Google is consistently transforming its search engine toward AI-powered conversation and intends to fund the new answer formats based on the Gemini model with advertising in the future. At its marketing conference “Google Marketing Live,” the company presented several new ad formats that are to be embedded directly into AI-generated search answers. In doing so, Google is responding to the growing use of the so-called AI Mode in search while simultaneously safeguarding its core business of advertising revenue.

One thing is clear: the cost of an AI-generated answer is many times higher than that of a conventional search query. On one hand, Google is introducing more and more paid AI features and subscriptions, but the company will also need to monetize its free users in light of exploding AI costs going forward. Now comes the logical next step.

New Ad Formats in Search’s AI Mode

Google is planning two new advertising formats developed specifically for the AI Mode of search and deeply integrated into AI-generated answers. Both formats will continue to be labeled as “Sponsored,” but will additionally contain an independent AI explanation generated autonomously by the Gemini model.

• Conversational Discovery Ads: These ads respond directly to a user’s specific question. If someone searches for ways to make their home smell like a spa or a rainforest, for example, Gemini creates an ad tailored to that query, highlighting specifically relevant product features.
• Highlighted Answers: When AI Mode displays a list of recommendations — such as the best language apps for a trip — particularly relevant and high-quality ads can appear as a highlighted answer within that list.

In addition, Google is announcing two further formats for regular search. AI-powered Shopping Ads are designed to automatically select the most suitable products from a retailer for complex purchasing decisions — such as for a refrigerator or a television — and generate an individualized explanation of why that product might be right for the respective user. The Business Agent for Leads embeds an AI-powered chatbot directly into an ad, allowing users to click “Chat” and ask questions immediately, without having to fill out a static form.

How Targeting Works

The basis for delivering the new ad formats is the combination of the user’s search context and Google’s existing advertising systems. The Gemini model analyzes the specific search query in real time and matches it against the product data and campaign objectives of advertisers. Google recommends that advertisers build their campaigns on the products AI Max for Search, AI Max for Shopping, and Performance Max in order to take advantage of all new formats.

These systems draw on the extensive user data that Google collects across its services, including search history, location data, demographic information, and interests. Targeting is therefore not limited to individual search queries, but makes use of the complete user profile that Google has built up over the years. How exactly the balance between contextual relevance and profile-based targeting is weighted in the new AI formats remains an open question for now.

Gemini App Ad-Free for Now, but Changes Possible

The standalone Gemini app, which Google positions as a direct AI assistant, currently contains no advertising. Users can interact with the language model there without interruption for the time being. However, it stands to reason that Google could open this channel to advertising in the medium term as well — particularly for free users who have not taken out one of the paid Gemini subscriptions. An official announcement to this effect has yet to be made, but the company has broadly signaled its intention to monetize AI experiences more extensively.

How Other AI Providers Handle Advertising

Google is not the only AI provider thinking about advertising or already deploying it. The strategies of competitors differ considerably.

OpenAI has taken a similar path to Google by introducing advertising in ChatGPT, demonstrating that even pure AI assistants are increasingly being viewed as advertising space. Perplexity and Anthropic, by contrast, rely exclusively on subscription models for the time being and reject advertising as a source of funding. Whether this positioning is sustainable in the long term remains to be seen.

Assessment

Google’s move to link AI-generated search answers with advertising is consistent from a business perspective: the company generates the majority of its revenue from search ads and must ensure that the transition to AI-powered answer formats does not jeopardize this business model. The challenge lies in integrating advertising into AI answers in a way that does not cause users to lose trust in the quality and neutrality of the information. Google’s approach of generating AI-produced explanations independently of the advertiser and clearly labeling ads is a first step in this direction, but it will be scrutinized critically by consumer advocates and media observers.