The AI Economy: Study Shows Perplexity Drives Web Traffic

This is "The AI Economy," a weekly LinkedIn-first newsletter about AI's influence on business, work, society and tech and written by Ken Yeung. Sign up here.

It’s been a busy week since my return to VentureBeat with no shortage of AI news to report on. For this issue of The AI Economy, I spotlighted Andrew Lee, an entrepreneur with a storied past. He cofounded Firebase, a major developer backend service, and now he’s back with a new startup. Lee is betting the farm that artificial intelligence will bring his company good luck at surpassing its competitors.

He’ll need it because he’s up against the biggest of them all: Google.

Enjoy the interview!

The Prompt

Eight years ago, I authored an article calling reports of email’s demise greatly exaggerated. The people I spoke with shared how there were still sparks of innovation left within this communication medium. That was all before artificial intelligence. And now, there’s renewed energy in finding new ways to leverage the inbox to improve productivity.

Andrew Lee is the founder of Shortwave, an AI-powered email client. He’s also an accomplished entrepreneur, helping build the developer backend service Firebase, acqu i red by Google in 2014. In an interview, Lee explains the goal of his latest startup and why he’s betting big on AI to help achieve it.

Justice For Email

“The company started at the beginning of 2020, largely because I saw something really cool, special, and beautiful,” he says. “Email, unlike every other communication app you have on your phone, it’s not one company with one app. If you want to have a group chat with somebody, you don’t have to get them onto your email app; you just have to get their email address, and you can put everyone together…I don’t need to ask, ‘Are you on WhatsApp?’ Or ‘Are you on Signal or whatever?’ I can send you an email.”

Lee cites two pivotal moments that convinced him that email was a lingering problem. The first was the Hong Kong 2019 protests, during which he read about the Chinese government using WeChat to surveil the public. He said that if you can’t trust the major chat app, at least people could trust email. Secondly, the demise of Google’s Inbox app showed Lee that if Google “with their infinite money and billions of users on email is not willing to invest in email, we’re all going to end up on WeChat.”

Realizing there was email potential, he reconnected with his former Firebase colleagues to ask if they’d be willing to “do justice to email” — they said yes. Initially, Shortwave tried recreating the core features from Google Inbox.”Let’s bring back some of the goodness…make these things fast…easy to use.” Eventually, the team said, “holy crap, these LLMs have gotten really good…maybe we could build some real features.”

Shortwave launched its first AI features in 2022, with an email summary tool and an AI that helps autocomplete messages. Lee said the technology helped define the startup, giving it insight into how to stand out from peers like Superhuman and Spark. In fact, Shortwave is going after Superhuman because, according to Lee, from a business perspective, it’s “the most exciting one, and kind of the one to beat.”

Overcoming the Excel Problem

There’s a reason why we don’t see a plethora of email clients marketed on the internet, and that’s because of something Lee describes as the “Excel problem” or is perhaps better known as the 80-20 rule.

“It’s so damn hard to compete with Microsoft Excel. There’s no small subset of features in Excel that covers most users, right? So, if you could do 20 percent of the work of rebuilding and get 80 percent of the benefit, there’d be a ton of startups out there,” he explains. “But the problem is, you have to build 80 percent of the product before you can draw a circle around enough users that you can start to gain traction because there are just so many little things you must do. And it turns out that email’s kind of the same way. Even today, we struggle because there’s just little features that are missing here and there that people expect.”

Lee credits his past founder experience with making him aware of what users want besides a simple feature release. But that wasn’t the only thing Shortwave needed to tackle. It also needed to address its user experience. Lee concedes that in the email world, there’s not a lot of room to make drastic changes to the layout—it’s been tried, and “most of the best practices have already been adopted.”

So, how did Superhuman grow its business and stand out? Lee believes it’s because they found niche design opportunities—inbox splits, he says—that moved the needle, and they had “really good marketing.”

