For years Paula Thompson, vice president of client strategy at the US digital ad agency Optimal, has been helping Plunge sell baths to soak in chilling water by buying ads on Google search and Microsoft Bing. The ads appear atop results for searches such as “ice bath” and invite users to “Buy our cold plunge today” or “Experience the cold plunge difference.”
But as Microsoft put an AI spin on its search engine, the tub maker’s ads on Bing now invite users to “learn about the benefits of cold plunging” or “learn about the exclusive benefits of Plunge,” according to Thompson. They direct to informational material, not the purchase pages that were mainly pushed before.
This new tactic is one of the first examples of how the debut over the past year of search chatbots such as Bing Copilot are affecting advertisers, whose decades of patronage have kept tools free for searchers. Last month, Google confirmed that it would join their ranks and soon test ads in its AI Overviews search feature—prompting anxious ad buyers to study up on what’s been happening with Copilot. There is a lot at stake: Google parent Alphabet generated $74 billion in profits last year, and Microsoft $83 billion, with significant (though unspecified) contributions from selling search ads.
It’s not certain that the companies can continue balancing the demands of advertisers with the desires of users in the newer AI search features. Already, WIRED, one ad buyer, and users on social media have experienced irrelevant and potentially deceptive ads in Bing’s new technology.
In WIRED’s limited testing, ads in Copilot have felt incoherent. A prompt about ice baths brought up ads for backpacks, not for Plunge or its rivals. A request for weight-loss tips returned ads for fat-freezing belts, which weren’t listed among the AI-synthesized suggestions. Others have reached similar conclusions, including a user who last year described on Reddit seeing ads for dietary supplements not mentioned in an Copilot answer about burnout at work.
Kya Sainsbury-Carter, corporate vice president of Microsoft Advertising, told WIRED in an interview that ads “are meant to be highly relevant, and so that's probably something we want to take a look at.”
But James Murray, senior product marketing manager for advertising, later added in an email that seeing ads for products not mentioned in a Copilot response is normal. Traditionally, searchers receive ads based on the keywords they enter into the search bar. Copilot ads are driven not only by search terms, Murray says. They also could be tied to questions a user asked earlier in a conversation with the chatbot, prompts that Microsoft auto-generates behind the scenes to engineer a better answer from Copilot, and the AI-generated response itself.
While the ads are always meant to be relevant, serendipity is part of Microsoft’s aim. Someone may search for “best ultra-HD, 8K QLED 80-inch TV,” but to help them explore a range of options, Microsoft will show ads for a TV that is 85 inches or has an OLED screen. “Even when users ask for something extremely specific, they still often click on ads for something that they didn’t ask for,” Murray says. (Google’s ads are meant to be relevant to the query and the AI response.)
Disclosure of ads has been an issue on Copilot as well. Though Microsoft says it labels all ads, Marcus Pratt, senior vice president for insights and technology at the ad-buying agency Mediasmith, says he’s encountered at least two searches in which links with indications that they are sponsored arguably haven’t been adequately disclosed.
Last week, Pratt looked up the best reels to wind up and store his garden hose. Copilot recommended eight options, all apparently lifted from an article from the reviews publication Spruce, which links to Amazon product listings and gets a commission when readers make a purchase. When clicking on the reels in Copilot, he ended up on giraffetools.com, with code in the URL suggesting it had been a sponsored link. But an “Ad” label is only visible if a user hovers over the link for a moment before clicking. Spruce and Giraffe Tools didn’t respond to requests for comment.
In the other search, Copilot recommended a Nike Pegasus running shoe, but when hovering over the name, Microsoft showed a link to the shoe brand On with a small “Ad” label in the corner. A link to a Women’s Health article with more details about the Nike pair is below the ad. Pratt calls it a potentially dissatisfying experience for brands and a confusing one for consumers. “This blending of organic recommendations and sponsored listings is blurring the lines more than I have seen in the past,” he says. Nike, On, and Women’s Health didn’t respond to requests for comment.
Microsoft’s Sainsbury-Carter says ad experiences may vary as Microsoft continues testing and applying feedback.
Despite optimism among investors in the tech giants’ abilities to smooth out the rough edges and keep sales flowing, mixing AI-generated content into search is the industry’s biggest shift since the advent of smartphones. Google is trying to quickly satisfy people’s curiosity by using AI Overviews’ generative AI to summarize the web, which users have panned for embarrassing gaffes like suggesting they squeeze glue on pizza.
Microsoft is not only publishing similar AI summaries, but also enabling users to explore topics by conversing with Copilot, the AI chatbot from Bing. Though Google has tested ads in a precursor to AI Overviews, Microsoft is so far ahead—displaying more ads and disclosing more about how they are doing.
