#4 Google and the Innovator’s Dilemma: From PageRank to Perplexity
Remember when Google revolutionized web search with its PageRank algorithm? Developed by Larry Page and Sergey Brin in the late 1990s, PageRank determined a webpage’s importance based on the number and quality of links to it, much like academic citations measure research impact. This innovation quickly made Google the dominant search engine, providing high-quality content at the top of the search results.
For over a decade, Google’s system worked brilliantly. The user experience was great, the user value was exceptional, and we all switched from Lycos and Altavista to Google. However, as the internet evolved, so did the tactics to exploit the system.
The Decline: Manipulation and Ads
Everyone involved in making websites tried their best to reach the top of the first page of the search results. Me too. Most of us were content with writing good meta descriptions and optimizing keywords. Still, aggressive SEO practices such as link farming and the creation of low-quality content designed to attract clicks began to undermine the effectiveness of PageRank. Google responded to these challenges with continuous algorithm updates aimed at countering these tactics but with limited success.
At the same time, Google, holding almost 90% market share, optimized its business model, adding more and more ads. This shift made it increasingly difficult for users to find valuable information quickly.
The Market Ripe for Disruption
The search market is now ripe for disruption. A while back, AI and design entrepreneur Allen Smith introduced me to Perplexity, a conversational search tool combining search engine elements and AI chatbots. Perplexity offers a fairly unique setup with great summaries (just like e.g., ChatGPT), but it also includes references to source material immediately available for validation.
This, of course, is needed since it has the same challenges as the other generative AI tools and tends to make things up once in a while. However, since the source materials are just a click away, it takes only minutes to validate even complex information.
The Innovator’s Dilemma
Perplexity uses a freemium model and has reached an annual recurring revenue of $20 million. In contrast, Google’s annual ad revenue 2023 was $175 billion. Despite Google’s recent experiments with AI Overview, which provides AI-generated answers at the top of search results, its enormous revenue from ads creates little incentive to overhaul its ad-driven model and give the actual search experience the radical redesign it needs.
So, is Google getting closer to its Altavista moment? Is Perplexity positioned to become the new Google? Who knows. But I do know that Perplexity, not Google, is now my starting point whenever I want to learn something beyond just the opening hours of the local hardware store.
Over time, I’m sure Perplexity will become just as cluttered with ads as Google, but for now, I’m just enjoying a period of great user experience and exceptional user value. Just as I once did with Google.
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Johan Berndtsson