Google says its AI-powered advertising tools are starting to deliver meaningful results, including major revenue gains for some retailers, as it experiments with how ads work in AI-driven search.
The big picture. Fears that AI chatbots like ChatGPT would disrupt Google’s core search business haven’t materialized, and instead the company’s ads business continues to grow, suggesting AI may be expanding how people search rather than replacing it.
By the numbers:
- Alphabet Inc. surpassed $400 billion in revenue in 2025.
- Q4 ad revenue: $82.28 billion (+13.5% YoY).
- YouTube ads: $11.38 billion (+~9% YoY).
What’s happened. Google is embedding ads into its AI-powered search experiences, including AI Mode powered by Gemini, while introducing new ad formats designed for conversational queries and tools that allow brands to shape how they appear in AI-generated answers, with a new “business agent” feature enabling companies like Poshmark and Reebok to control how their products are represented.
Driving the results. AI-driven campaigns like Performance Max and AI Max match ads to more detailed and conversational search intent, and Google says queries in AI Mode are often two to three times longer than traditional searches, giving the system more context to connect users with relevant products, as seen with Aritzia, which reported an 80% increase in revenue after adopting AI Max.
How it works. The system scans a retailer’s website and creative assets, interprets user intent from conversational queries, and dynamically matches products and messaging in real time. This is increasingly important given that 15% of daily searches are entirely new (according to Google) and cannot be predicted through traditional keyword targeting.
Why we care. Google is shifting from keyword-based ads to intent-driven, AI-matched advertising, meaning campaigns can reach consumers with far more precision at the moment they’re ready to buy. As search becomes more conversational and unpredictable, advertisers who rely on traditional targeting risk falling behind those using AI-driven formats that automatically adapt to new user behavior.
Zoom in. Google is testing new formats such as “direct offers,” which deliver personalized promotions when users show purchase intent, using Gemini to analyze conversational context and behavior, with brands like E.l.f. Beauty, Chewy and L’Oréal participating in early trials.
Commerce push. Google is also advancing its commerce strategy through a Universal Commerce Protocol developed with Shopify, which allows purchases to happen directly within AI conversations.
Yes, but. Google is not alone in experimenting with ads in AI search, and early results across the industry have been mixed, as Amazon has reportedly seen limited traction from ads in its AI shopping assistant, OpenAI continues to explore monetization models, and Perplexity AI has begun phasing out ads after underwhelming performance.
What they’re saying, Google positions itself as a “matchmaker” rather than a retailer, emphasizing that AI helps deliver more relevant and personalized ads while allowing brands to maintain control over their messaging and build user trust by showing the right product at the right moment.
What’s next. Gooogle says it has no current plans to introduce ads directly into Gemini but will continue testing and expanding advertising within AI Mode, including more personalized offers and AI-driven shopping experiences.
Bottom line. AI is not replacing search but reshaping it, and for Google that shift is making advertising more conversational, more targeted and, in some cases, significantly more profitable.
Dig deeper. Google says its AI-powered ads help some brands lift online sales by 80%.
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