In a webinar for select ad agencies last week seen by WIRED, Microsoft’s Murray said that users click on ads in Copilot at nearly twice the rate they do for equivalent ads when they’re shown as the first ad above traditional search results, which historically is the most clicked ad. They also prefer a Copilot experience with ads than without by a slim margin.
Sainsbury-Carter says to her, the data mean users are finding Copilot ads more integral than tacky. She adds that clicks on multimedia ads, specifically, were three times higher in Copilot than elsewhere in Bing between last July and this past January. The company declined to share specific figures but described the measure as statistically significant.
Opted-In to AI
Advertisers don’t have much choice about investing in AI search. Microsoft and Google are pulling from customers’ existing ad campaigns for other environments to fill the ad slots in Copilot and Overviews until more data is gathered on their effectiveness. That means Copilot can draw on advertisers’ content to show ads as simple text, a row of product images, sponsored links embedded within AI summarization, or multimedia widgets for booking travel or deciding which car to buy.
“We're still in a place where we don't feel like asking advertisers to adopt, launch, manage, and optimize an entirely new campaign type,” Microsoft’s Sainsbury-Carter says. “Certainly that could happen over time if it feels like it's really bifurcating and the differences are great enough.”
Fortunately for Microsoft, she says, advertiser requests to opt out of AI-focused ads and complaints about ads appearing beside inaccurate AI-generated copy have both been minimal. Microsoft is being “super measured” about how many ads are shown in the new features, Sainsbury-Carter says, declining to provide specific figures.
Microsoft and Google also have not told advertisers exactly when their ads have appeared in AI features, limiting their ability to measure the payoff compared to traditional search ads. And the companies haven’t shared many tips on crafting ads for the new search features, according to four ad agencies’ executives, including Thompson. Sainsbury-Carter says the core message to advertisers is that optimizing for ads on Bing in general does the trick.
Thompson, whose agency also represents Microsoft’s Azure Cloud business, has crafted her own theory about how to adapt: Instead of targeting people who search for a specific product, advertisers need to educate people who have never heard of the product in the first place, since it seems people often turn to Copilot with broad questions.
Rather than targeting just short phrases like “cold plunge,” Plunge now tries to run Bing ads on longer queries such as “How to cold plunge,” “Where do I put cold plunge,” and “What is the optimal temperature for a cold plunge.” (As low as 37 degrees Fahrenheit, Thompson says.)
Thompson believes that the strategy is helping because clicks are up on her clients’ Bing ads, though the search engine’s growth to 140 million daily users from 100 million a year ago also could be a factor. She gains additional comfort from Google’s statement at its big annual advertising conference last month that users find ads in the new experiences less gimmicky. But it’s hardly definitive. “I don’t think there’s enough transparency yet,” she says.
AI Search Will Spread
There’s little doubt, though, that Microsoft views Copilot as essential to the feature of search. Heavy promotion and integration certainly contributed to the number of Bing searches that involved at least some use of Copilot growing four times faster over the past year than traditional searches alone, according to the company, which declined to share specific figures. Those using Copilot in some way during the second half of last year seemed to get to their answers quicker, shaving 12 percent off their searching time and increasing their ad clicks by 30 percent.
That puts greater pressure on advertisers to perfect their messages and Microsoft’s algorithms to deliver them on the appropriate queries. About four out of every five ad clicks in Copilot during testing throughout last year came from chats lasting less than a minute, Sainsbury-Carter says.
Advertisers and consumers had better get used to it, because ads are poised to spread to additional AI-heavy services. Snapchat, Chinese tech giant Baidu, and German newspaper Bild all signed up to use Microsoft technology to serve ads in their chatbots. Snap spokesperson Ahrim Nam says the partnership has graduated past the testing phase, but declines to further comment. Baidu declined to comment, and Bild didn’t respond to a request for comment.
Microsoft works with over 1,500 publishers, so ads could come to more chatbots as the trend of adding AI conversational tools to apps and websites grows. It will have some competition. OpenAds, a New York City startup that’s raised $1 million in funding, expects its ad technology to launch inside multiple AI search chatbots and image generators in the next couple of months, its CEO, Steven Liss, says.
Liss took on the challenge of developing the service in part because Google, the dominant provider of ad technology on the web, currently refuses to serve ads on webpages and apps “where dynamic content (e.g., live chats, instant messaging, auto-refreshing comments, etc.) is the primary focus of the page.” Even if Google updates its policy, Liss says OpenAds can survive bigger players by designing more engaging ads.
For now, Microsoft enjoys the rare advantage of being in the lead. But the contribution from Copilot and the other AI features to Microsoft’s $18 billion in annual ads sales is unclear, and Sainsbury-Carter declines to disclose the prices the new ads are fetching. “We think this can be a really interesting business over time, but we think it's an interesting business if we are surfacing personalized ads that people love and find joy from and that are super, super useful,” she says. It’ll also require them to keep plunging into the depths of trusting AI with their queries.
