How Will Ads Work with Conversational AI?

The impact of generative AI on digital advertising has captured the imagination of the marketing world. Indeed, our own paid media team recently published a blog post on how generative AI is influencing both search behavior and paid media as a result. For instance, AI-generated search results could diversify the complexity of search engine results pages and turn attention away from both paid and organic listings. One critical question: how will advertisements be incorporated into search that happens when people use conversational AI tools such as Google Bard and Microsoft's Bing Chat? Microsoft has provided a potential answer.

For context, the controversy around integrating advertising into conversational AI comes down to how these tools provide answers to search queries. Chatbots (so far) provide brief, direct answers rather than directing users to external websites. In contrast, Google's advertising model relies on users remaining engaged with Google Search and clicking on links. Since search ads generate the lion's share of Google's $279 billion in revenue. Similarly, while Microsoft's advertising business is not as sizable as Google's, it also depends on clicks and user engagement.

Understanding how chatbots will serve content

Since February, Microsoft has been testing ads in Bing Chat. Microsoft's head of digital advertising, Kya Sainsbury-Carter, told The Wall Street Journal that Bing Chat uses conversational responses and website links to answer user questions, sometimes including links to brands that have paid for search ads.

Although these links are not identified as ads within the chat, hovering over them with a mouse will reveal an "Ad" icon in a pop-up if they are paid links. In the pilot phase, advertisers are not bidding for the ads individually, but instead, Bing is integrating their paid links into relevant chat results if they are already buying search ads.

Policies for sensitive categories, such as prohibiting paid links for prescription medications, will remain enforced in the chat experience as they are in the traditional search experience. Additionally, Bing is experimenting with photo and video ads that would appear beneath a user's chat with a chatbot.

This approach contrasts with the traditional search experience, in which users enter a query, and advertisers bid on the opportunity to display their links in the results. These ad-based results are typically featured at the top of the page or interspersed among other responses, often marked with a designation such as "ad" or, in the case of Google, "sponsored."

As she told The Wall Street Journal

If you think about traditional search queries they tend to be very explicit like, "Show me Microsoft's stock price or the weather or a brand, or show me this product." With the new chat experience, we're starting to see more conversation, multiquery engagement, more in the realm of, "I sort of know what I want," versus "I want this. Show it to me."

So I love the example of, "I need to throw a dinner party for six, and one person is a vegetarian. Can you recommend a three-course meal?" If you put that in traditional search, you get all kinds of mostly nonuseful results. If you put that in the new Bing, you get something very specific that you can then engage with and go look for the products. And so our ability to really understand user contact and intent is deeper.

The Wall Street Journal challenged her to clarify why AI-powered search will not diminish a publisher's ad revenue. In essence, her answer was that Bing Chat actually provides one more advertising opportunity instead of eclipsing traditional search. After all, Bing Chat is optional. She said, "We have a clear point of view that the future of search is an integrated experience across search, answers, chat, and creating . . . The value proposition that we see for publishers, specifically as we go forward, is driving more traffic and clicks - not less - and ensuring that publishers and partners earn more money. So we're exploring how we might be able to share ad revenue from Bing Chat in different ways as we learn what behaviors look like.

Meanwhile, Adweek reported that Sainsbury-Carter provided even more context recently during the advertising NewFronts. She noted that a new feature has been introduced that enables ads to be integrated into interactions with an AI chatbot. Advertisers are not obligated to request that their ads be included in the chat format, and they will not be notified if their ads are displayed in this way when they receive performance reports. Additionally, image-based ads can be displayed following the chatbot's reply, and companies do not need to create new content that mimics the chatbot's style. Instead, all text advertisements and other creative resources uploaded on Bing will be exhibited in the new chat formats. Microsoft has provided examples of this new feature, for example:

The advertising products within Microsoft's AI chat will function based on the same auction principles as Bing search auctions, indicating that advertisers may not necessarily experience an increase in cost per click.

So, what should advertisers do amid these wide-ranging changes?

Next Steps

1.) Test additional digital channels for reaching readers with informational content

People using search engines in order to seek information about specific topics or answers to specific questions may be less incentivized to scroll past the AI-generated content provided by the search engine. This could potentially lessen the amount of impressions and clicks on paid search ads that lead to informational content. Other platforms that are heavily used for search and discovery (YouTube, TikTok, Pinterest, Reddit, Google Discovery) may prove to be more suitable for upper-funnel search purposes.

2.) Consider increasing investment in Bing - but with eyes wide open

As users move to test the new Microsoft Edge and Bing Search experience, it may make sense to ride the wave of interest by adding dollars to Bing to capitalize on the increase in available impressions. At the same time, advertisers should challenge Microsoft (and Google) to have control over where their ads are placed and whether or not they are displayed in chat. If it is unclear whether an ad is appearing in chat, how can an advertiser evaluate the effectiveness of their ad placement?

3.) Include more broad match keywords

AI technology may allow consumers to search in a more conversational way. As search queries evolve, broad match keywords could catch long-form searches that may otherwise be missed.

4.) Keep a close eye on key metrics

As the search landscape changes, key performance metrics can give insight into how these changes are affecting campaigns and can help us understand what campaign/keyword changes need to be made. Keeping a close eye on CPC, click, and impression volume will be imperative.

5.) Stay updated

Staying informed of relevant updates in the search landscape is crucial for a paid search marketer to adapt their strategies and stay competitive. Updates in search algorithms, new ad formats, and changes in consumer behavior can significantly impact ad performance and campaign success. By keeping up-to-date, paid search marketers can take advantage of new opportunities, avoid potential pitfalls, and optimize their campaigns to maximize ROI.

Contact Investis Digital

To learn more about how Investis Digital can help you navigate these changes, optimize your paid search campaigns, and stay up to date on the latest in AI, check out our paid media campaigns or reach out to our team today.

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