Alphabet is introducing new personalized advertising features into its AI shopping tools, marking a critical step for the tech giant in the race to monetize artificial intelligence. The company announced on Sunday that advertisers will be able to offer exclusive promotions to consumers preparing to purchase items through its AI mode, which is powered by its Gemini model. This initiative represents a significant shift from its traditional advertising model. Vidhya Srinivasan, Vice President of Ads and Commerce, stated, "This is a new concept that goes beyond our traditional search advertising model," enabling retailers to provide value to AI mode shoppers at the most crucial moment, "to close the deal." The AI will determine when to display offers based on users' shopping behaviors and purchase likelihood. This move comes as AI chatbots pose a threat to the traditional "sponsored" ad slots that generate tens of billions of dollars in annual revenue for the company. Simultaneously, the company is seeking to capitalize on the success of its latest large language model, Gemini 3, which has made progress in competing with OpenAI's GPT-5. The company also introduced a "Universal Commerce Agreement," enabling shopping agents to research products and complete purchases within its platform. This agreement was developed in collaboration with major retailers and marketplaces like Walmart, Target, and Shopify.
The new advertising feature will allow brands to deliver highly personalized ads, such as discount codes, through its chatbot, giving it an edge over AI competitors. The feature will utilize contextual information from user conversations with the AI mode chatbot and trigger offers related to products the user has clicked on. Retailers can set the offers they wish to provide, and then the company's AI will decide the optimal time to present the deals to potential customers. Existing shopping partners include pet brand Petco, cosmetics retailer e.l.f. Cosmetics, and luggage manufacturer Samsonite. Srinivasan indicated that the initial pilot focused on discounts and will expand to support creating offers with other attributes, helping shoppers prioritize value beyond just price, such as product bundles and free shipping.
The company is leveraging its massive market share in online search to showcase its AI models to billions of users through the "AI mode" added to search pages last year. Its standalone chatbot, Gemini, still lags behind ChatGPT in popularity. Last month, OpenAI paused internal discussions about advertising products after CEO Sam Altman declared a need to improve ChatGPT's capabilities. This move stemmed from concerns that competitors are narrowing its early lead in the race to develop cutting-edge technology. AI companies, including OpenAI, Microsoft, and Perplexity, have raced over the past year to introduce e-commerce features into their chatbots, seeking new ways to generate revenue from their popular but costly AI products. As first reported by the Financial Times, OpenAI has been rolling out its checkout feature, with the AI startup taking a commission from sales made on ChatGPT.
Microsoft launched Copilot Checkout on Thursday, a feature that also provides recommendations and checkout services within its AI chat. Microsoft stated that users shopping via Copilot demonstrated a 53% increase in purchases within 30 minutes of interaction compared to users who did not use the feature. CEO Sundar Pichai, speaking at the National Retail Federation's annual exhibition in New York, said, "We need to work together. I think if we do it well, this will be a moment of extraordinary expansion." The "Universal Commerce Agreement" will enable shopping agents to research products and make purchases without leaving the platform. This agreement was developed in collaboration with major retailers and marketplaces like Walmart, Target, and Shopify.