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Lightcone · 3 min · Jul 11, 2025

Google’s incentives leave room for search startups

Aravind Srinivas explains why Google’s ad incentives make direct answers and commerce recommendations hard to fold into its core product. Open models and lower risk tolerance gave Perplexity room to compete.

Aravind Srinivas

Aravind Srinivas is cofounder and CEO of Perplexity.

Held research roles at OpenAI and Google DeepMind before co-founding the AI search engine Perplexity in 2022.

  • Garry Tan, Host · President & CEO, Y Combinator

    Co-founded Posterous and Initialized Capital, an early Coinbase backer.

  • Harj Taggar, Host · Managing partner, Y Combinator

    Co-founded Auctomatic with the Collison brothers and later Triplebyte.

  • Diana Hu, Host · Managing partner, Y Combinator

    CTO of Escher Reality; after Niantic bought it, ran AR for Pokémon GO.

  • Jared Friedman, Host · Managing partner, Y Combinator

    Co-founded Scribd, which YC funded in 2006; has advised 20+ YC unicorns.

About this segment

Aravind Srinivas explains why Google’s ad incentives make direct answers and commerce recommendations hard to fold into its core product. Open models and lower risk tolerance gave Perplexity room to compete.

From “Aravind Srinivas: Perplexity's Race to Build Agentic Search”, Jul 11, 2025. Watch the full episode

“So that's when I realized that they have to build a separate product, but they can never capitalize on their core distribution.”
Aravind Srinivasat 12:52 · Lightcone12:52

Takeaways

  1. Direct answers can conflict with ad-driven business incentives.
  2. Startups can take risks that could hurt a public company’s stock.
  3. Access to strong outside models changed the competitive landscape.

In this episode

Full episode

  1. 11:27Google’s incentives leave room for search startups2:48

  2. 17:01A browser can turn an assistant into an agent2:47Up next
  3. 27:33Perplexity sees subscriptions and task fees as revenue streams2:23
  4. 3 more moments in the full episode

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

  1. 11:33

    did you in your head think I'm building a thing that could really compete with Google and like take over a market as big as what Google offers? No. Or was it just a toy for you? The first time the thought occurred to me was when Google wrote a blog post. Sundar wrote a blog post about Bard. Like that was around the time when we were raising Series A funding. And everybody said, Okay, Bart is going to do whatever you're doing.

  2. 12:00

    Why do we have to build BART? Like, why not just do it on Google, right? Where you have all the distribution in the world. So why do you have to build a separate product? Like, just update your core, main, only great. Yeah, you have the best possible asset to do this. Exactly. And when I kept thinking, it was pretty obvious, you cannot. Like, if people can get answers to best hotels to stay in San Francisco with a view of the Golden Gate Bridge or like Bay Bridge, or like, where can I stay in New York, like, next to the Central Park with good amenities or like which flight is the best thing for me to take to fly from SF to London if you get direct answers to these questions with booking links right there how are you going to mint money from booking and Expedia and Kayak and like like you know all like same same same thing

  3. 12:47

    for shopping how are you going to take money from Amazon and like Walmart for the same ad where they're all bidding against each other it's not in their incentive to give you good answers at all So that's when I realized that they have to build a separate product, but they can never capitalize on their core distribution. And 2023 especially, and large part of 2024 too, Google had like maybe the fourth or fifth best models at any moment.

  4. 13:16

    So as a startup outside Google, you had access to AI that was better than what Google internally had, which was unprecedented, right? Until then, if you had to compete with Google and you had to build something that needed a lot of AI in it, good luck, right? Because you never have an AI outside Google that's even equal, leave alone being better. But now it's a complete reversal of the situation thanks to OpenAI or anthropic or open source models.

  5. 13:43

    So that plus innovator dilemma, plus the fact that we could make a lot of mistakes and it's fine. Whereas for Google, one mistake tanks their stock. Like you remember the live demo of Bard where it failed and the stock went down at 6%. So we knew that there was a lot of advantages for us. Yeah, I heard you talk about this recently, but Google specifically has been trying to build perplexity-like experiences.

  6. 14:09

    And you know, you joke- AI mode.