Perplexity AI, the rapidly growing AI search engine startup, has submitted a bid to merge with TikTok U.S., according to sources close to the matter. The proposal was presented to ByteDance, TikTok’s parent company, on Saturday.

Key Takeaways:

• Perplexity AI submitted a bid to ByteDance to merge with TikTok U.S., proposing a partnership that would retain existing investors and integrate AI-driven search with video content.
• The proposal comes amid TikTok’s ongoing regulatory challenges in the U.S., with President-elect Donald Trump granting a likely 90-day extension for negotiations.
• A merged entity could reshape the AI and social media sectors, bringing innovative search capabilities to TikTok’s massive audience.

The Vision Behind the Merger

The proposed merger would create a new entity combining Perplexity AI, TikTok U.S., and new capital partners. According to insiders, this structure would allow most of ByteDance’s current investors to retain their equity stakes while leveraging Perplexity’s AI-driven search expertise to bring enhanced video discovery and engagement capabilities to TikTok.

“This is not a sale but a strategic partnership,” a source familiar with the negotiations emphasized. The deal could help ByteDance navigate regulatory scrutiny in the U.S. while enabling Perplexity to expand its reach in video-driven content ecosystems.

Why Perplexity AI is Making Waves

Perplexity AI has rapidly ascended in the tech space, starting 2024 with a valuation of $500 million and ending the year at an eye-popping $9 billion. This growth reflects the broader generative AI boom, with investors eager to capitalize on its disruptive potential.

The company, known for its innovative search capabilities that rival giants like Google and OpenAI, has positioned itself as a key player in the next wave of AI-driven tools. AI-assisted search has been identified as a major risk to traditional search models, prompting fierce competition among tech giants.

TikTok’s U.S. Challenges

TikTok has faced mounting regulatory pressure in the United States, with concerns over data security and its ties to ByteDance in China. The app was slated to go dark in the U.S. on Sunday unless the Biden administration provided assurances to Apple and Google that they would not face penalties for hosting TikTok.

President-elect Donald Trump has signaled a willingness to extend TikTok’s deadline by 90 days, stating to NBC News:

“Most likely, we’ll give them more time to work out a solution.”

TikTok CEO Shou Zi Chew, in a TikTok video on Friday, expressed gratitude for Trump’s willingness to collaborate on a resolution, saying:

“I want to thank President Trump for his commitment to work with us to find a solution that keeps TikTok available in the United States.”

Watch Shou Zi Chew Message on Tiktok

ByteDance’s Perspective and Perplexity’s Strategic Edge

ByteDance has consistently resisted calls to sell TikTok U.S., citing the platform’s immense value and growth potential. The merger proposal from Perplexity offers a unique alternative. By framing the bid as a merger rather than an outright sale, Perplexity aims to preserve ByteDance’s existing structure while providing a pathway to comply with U.S. regulations.

A source close to the deal suggested the valuation for TikTok U.S. in this context would likely exceed $50 billion, though the final number will depend on which ByteDance shareholders opt to remain involved and which choose to cash out.

Financial graph depicting TikTok’s revenue growth over the years

Implications for the AI and Social Media Landscape

Should the deal go through, the partnership between Perplexity AI and TikTok U.S. could create a powerhouse that combines generative AI with short-form video—a potentially game-changing synergy. AI-driven search could enhance TikTok’s already unparalleled content discovery algorithms, while Perplexity would gain access to TikTok’s massive user base and video expertise.

What’s Next?

While the potential merger remains in the early stages, its implications are significant. For ByteDance, this is an opportunity to address U.S. regulatory concerns without fully relinquishing control of its prized platform. For Perplexity AI, it’s a chance to redefine how users engage with both search and video content.

The deal is expected to take months to finalize, but if successful, it could set a new precedent for collaboration between AI startups and social media giants.