🔥💰Perplexity's $20 Billion Secret: The Real Reason They're Building a Browser

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My aim with this newsletter is not to just cover the most recent news, it’s to analyse the real reason why something is happening.

So today’s article is on why Perplexity is trying to introduce a new browser. There hasn’t been any new information released in the last 24 hours but this will likely be the most comprehensive analysis you read on the opportunity and I hope by the end of this article you’ll understand the real value behind AI agents and browsers.

With that, let’s dig in!

What’s Happening?

Perplexity AI is developing a browser as part of its strategy to enable AI agents with greater control over applications, particularly on iOS. CEO Aravind Srinivas has explained this move as necessary infrastructure for the company's long-term vision.

"It's the only way to create AI agents with enough control over multiple apps," Srinivas stated regarding the company's browser development plans.

The Agent Vision and Timeline

Perplexity aims to create AI agents capable of booking travel, making purchases, and functioning as virtual executive assistants for those who cannot afford human support. However, Srinivas acknowledges the gap between current capabilities and this vision, noting: "Anyone who's saying agents will work in 2025 should be skeptical."

Arc Browser is pursuing similar agentic capabilities. Early versions have been described as underwhelming, despite the company's strong team known for rapid iteration. The parallel development suggests browsers may be becoming table stakes for companies looking to advance AI assistant technology.

Technical Requirements: Browser vs. Extension

A full browser development may not be technically necessary for the stated goals. A Chrome extension with DOM access could theoretically provide similar functionality with less development overhead.

The Perplexity team almost certainly know this, but you can’t raise billions more in VC funding by building a chrome extension that could be seen as a wrapper. They need to own the consumer touchpoint, not be at the mercy of Google Chrome or iOS.

Travel Booking: A Problematic Use Case

The focus on travel booking as a primary use case for AI agents presents numerous challenges that reveal a worrying weakness in the strength of Perplexity’s product team.

Most travelers book infrequently, making it a low-frequency interaction with significant consequences if errors occur, a pretty terrible combination for an autonomous AI agent.

The economics of travel booking as a thin-margin business compounds this problem, as the cost of inevitable mistakes during early implementation could quickly erode profitability. Additionally, the vast majority of bookings involve straightforward return trips with predictable parameters, making the automation benefits minimal for most use cases.

The process of explaining all relevant preferences and edge cases to an AI—such as airline preferences when traveling in regions without service from preferred carriers—often requires more time than making the booking directly. With manual booking typically requiring only about 15 minutes and necessitating document preparation regardless, the efficiency gains appear limited.

B2B Applications: The Overlooked Opportunity

While Perplexity focuses on consumer applications, agents and business process automation within the workforce offers a far better opportunity. Corporate environments have thousands of tasks amenable to automation, essentially representing an upgraded version of Robotic Process Automation (RPA), an area already being developed by companies like Zapier, Retool, and UiPath.

These business applications often have clearer economic benefits and a higher willingness to pay, though Perplexity appears to not be going after the space because it’s a less “sexy” industry that won’t grab as many headlines.

Platform Limitations

Apple's restrictive iOS ecosystem presents significant obstacles. The company has historically limited API access that would allow third-party browsers to control device functions—capabilities essential to Perplexity's vision. Even Apple has encountered challenges with these limitations, reportedly contributing to delays in Apple Intelligence as the company addresses safety concerns around third-party data access.

Strategic Value: Default Search Position

Despite everything I’ve said Building a browser isn’t a bad idea. It’s actually the best thing perplexity can do. But it’s not to build a browser for agents. Browsers are possibly one of the most valuable applications in the entire web, for a couple of reasons:

• As we transition to the cloud more and more of the time we spend at work is via a browser/the web vs traditional apps. Think about how you spend your time: Google, YouTube, Figma, Notion, Slack, they are all web-first applications you can access via your browser.

• The browser makes the decision for what search engine you use, meaning it’s worth a LOT of money.

To illustrate the crazy amount of value of a search engine Google pays Apple $20 billion per year to be the default search engine on iPhones. They also pay Firefox $400-$450 million per year to be the default search engine.

For Perplexity, whose core business is search, if they could build a browser that means their search engine is the default, that means far greater user growth and a point of differentiation vs competitors like Google Gemini and OpenAI.

If you’d like to read more about the value of browsers, check out this fantastic article

Strategic Focus Questions

Perplexity's simultaneous pursuit of multiple initiatives—challenging Google and OpenAI in search, building a browser, developing agents, and creating an ad platform—raises questions about focus and resource allocation.

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