Perplexity is intensifying competition in the artificial intelligence search market, challenging Alphabet Inc.'s (NASDAQ:GOOGL) (NASDAQ:GOOG) dominance. Perplexity CEO Aravind Srinivas stated on X Tuesday that "Native transactions are the best way to go after the AdWords revenue." He believes this approach, though complex to implement seamlessly, is crucial for competing with Google.

What Happened: Srinivas announced Perplexity's introduction of answer modes to improve its core search product for specific verticals like travel, shopping, places, images, videos, and jobs. He highlighted the travel vertical, where Perplexity now enables native hotel bookings, a feature developed in collaboration with TripAdvisor and Selfbook.

Srinivas emphasized the importance of moving beyond text-based answers to structured responses for verticals with entities like images, videos, and transactional capabilities. "Going beyond answering a wall of text and being good at structured answers for verticals with entities like images, videos, cards with built-in commercial transactions is a necessary step for being a daily-usage product and taking on Google," he said.

Native transactions are the best way to go after the AdWords revenue. It will take a while to get right and make it seamless. Google is positioned in an evil but legal way to claim maximum credit for any brand awareness that another platform (research or social) provides users.

— Aravind Srinivas (@AravSrinivas) March 25, 2025

This development comes as Alphabet reported that its AI-powered search features are generating revenue at similar rates to traditional search results. During Alphabet's fourth-quarter 2024 earnings call, Chief Business Officer Philipp Schindler stated that AI overviews are delivering revenue "at approximately the same rate" as conventional search results.

This is significant, as search advertising remains Alphabet's largest revenue source, generating $54 billion in the fourth quarter, a 13% year-over-year increase.

Why It Matters: Alphabet faces growing competition from companies like OpenAI, Microsoft Corp. (NASDAQ:MSFT) with its AI-powered Bing, DeepSeek, and Perplexity.

Alphabet CEO Sundar Pichai hinted at potential monetization strategies for Gemini AI, including the future integration of ads. During the earnings call, Pichai acknowledged that while the company is currently focused on subscription tiers, advertising is likely to play a role in Gemini's monetization.

Perplexity, backed by Amazon.com Inc. (NASDAQ:AMZN) founder Jeff Bezos and Nvidia Corp. (NASDAQ:NVDA), is reportedly in talks to raise up to $1 billion in a new funding round, potentially valuing the company at $18 billion.

Perplexity's rapid growth has also drawn scrutiny. Media companies have accused the startup of scraping and republishing content without attribution.

Alphabet stock outpaces Microsoft in growth and momentum, per Benzinga Edge Ranking— For more insights, sign up for Benzinga Edge.