Is Perplexity’s $34 billion offer to buy Chrome real or a marketing stunt?

AI startup Perplexity has sent Google/Alphabet an offer to buy Chrome for $34.5 billion. 

The offer was made in a letter from Perplexity CEO Aravind Srinivas to Sundar Pichai, who serves as the CEO of both Alphabet and Google. A copy of the letter, provided to Computerworld by Perplexity, pledges to maintain Google as the browser’s default search engine, although it points out that users can always change that via settings.

The letter promises to maintain, support, and promote Chromium, the open source project underpinning Chrome. “We intend for this commitment to be legally binding, subject to regulatory approval,” it said.

It also promises to invest “$3 billion over 24 months in reliability, performance, security, and customer support scale; pursue appropriate security certifications; maintain a quarterly customer-facing roadmap and convene an Open Web Advisory Board within 120 days post-close.”

However, the letter does not promise to retain all Chrome employees, but said that Perplexity will “extend offers to a substantial portion of designated key personnel and implement retention programs to preserve expertise and continuity.”

It also said, “this proposal is designed to satisfy an antitrust remedy in [the] highest public interest by placing Chrome with a capable, independent operator focused on continuity, openness, and consumer protection.”

The backdrop to the story, and potentially the sole reason for the acquisition offer, is a federal court case to determine whether Google should be forced to sell off units to undercut its supposedly monopolistic hold on web search. US District Court Judge Amit Mehta is currently considering a decision about the actions the court will order.

A marketing stunt or genius play?

Analysts were mixed on the implications of such a move. 

“My brain says ‘marketing stunt,’” said Jason Andersen, a VP/principal analyst with Moor Insights & Strategy. Perplexity has been quiet for the last few months, Andersen said, “and this is them taking a shot to get their name out there so people don’t forget them. Their competition is making a lot of noise right now.”

Brian Jackson, a principal research director at Info-Tech Research Group, had a more charitable take. 

Jackson said that “part of the genius of Perplexity’s play” is that it comes right before the judge’s decision. Jackson saw it as a way to let Google avoid an unfavorable judicial decision by moving Chrome to a third party.

The financial portion of the offer also raised some issues. Some questioned whether Perplexity can justify spending $34.5 billion on a browser, and even whether it can raise that much money at all, given that Chrome users could easily abandon the browser if it is disconnected from the Google universe of products.

Jackson said he thinks that the price tag Perplexity placed on Chrome is too low. “I don’t think it is fair market value. It probably [should sell for] twice as much, at least.”

Google did not initially report the offer to the United States Securities and Exchange Commission (SEC), but given that parent company Alphabet reported $350 billion in annual revenue last year, the offer might not have been considered material.

A question of integrations

While it is noteworthy that the letter promises to not change the default search engine from Google, it doesn’t address Chrome’s most compelling feature: The browser’s seamless integration with a large number of Google services, including Gmail, Google Docs, Google Drive and YouTube.

There are pros and cons to whether the tight Google app integration would survive a Perplexity acquisition. Perplexity might want to instead integrate its own services, but doing so might risk alienating the users it is paying for. Given that the browser is free, its users have no financial reason to stay if the value seems diminished. 

But would Google permit that integration to survive? Depending on the judge’s order, it might have little reason not to. That tight integration delivers a lot of revenue. If Google/Alphabet is not permitted to create a browser for those services, it might simply let Chrome remain so linked.

“A lot of the entrenched value is in the [Google apps] integration,” Jackson said.

Andersen said that Comet, a recent Perplexity extension to Chrome which allows interaction with the AI from within Chrome, might help explain Perplexity’s interest. 

Andersen said he has been testing Comet and found it unimpressive, adding that it was “a little slow” and “there were certain tasks that I could do faster on my own. It was intriguing but still early. Maybe not there yet.”

But, Andersen said, “if Perplexity was to buy the Chrome browser, they could remedy the complaints I had” because they would have direct access to, and control over, the browser source code. 

Andersen also said that Perplexity might welcome keeping the Google app integrations. “Perplexity only has one or two services to plug into Chrome, whereas Google has hundreds,” he said. 

A different path

He also said that he sees a different path if the judge orders Google to sell Chrome. Google parent Alphabet could simply shift it to another part of the company and then strictly wall it off to address the judge’s concerns, not unlike the way many financial firms isolate sensitive business units to maintain compliance.

“If they lose [in court], they are not going to sell it,” Andersen said. “They are going to find a way around it.”

Another concern that Andersen saw involves hardware, specifically Chromebooks. “Chrome is effectively the operating system for that device,” he said. “This might extend to the Android phone community as well.”