Google’s experimental ads within Gemini AI responses could transform digital advertising through intent-based placements, sparking competition with Microsoft’s Copilot and raising privacy debates.
Google is piloting shoppable ad carousels in its Gemini AI chatbot through the Search Generative Experience, leveraging user queries to serve commerce prompts. The move comes as Microsoft integrates similar ads into OpenAI-powered Copilot, with both tech giants vying to dominate AI-driven advertising. Early tests show 50% higher click-through rates for brands like Wayfair, but 68% of users distrust AI ad disclosures per Mozilla research.
Ad Insertion in Conversational AI
Google confirmed to TechCrunch on May 20 that it’s testing ads within Gemini’s responses through its Search Generative Experience (SGE). When users ask for product recommendations, Gemini now displays scrollable carousels from advertisers like Wayfair and Best Buy. Unlike traditional search ads, these units appear after AI-generated answers, prioritizing ‘user intent analysis over cookies,’ per Google’s SGE documentation.
Microsoft Counterstrike in AI Ad Race
During Microsoft Build 2024 (May 22), CTO Kevin Scott announced plans to monetize Copilot via ‘contextual commerce experiences,’ directly challenging Google. Analysts note both companies leverage proprietary data – Google’s search history and Microsoft’s LinkedIn/OpenAI datasets – to train ad algorithms. This could centralize AI advertising, recreating walled gardens reminiscent of early 2000s web portals.
Regulatory Hurdles and User Skepticism
The EU’s draft AI Act (Article 15b) now requires clear labeling of commercial AI content, complicating rollout plans. A Mozilla Foundation study (n=2,500) found 68% distrust chatbots’ ability to distinguish ads from organic responses. IAB’s new guidelines (May 2024) mandate opt-outs for AI recommendations, but enforcement remains unclear.
Historical Context: From AdWords to AI
Google’s current experiment echoes its 2000 AdWords launch, which revolutionized pay-per-click advertising by tying ads to search terms. However, where AdWords relied on keywords, AI ads analyze semantic intent – a shift accelerated by cookie deprecation. Similar transformations occurred in the 2010s when mobile ads grew from 3% to 52% of digital ad spend (Statista, 2010-2020).
The Walled Garden Resurgence
Meta’s Q1 earnings revealed 30% higher engagement for AI-curated Reels ads, suggesting broader industry reliance on proprietary algorithms. Critics argue Google and Microsoft’s control over both AI platforms and ad networks creates antitrust risks, reminiscent of the 2019 EU fine against Google for AdSense dominance. Startups like Perplexity AI now pitch ‘neutral’ ad models using decentralized LLMs, but lack comparable training data.
