Perplexity's CEO deals with lawsuits amid tensions with news publishers

• Perplexity CEO Aravind Srinivas addressed the lawsuits from news publishers that the company is facing.
• Appearing at the WSJ conference, Srinivas said Perplexity had previously held discussions with Dow Jones.
• Perplexity is reportedly in talks to raise new funding in a deal that would be valued at $8 billion.

The simmering tensions between news publishers and search engines powered by artificial intelligence came to public attention on a beachside conference stage Wednesday.

“Let’s talk about the elephant in the room,” Aravind Srinivas, co-founder and CEO of Perplexity, opened his interview at The Wall Street Journal’s Tech Live conference.

Rupert Murdoch's Dow Jones, publisher of the Journal, and the New York Post filed a lawsuit in New York on Monday accusing Perplexity of “free-riding” on the journalism they produce. With Perplexity's app, users get instant answers to questions with sources and quotes from trusted blogs, news outlets, and academic papers.

The two-year-old startup absorbs cash like oxygen, have raised successive rounds of financing just months apart, and that's it supposedly in talks to raise a fourth round that would value the startup at $8 billion.

The lawsuit alleges that Perplexity exploits copyrighted works to power its search engine, thereby driving potential readers and customers away from its websites.

“No one comes to Perplexity to record their messages. People go straight to (the) New York Times, the Wall Street Journal,” Srinivas said. He explained Perplexity's goal is to help users digest the news. “People come to Perplexity because they understand the news in the context of what they already know. 'How does this news affect me?'”

“We are not interested in taking the exact content and bringing it back to the surface. We’re not trying to be the news alternative,” he later added. “So we will do our best to achieve and communicate the goals of our product and how they can work with existing news channels.”

The company has said it does not scrape data to train large language models; Rather, it searches the Internet and creates an index of websites that its models can point to.

The entrepreneur remained calm as WSJ reporter Deepa Seetharaman asked questions about Perplexity's cash flow and news outlets claimed quotes were inconclusive. Srinivas acknowledged that the technology is “not perfect.”

“We are still working with technology that is constantly improving,” he said in response to a question about plagiarism. “Just yesterday Anthropic released another version of their models, Claude 3.5. It gets better and better every few months. Whatever problems are today are a new set of problems that didn’t exist a year or two ago.”

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In his interview, Srinivas defended the company's actions, saying it had a conversation with the Journal's publisher in June about potentially entering into a deal that would allow Perplexity to share future advertising revenue with the publisher. He did not provide any details about the content of the contract, but said the conversation was conducted in the dark.

“We were definitely very surprised by the lawsuit because we actually wanted to have a conversation,” Srinivas said.

This month, the company will begin selling ads for popular searches, Srinivas said. For example, a user might ask Perplexity about a shoe company that just went public on Wall Street. The search engine provides a summary of the shoemaker's stock debut with sources and quotes. When a shoe brand pays to advertise in the results, Perplexity shares a portion of the money earned with the publishers whose content was used to answer the query.

“We can only exist if we make money ourselves and not just continue to collect donations,” said Srinivas. “If we then start making money ourselves, that will certainly benefit all publishers and ensure that they continue to thrive.”

Just last week, the New York Times sent Perplexity a cease-and-desist letter seeking to end the practice of using their stories to train chatbots. The news outlet is also suing OpenAI and Microsoft for copyright infringement.

Srinivas said Perplexity hopes to become profitable within three to five years by selling subscriptions and advertising. He acknowledged that while Perplexity doesn't train large language models and doesn't need to raise as much capital as OpenAI or Anthropic, the influx of investor money allows for faster development.

“Fundraising obviously helps us stay focused on the product and keep improving it, but not worry too much about the finances,” Srinivas said.