Perplexing Perplexity

$34.5 billion. That's an unsolicited offer from Perplexity to Google to buy the Chrome browser.

What is Perplexity and what possessed people there to talk to Google about Chrome?

In April of this year, a federal judge ruled that Google is a monopolist when it comes to search and it violated the Section 2 of the Sherman Act. One of the remedies floated at that time was breaking up Google’s business into smaller pieces and divesting Chrome, the world’s most popular browser.

Naturally, the questions come to everyone’s mind. What's so special about Chrome? Why is Perplexity interested in it? What would Perplexity do with it? Is $34.5 billion enough? And for the aficionados of questions: Do you really think that Google is going to sell it?

Let's start with the last one first. For once, there was no decision made by the judge on what the eventual punishment for Google is going to be. Even if the judge decides that this is the right remedy, Google will appeal the monopoly judgement and will fight with all its billions any proposed remedy. We are talking years.

Now, the question is what's so special about Chrome. Chrome right now commands the biggest market share. Depends how exactly you count (e.g. desktop vs. mobile) but it has about 60% of market share, which is more than 3.5 billion users.

You might remember my post 'The fight for your desktop' from early last year where I documented how every 'AI' company is racing to bring their 'AI' to you. And since everyone wants to be agnostic when it comes to hardware and operating systems, a browser is the technology to deliver. This is what is special about Chrome. Not only it delivers Google all the information about what you are browsing and in return what ads Google should serve you, but it integrates with Google Search and with all the current and future AI functionality.

Do you remember the trial when Microsoft was accused of monopolistic behavior and the tight integration between Windows operating system and then Explorer browser? Another recurrent pattern for you. It only shifted from desktop to the cloud but the concept stays the same.

In this respect, Google and Apple are best positioned to capture (or keep) customers for the foreseeable future, the AI future. And that's why Perplexity is so interested in buying Chrome. To immediately capture over 3.5 billion users and get a huge advantage over the other AI startups, namely OpenAI. It would be magical.

Now, let's talk about the price. $34.5 billion is a big number. Especially when you consider that the last valuation of Perplexity was $18 billion. Google's market cap, at the time I am writing this, is $2.47 trillion! But what about the price? Is it a reasonable offer?

One estimate is that Chrome should be valued at about $21/user and not the measly $10/user offer from Perplexity. Or you can create your own formula where as a base you use $400/person ad revenue Google is getting and decide what percentage should be attributed to the existence of Chrome. Note: All the numbers are estimates and/or approximations, but $10/user is somewhere between naïve and insulting.

And the final question: What would Perplexity do with it?

This is when this whole offer loses all credibility. First, Perplexity would have to find the money for it. According to the reports, Perplexity people were talking with money people and they told them that they could find the pocket change to finance the deal. That's the easy part. Now, imagine it is Monday morning and your company which - according to Linkedin - has somewhere between 11 and 50 employees. Let's be generous and say 100. This company forcefully acquires a product where there are about 1,000 people. What are you going to tell them when you first walk into the Chrome offices 'stop working, put the bucket down, the plan has changed, go home'?

I remember talking with people at IBM which grew by acquisitions about how they are buying companies. IBM has departments specializing in the process of swallowing companies and it would still take years to make it happen. And I am not sure about their success rate. Here we have a startup, which has a marginally successful product, trying to get into the adult party with fake ID. For a trip through the memory lane, you can read the story from the year 2000 when AOL bought Time Warner. And if you don't know what AOL is or better say what it was, that's exactly the reason why you should no longer pay any attention to the publicity stunt by Perplexity.

The recurrent pattern? Rather than focusing on publicity stunts, focus on a strategy and product so good that Google comes and makes you an offer you can’t refuse.