), and, in a godsend for every person with way too many tabs open, auto-group those tabs into categories.
That’s all great, but the real “killer feature,” if you want to call it that, is that the browser operates agentically. That’s more technobabble, but here’s an example:
Enter in the search bar, “Find a lamp on Amazon that’s at least 6 feet tall and under $30, with great reviews, and add it to my cart.”
Comet/Perplexity searches Amazon, reads the reviews, and looks at the product specifications before adding one to your cart.
Comet/Perplexity comes back to you, says it added it to your cart, and you’re free to review it and/or check out if you want to.
In a tech environment where a lot of startups are just ChatGPT replicas, Perplexity has actually done a great job of creating a properly useful product. Heck, it can even unsubscribe from emails for you without you doing so much as entering a prompt:
Pretty incredible stuff, and due to how Perplexity cites sources, it doesn’t seem to suffer from hallucinations (i.e., Gandhi did not use nukes in real life [he did in Civilization], but ChatGPT might think otherwise) as much as other systems from OpenAI, Google, and others in the space.
But guess what: Having a great browser doesn’t really matter; getting market share does.
Hence, Perplexity goes to ye olde playbook.
The Pay-Off Business Model
If you’ve kept up with antitrust news any time in the past year, you probably heard that Google might be forced to sell Chrome. That’s pretty bad for Google, but I’m more concerned with the details here. As part of the antitrust lawsuit’s proceedings, it was revealed that Google paid as much as $20 billion (with a B!) to get Apple to use Google as its default search engine for Safari. That’s kind of like paying an influencer to use your product and promote it to your users, or, uh, playing a nice American game of Monopoly, depending on how you see it.
Because Google gets so much revenue from advertising and its ranked search system, it was willing to pay seemingly exorbitant fees to keep its dominance and front-of-mindness. And, on the browser front, they already hold a significant share; when you combine Safari and Chrome into one (assuming most users use Google on both), you get a market share of over 85%:
Perplexity, it seems, is trying to do a similar strategy to Google’s. If Perplexity were successfully able to pay off some phone manufacturers to use Comet as the default browser (likely to be non-Apple or Google ones like Motorola, Oppo, LG, etc), it would effectively circumvent Google’s search system entirely on those platforms.
Of course, it’s worth noting that the Chrome browser and Google’s search business are entirely separate, but in this case, they are actually one and the same. Because of the way Comet works, users are never going to see the ranked search system they’re used to seeing on Chrome, Microsoft Edge, or any other browser, effectively circumventing all ad revenue that Google would otherwise receive.
The question is what it would take to court even the smaller players in the space. Perplexity, being a high-growth startup, is likely unprofitable despite some, shall we say, Hollywood accounting, and nobody but its investors knows how much cash it has on the table.
Plus, I am skeptical that grabbing up smaller players in the space would be good enough to truly circumvent Google. Even if Chrome were sold off, people would still use it, and it would hold a persistently significant market share. Perplexity would become a decent niche competitor, but never one that could get the laggards and late-adopters to actually get on board.
Instead, maybe it would be better for Perplexity to get acquired by someone else who has the leverage and customer loyalty to move the needle. And there’s likely only one candidate that really makes sense and wouldn’t set off antitrust alarm bells…
Apple of My Eye
Less than a month ago, a report came out that would qualify as a bombshell if it actually had any real action to it: Apple was internally considering buying Perplexity. Of course, everyone treated it as a bombshell, and for good reason. To this point, Apple has had a very poor time on the AI front, promising an updated Siri that has continually been delayed (and delayed, and delayed again). Acquiring Perplexity, or a company like it, would immediately inject both talent and infrastructure to become a lead competitor in the AI space alongside Google, Microsoft, and OpenAI.
In my mind, though, the bigger benefit is that Apple would gain the best browser in the business, and I’m not the only one with that opinion. Apple analyst Dan Ives recently told Fortune:
“Apple is way too behind and does not have the AI technology to compete. The clock has struck 12, they need to acquire Perplexity or risk getting further behind,”
- Dan Ives, Apple Analyst
If Apple were to acquire Perplexity—and, with around $48B of cash, it certainly could try—it could immediately make Comet one and the same with Safari. Safari is a perfectly fine browser, but it has no innate search engine and, for all of Apple’s innovativeness in other areas, feels like the most stagnant and downright boring part of its ecosystem. Perplexity has successfully circumvented the ranked search system and could be bringing about a new age of the browser, and acquiring it would make Apple the pioneer.
There are a few caveats that would likely have to be included in an acquisition agreement to ensure that the FTC doesn’t see it as an anticompetitive measure. For one, it would likely have to allow other platforms to use the Comet/Safari conglomerate browser if they so choose. However, because Apple’s ecosystem is generally so well integrated, it could make Comet/Safari work far better on Apple devices due to other aspects of the platform, like Siri or iMessage. Throw in the excessive amount of talent you get from Perplexity in the process, and it seems like a slam dunk.
This obviously hinges on Perplexity’s willingness to be acquired, though other companies like Meta have successfully acqui-hired companies without full buyout agreements on paper. If Perplexity were acquired by any other Big Tech firm (Google, Meta, Microsoft, etc.), I would feel much more pessimistic about it, as it would be a showcase of further centralization of power and the death of further innovation. With Apple, however, innovation is in its blood, and it’s far enough behind in the AI race that it may need a nice injection of talent to ensure it doesn’t get swallowed up in the long term.
Apple buying Perplexity would be the biggest blow in the nascent Browser Wars, and one that seems like a smart move for both sides. Perplexity’s growth may be stunted by OpenAI’s rumored browser release and Chrome’s dominance. To make sure they come out on top, the startup may need a bigger fighter in their corner.