The technology industry has found itself in an endless cycle of making products that intentionally deteriorate over time, followed by solutions for those deteriorated products. There was a time when Amazon was just a better bookstore. Now it’s a maze of sponsored products, fake reviews, and identical items with confusing prices. New players in this industry are now using AI to fix the problems the last generation of tech created.
Recently Amazon filed a lawsuit against Perplexity for its product Comet AI. Comet is a browser that is tightly integrated with a chatbot that can execute online tasks for its user. The specific task that Amazon took offense to was Comet’s ability to make purchases for its users.
Here’s what this looks like in practice; You ask Comet ‘find me the cheapest headphones with good reviews.’ It scans dozens of sites, ignores Amazon’s sponsored listings, and finds you a deal from a small retailer Amazon buried on page 5. Amazon gets no cut, sellers pay no placement fees, and you save time, money, and the mental freedom from evaluating 10 products that look alike. For Amazon this is financial threat.
Amazon has spent over two decades building a business model around curation and cheap prices. No interaction on the Amazon web store is an accident. Every product curation, pricing, and deal is crafted through deals sellers make with Amazon and metrics Amazon has collected about consumers. Perplexity’s product circumvents all of this and this is a problem for those e-commerce platforms. Why would sellers sign deals to be at the top of search results if the user never even sees those results?
Clearly Perplexity is the hero in this story, right? They are breaking the shackles of Amazon’s highly manicured platform and giving businesses a new opportunity to be found. Amazon has become an annoying middleman between shoppers and smaller businesses. Yet, if the last two decades have taught us anything it is that eventually Perplexity will become the same kind of problem.
Perplexity is guided by the same incentives that drove Amazon. The company needs to grow aggressively for investors as it’s currently valued at 120 its actual revenue, meaning it must find new ways to make money, fast. And with regulators largely looking away at the AI industry, Perplexity will be tempted to behave with the same scruples that Amazon had. Perplexity has all the reason to position itself as a new middle man.
Corey Doctorow, a technology advocate, coined the phrase “enshittification” to describe this pattern. It describes the tendency for online platforms to deteriorate for both consumers and business once the owner of the platform has gained enough market share that neither party can leave. First online platforms treat consumers well to build a network. Then they begin to take advantage of consumers to make businesses from businesses. Finally, they abuse both to maximize profit. But, if even the tools that remedy enshittified products veer towards enshittification, then we are in an arms race to build enshittified tools. A never ending race to the bottom, where each solution just becomes the next problem.
Theoretically, products like Comet AI would act as a check on Amazon. Amazon would acknowledge that users are buying products through Comet AI and develop new solutions to retain them. In response, Comet AI would adapt by becoming even more useful to customers. So why won’t market competition solve this? For one Amazon has massive momentum after decades of acquiring competitors and expanding in new markets unchecked. For another, Amazon has legal resources that Perplexity will unlikely be able to match.
For real competition to work regulators would need to do three things they rarely do. First, Amazon’s lawsuit against Perplexity would need to be tossed out, or severely limited. Amazon shouldn’t be allowed to lock up basic product information (prices, descriptions, availability) that any shopping tool needs to function. In the European Union, they call this ‘gatekeeper data’ and prevent monopolies from hoarding it. We need the same rules here.
Second, Amazon needs to be blocked from buying it’s way out of competition. It today’s lax merger environment, Amazon could purchase AI shopping startup and crush Perplexity overnight, or just buy Perplexity itself. Tech regulators tend to undervalue first-movers advantage when considering competition. But being first in software matters enormously. Even when competitors can copy features (look at Instagram’s and YouTube’s response to TikTok), the first mover keeps its lead. Amazon should be forced to actually something better and not just buy the thread.
But these two changes wouldn’t break our arms race. Perplexity cannot become the next Amazon. If Comet AI captures a large market share, it cannot be allowed to rig shopping the way Amazon has. Amazon has a direct conflict of interest on its platform as it also sells products that compete with sellers’ products (e.g. Amazon Basics). Amazon however has a clear advantage since it has a sea of data showing what consumers care and pay for. The FTC antitrust lawsuit details many more anticompetitive allegations. The rule should be simple: you can host the market, or you can sell at the market. Not both.
There is a world where these AI products do actually improve competition. Where consumers receive better experiences. But based on the last twenty years, that’s not the default outcome. The default is another decade of watching ‘solutions’ turn into problems, while we wait for the next generation of startups to save us from the last one.