Perplexity’s $34.5B Chrome bid: How AI is fueling the next browser wars

However, Perplexity’s move is still significant as it is targeted at one of Google’s prized assets even as the US government pushes to break up the big tech company. The $34.5 billion potential price tag also highlights the growing strategic importance of web browsers in the age of AI.

What do we know about Perplexity’s offer?

Perplexity has positioned itself as a challenger to Google with its generative AI-powered search products. The San Francisco-based startup closed a $100 million funding round in July this year at a valuation of $18 billion, as per reports. Its offer to buy Chrome at nearly twice its own value has drawn skepticism from analysts, tech columnists, and others.

To be sure, Perplexity has said it will seek the help of outside investors to fund the $34.5 billion bid for Chrome. The company added that it would not make stealth modifications to the web browser, and has further offered to invest $3 billion in Chrome and its underlying web infrastructure over the next two years if the deal goes through. But that is still a very big if.

Is Google Chrome even up for sale?

The deal would realistically be possible only if the US district court rules in favour of the Department of Justice (DOJ) and forces Google to spin out its market-leading web browser, among other proposed remedies.

In a landmark antitrust ruling last year, Judge Amit Mehta of the US District Court for the District of Columbia held that Google had an illegal monopoly of the online search market. The case then entered the remedies phase, where Judge Mehta heard arguments from both Google and the DOJ on the most appropriate ways to address the tech giant’s anti-competitive behaviour and create a more equal playing field for other search competitors.

The DOJ, which filed the antitrust case against Google in 2020, has called for the company’s divestiture of Chrome. It also proposed to prohibit Google from making exclusive search deals with smartphone makers and browser developers to set its search engine as the default. For instance, Google reportedly pays Apple $20 billion every year to make Google Search the default search engine on iPhones.

Another proposed remedy by the DOJ is to make Google Search more interoperable. This would involve the company providing access to valuable search data such as ranking signals, US-originated query data, and its search index at a “marginal cost, and on an ongoing basis.”

In its defence, Google has argued that “the DOJ’s proposal to break off Chrome — which billions of people use for free — would break it and result in a shadow of the current Chrome.” The browser would likely become “insecure and obsolete”, Parisa Tabriz, vice president and general manager, Google Chrome, said.

Google’s counter-proposal is to let smartphone makers and browser developers have multiple default search agreements.

With Judge Mehta set to rule on the proposed remedies this month, there is blood in the water as AI companies like Perplexity move to challenge Google’s search dominance by trying to take Chrome off its hands.

How does this tie into the browser wars?

The second, and more strategic reason AI companies are eyeing web browsers is the shift in user behaviour. People are increasingly turning to AI chatbots like ChatGPT instead of traditional search engines to look up information online.

Eddy Cue, a senior Apple executive, testified in the Google antitrust remedies case that search volume to its Safari browser had declined for the first time in 22 years. Cue linked the drop in search volume to the rise of AI chatbots.

However, AI chatbots lack user context. Unlike traditional web browsers, chatbots do not offer insights into a user’s online activity such as reading articles, writing emails, online shopping, etc. Tech startups like Perplexity, The Browser Company, and even OpenAI are looking to fill this gap by developing AI native web browsers, where the traditional search bar is replaced by an AI chatbot or agent. To be sure, Google is also testing a Gemini integration in Chrome.

Perplexity on Wednesday announced that its agentic AI browser Comet is available to all Pro subscribers in the US. “We’ll start expanding access every week going forward to make Comet generally available to all Perplexity Pro users,” CEO Aravind Srinivas said in a post on X.

Comet is a desktop browser that primarily relies on an AI agent to respond to user queries with links to relevant websites. It comes with several advanced features such as the ability to describe an image on a user’s screen or perform deeper research about a particular topic. Users can also prompt the AI agent within Comet to take control of the browser and autonomously perform tasks such as sending an email or posting on a social media platform.

Perplexity is reportedly in talks with smartphone makers to pre-install its Comet AI mobile browser on devices.

Does it make sense for Perplexity to buy Chrome?

For Perplexity, the appeal of Google Chrome is most likely its distribution.

Google Chrome has a market share of 70 per cent in the global desktop browser market and a 67 per cent share in the mobile browser market. It has around 3.5 to 4 billion users globally, as per the DOJ.

While Chrome’s business model is not highly lucrative on its own, it plays a pivotal role in Google’s search flywheel. The browser gathers data that feeds into its search engine, which uses the data to show more relevant search results as well as targeted ads. Note, search-related advertising makes up a bulk of Google’s revenue.

Chrome could also serve as a direct channel for Perplexity to showcase its latest and most advanced AI products, where users can experience their capabilities without actively seeking them out.

Who else is interested in buying Chrome?

It is likely that other AI companies will also throw their names into the running. Nick Turley, the product head of OpenAI’s ChatGPT, testified during Google’s antitrust remedies trial that OpenAI would be interested in buying Chrome. While ChatGPT already has web search features baked into it, the company would be able to potentially bring its AI chatbot to even more users with Chrome.

Brian Provost, Yahoo’s general manager for search, also testified that the company would be open to buying Chrome with the help of its parent firm Apollo Global Management.

However, big tech companies such as Apple, Microsoft, Meta, and Amazon are unlikely to pursue Chrome as it would be difficult to pass antitrust scrutiny.