Apple Ponders Perplexity
Mark Gurman
Well, well, well:
Apple Inc. executives have held internal discussions about potentially bidding for artificial intelligence startup Perplexity AI, seeking to address the need for more AI talent and technology.
Adrian Perica, the company’s head of mergers and acquisitions, has weighed the idea with services chief Eddy Cue and top AI decision-makers, according to people with knowledge of the matter. The discussions are at an early stage and may not lead to an offer, said the people, who asked not to be identified because the matter is private.
To be clear, it sounds like these are very much just internal discussions – i.e. they haven't even broached the topic with Perplexity yet.1 But yeah, at least thinking about/exploring the notion makes sense – and I'm not just saying that because I've been saying it/predicting it for months and months. I'm hardly alone. Apple is behind in AI and one way to catch up a bit faster is through M&A. And Perplexity seemingly has a lot of what Apple would want. And actually, it goes a bit beyond just AI:
Such a deal would help Apple develop an AI-based search engine, part of efforts to cope with the potential loss of a longstanding arrangement with Google. That partnership, which involves making Google the default browser on devices, generates roughly $20 billion a year for Apple — and is now under threat from US antitrust enforcers.
If the Google Search deal goes away – by which I really mean the $20B+ a year payments to Apple from Google goes away – Apple will obviously be more open to looking into other search arrangements. And that's more true than ever before because of the rise of AI and the disruptive effect it's already having on search. Eddy Cue may have had his own reasons for saying as much on the stand during Google's antitrust trial, but that doesn't mean it's not true.
One argument against such a deal would obviously be price. Given that Perplexity is currently valued at $14B and that such a deal would clearly require a premium, this would likely require Apple doing a deal that may be an order of magnitude larger than the current biggest deal: the $3B deal for Beats just over a decade ago.
Another argument against the deal may be co-founder and CEO Aravind Srinivas, who is known to be quite outspoken. Alex Kantrowitz and I discussed this on his Big Technology Podcast las week (about 35 minutes in) – on the topic of yes, if Apple should buy Perplexity. It's hard to fault Srinivas for being so outspoken, he's a startup founder taking on both Big Tech and Big AI – startups with a lot more funding than Perplexity. His job is to get Perplexity's name out there and to recruit, and his tactics seem to be working. That said, it's hard to see someone like that working inside of Apple...
But the biggest problem may be the deal Perplexity just struck with Samsung. This was my exact angle on the news a few weeks back.
All of that may push Apple down a partnership path here versus an acquisition:
Apple has also discussed an alternative plan: teaming up with Perplexity instead of buying it. A partnership would involve adding Perplexity as an AI search engine option in Apple’s Safari web browser and integrating it into Siri.
Apple has met multiple times in recent months with Perplexity, and its AI team has been actively evaluating the technology — a sign that it’s at least considering a close relationship with the company.
If Apple were to buy Perplexity, suddenly partners like OpenAI might be a bit more reluctant to play nicely – something we're immediately seeing as a result of the Meta/Scale deal. So yeah, I'm talking myself out of this one a bit, but that said, if Apple cares just as much about attracting talent, shifting the culture, changing the mentality that got them in this AI mess, and sending a signal to the market...
Also, they now have to consider the possibility that Meta is going to buy every AI company. Including taking a run at, of course, Perplexity.
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 Which makes the scoop all the more wild. Who on Earth is talking to Gurman about clearly priveledged and secretive conversations between two of the most senior people at Apple? Normally this type of M&A chatter leaks out from lawyers or VCs or other tangential players, but this is not that.