#51: Checking in on AI + Acquisitions
Perplexity is a marketing machine
Earlier this week, the WSJ reported that Perplexity is offering to buy Google’s Chrome browser for $34.5B.
For context, Perplexity was valued at $18B as of its last fundraising round in July (and is rumored to be raising additional funds at a $20B valuation as I type). So, their offer for Chrome is double their company’s current value. It’s David taking a swing at Goliath with a sledgehammer. Bold move.
With that said, Perplexity apparently has venture backers that are willing to bankroll the acquisition. Few venture capitalists would walk away from a blockbuster deal like this, so it’s believable.
Also, side note: a web browser is a portal allowing users to access the internet. It is not the actual search engine, of which a user is able to then choose the search engine of their choice. Examples of web browsers are Chrome (Google), Safari (Apple), and Mozilla Firefox. It so happens that Perplexity recently launched a web browser named Comet, that combines its LLM interface with traditional internet browsing.
Perplexity’s outlandish bid comes at a tricky time for Google. They are under intense legal scrutiny after U.S. District Judge Amit Mehta ruled a year ago that Google has monopolized search. By the end of August, Mehta is expected to deliver a verdict on remedies related to this decision and may force a sale of Chrome under antitrust regulation.
Perplexity putting in a bid at this moment is likely meant to signal to the judge that there is a willing buyer for the Chrome unit. A crucial point, as Google has argued, in being selective where Chrome lands if sold. A bid from Perplexity could sway the judge to force the sale of Chrome as it would have a realistic place to land. Industry analysts remain bearish on the possibility of a Chrome sale given the potential disruption to the success of the browser if managed by someone other than Google.
Although there are justifiable synergies between Google Chrome and Perplexity’s Comet, I don’t see this acquisition going through. And it’s not because Perplexity is valued considerably less than Google’s Chrome unit. Or because the U.S. District Judge doesn’t want it to happen, as it would be a convenient way to settle an antitrust case.
I believe it’s because Perplexity doesn’t want the acquisition to go through. The acquisition offer is purely a marketing stunt to gain publicity for their new browser and their business at large.
Bidding double your company’s value to acquire one of the strongest business models in history (Google Chrome) borders on corny. But making headlines seems to be part of the Perplexity playbook. They’ve gone out to raise additional investment five times since early 2024. A rare stretch that must be all-consuming for their CEO, Aravind Srinivas. However, successful fundraising is widely treated as a marketing moment for a company, one of which can be excellent for recruiting and brand awareness.
Even if the bid was in poor faith, the willingness to bid for Chrome shows that Perplexity is serious about becoming a major contender in the AI space. Perplexity must have a certain scale and credibility for this headline to be taken seriously (which it has been so far). Thus, this is even more of a reason why Apple should open its checkbook soon and buy Perplexity before its price tag gets too lofty.
Apple is in a peculiar position, as discussed in AI + Acquisitions. Sales growth is slowing, they haven’t launched an innovative product since AirPods came out, and they are very publicly behind on their AI ambitions. Even though Apple is reportedly developing a series of new consumer products, their planned at-home robots and smart home display won’t be on the market until at the earliest midway through 2026. In fact, they are claiming that a revamped version of Siri won’t be here until 2027.
That’s too far away and investors won’t be so patient. Although Tim Cook (Apple CEO) has been a master operator historically, the AI market is moving so fast and other firms may start to challenge Apple’s dominant hardware position. Like OpenAI, especially with its acqui-hire of Apple’s former Chief Design Officer, Jony Ive.
To make matters worse, the Google antitrust case is also ruling on whether the Google-Apple search engine partnership constitutes anticompetitive behavior. Apple could lose roughly $20B in annual revenue if this partnership is halted.
Apple needs the Perplexity acquisition to supercharge their Safari web browser and gain momentum in the AI race. If Apple has to ditch the Google search partnership as we discussed in AI + Acquisitions, they do have the opportunity to upgrade Safari with an agentic browser. This will allow them to build a new business line to replace the hefty revenue hole they would lose from the Google deal and turn a threat into a product launch moment.
Back to Perplexity.
I must wonder if Perplexity aims to dominate headlines since they are much smaller than their peers. AI is a blazing-hot sector, but Perplexity is way behind its competition, with a projected $150M annual recurring revenue (ARR). For reference, Anthropic’s projected ARR lands closer to $5B and OpenAI’s stands at $12B. Through flashy tactics like constant fundraising and big-time acquisition offers, Perplexity’s potential may skew higher than its business fundamentals suggest it should.
I’d believe it if you told me Perplexity is trying to bid up its valuation through viral marketing, so Apple pays more to buy them. It’s smart, but only something that could come to fruition in such a frothy market.
My prediction is that Apple buys Perplexity by year’s end. I’m doubling down on my acquisition take and putting a date on it.