Undeterred, Shortwave pivoted to AI, and Lee was surprised at the results. Until then, the company grew slowly with marketing efforts described as “hell” thanks to repeated rejection from potential customers. But after making the switch, it “reopened the Pandora’s Box of new things to try. For the past 20 years, everything you could try in email has been tried. But suddenly, it’s like a whole new set of things to try that are radically better. And it has given us a whole new lease on life and a whole new set of opportunities to go after.”

▶️ Read the full interview with Shortwave’s Andrew Lee

A Closer Look

Does the rise of AI-powered search engines spell disaster for the SEO efforts marketers spent years working on? How worried should businesses be that their efforts to game the rankings on Google will no longer be impactful? According to a report from BrightEdge, companies shouldn’t be concerned. In fact, those SEO fears are all blown out of proportion.

The enterprise SEO platform researched database activity from the AI-first search engine Perplexity to understand how AI affects search. Its study reveals that Perplexity’s referral traffic to brand websites has grown 40 percent month over month since January. Moreover, 60 percent of cited sources match the top 10 organic Google results. This means there is consistency between AI search and traditional search.

The takeaway, if any, is that SEO is not going away. BrightEdge CEO Jim Yu says credibility is important in AI, so “if you rank well today [in traditional search], you’re off to a head start.” He advises companies to think bigger, optimizing entire websites around conversations rather than individual keywords. “Sharpen your focus. What topics do you have the right to win in?” he explains.

Today’s Visual Snapshot

CB Insights visualization showing the 2024 AI winners sorted by funding.

An interactive tool from CB Insights highlights the top 100 private AI companies in the market today. The above graph looks at the 10 firms in the U.S. that have received the most funding. Unsurprisingly, OpenAI is the most well-funded (14 billion), followed by Anthropic ($4.15 billion) and Databricks ($4 billion).

Outside of the U.S., Mistral AI is the one with the most money ($544 million), followed by Hugging Face ($399 million) and Helsing ($342 million).

Clearly, American AI companies have received the most backing — five of the top 10 have fundraised more than Mistral AI.

But what about their valuations?

In the U.S., OpenAI remains the leader with a valuation of $80 billion. But it’s not Anthropic that follows, but Databricks ($43 billion). The Claude creator is third with a valuation of $16 billion.

Internationally, Hugging Face is the most valuable at $4.5 billion. Mistral AI is second at $2 billion, followed by Helsing at $1.81 billion.

When looking at which U.S. company has the most headcount, the winner is Databricks with nearly 8,000 employees. By comparison, OpenAI has over 1,600 and comes in second.

This Week’s AI News

💰 Funding

Modal raises $25 million to train corporate works on data and AI (TechCrunch)
AI chipmaker Hailo receives a $120 million investment to develop processors for edge computing on smart, connected devices (Crunchbase)
Read AI raises $21 million to bring connected intelligence to meetings, email and messaging (VentureBeat)
SiMA.ai secures $70 million in funding to develop processors for industrial robots and other edge computing devices (Silicon Angle)

⚖️ Copyright and Regulatory Issues

U.S. and EU to increase cooperation over AI safety and governance, develop digital identity standards and push platforms to defend human rights (TechCrunch)
YouTube says OpenAI training Sora using its videos would violate its rules (Bloomberg)

💥 Disruption and Misinformation

🔎 Opinions and Research

Apple researchers develop AI that can “see” and understand screen context (VentureBeat)
Generative AI will be a “key enabler” for those in the enterprise, study shows (VentureBeat)
Why are women being sidelined in the AI race? (Fast Company)
The knowledge economy is over. Welcome to the allocation economy. (Every/Dan Shipper)
What MidJourney, DeepL, ElevenLabs, and HeyGen have in common (Sarah Tavel)

🎧 Podcasts

How should you be using AI? Practical tips from University of Pennsylvania professor Ethan Mollick (The Ezra Klein Show/New York Times)

End Output

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The AI Economy: The AI Startup Taking on Gmail, Perplexity Shows AI Search Power