Google begins placing ads in AI chatbot conversations

Google's AdSense network has expanded its reach into a new territory: conversations with AI chatbots. According to Bloomberg reports, Alphabet Inc. began showing advertising within chatbot conversation flows earlier this year, marking a significant step in the company's efforts to maintain its digital advertising dominance as generative artificial intelligence continues to gain traction.

The integration follows testing conducted last year and early 2025 with several AI startups, including iAsk and Liner. A Google spokesperson confirmed that "AdSense for Search is available for websites that want to show relevant ads in their conversational AI experiences." Both iAsk and Liner declined to comment on their specific relationships with Google when contacted by Bloomberg.

This development comes at a critical time for Google, as the search giant faces increased competitive pressure from emerging AI-powered search alternatives. Companies like OpenAI and Perplexity AI have been actively attempting to redirect user traffic away from traditional Google search with products designed to deliver more efficient information retrieval.

Google Search generated more than $198 billion in revenue in 2024, representing approximately 60% of Alphabet's annual sales. This core business now faces challenges from multiple fronts as user behavior evolves with the proliferation of AI-driven search tools.

Regulatory concerns amid expansion

The ad integration into AI chatbot experiences comes as Google navigates increasing regulatory scrutiny. In April, a federal judge determined that Alphabet's Google unit violated antitrust law in the markets for advertising exchanges and tools used by websites to sell ad space, known as ad servers.

Google has consistently maintained that its dominant position stems from the effectiveness and user-friendly nature of its tools. The company's new partnerships with AI startups potentially allow Google to benefit financially even if its direct share of the search market diminishes over time.

AI startups exploring ad-based revenue models

The high operational costs associated with running AI models have pushed many generative AI startups to explore advertising-based revenue models. For example, iAsk displays advertisements below its AI-generated responses before prompting users for follow-up questions. Beyond Google's involvement, other companies such as Koah Labs have begun developing solutions for brands to serve advertisements to chatbot users.

Perplexity, one of the more prominent AI search startups working to transform internet services, establishes direct relationships with brands interested in advertising on their platform, according to sources familiar with the situation. The company enables brands to sponsor follow-up questions to users' initial queries.

Adapting to new user behaviors

The integration of advertising into AI chatbot interfaces presents unique challenges and opportunities. Traditional online advertising models often rely on users clicking through links, with brands paying on a per-click basis. However, users of generative AI platforms typically click on fewer external links, as the AI aims to provide comprehensive answers directly within the conversation.

Liner CEO Luke Jinu Kim noted in an interview that his company has focused on delivering a select number of advertisements tailored to users' searches. Kim explained that Liner's user base, which primarily visits the site for research purposes, demonstrates different behavior: "The longer queries allow for more targeted advertising."

Kim described Liner's advertising approach as something that is "more like a very early version of Google search ads," adding that he hopes the site will display a small number of highly relevant advertisements related to user queries.

Legal battles continue

While Google expands its advertising ecosystem, the company continues to face legal challenges related to its market position. Alphabet CEO Sundar Pichai testified in federal court on Wednesday regarding the Justice Department's proposed remedies for Google's search monopoly. Pichai argued that the government's proposal to share search data with competitors would effectively constitute a "de facto" divestiture of Google's search engine.

"The proposal on data sharing is so far-reaching, so extraordinary," Pichai stated during his testimony. It "feels like de facto divestiture of search" and its entire intellectual property and technology over 25 years of research, he said.

During his court appearance, Pichai also addressed another aspect of the government's proposed remedies, pushing back against restrictions that would prevent Google from paying smartphone manufacturers or browsers for default placement. He argued that these payments help browsers like Mozilla and smartphone makers support the Android ecosystem.

U.S. District Judge Amit Mehta questioned this position, asking: "If Google is able to continue to pay for defaults, how could any other competitor possibly pay as much as Google is able to pay?" In response, Pichai pointed to instances where both Microsoft and OpenAI have successfully outbid Google on certain deals with publishers for content use in AI systems. He also noted OpenAI's agreement with Apple to offer ChatGPT technology on iPhones.

Google-Apple negotiations

During the court proceedings, Pichai revealed that he hopes Google's Gemini AI service will be added as a built-in option for iPhones this year. He mentioned ongoing conversations with Apple CEO Tim Cook throughout 2024, expressing optimism about finalizing a deal by mid-2025.

Currently, Apple's AI system, known as Apple Intelligence, utilizes its own models for most artificial intelligence tasks on iPhones, iPads, and Macs. However, the company has partnered with OpenAI to integrate ChatGPT into Siri and Writing Tools, which enables text creation and editing across the operating system.

If an agreement is reached between Google and Apple, the likely announcement venue would be Apple's annual developer conference scheduled for the week of June 9, where new versions of Apple's operating systems are typically introduced. According to Bloomberg, which first reported on talks between Apple and Google in March of last year, negotiations between the two companies remain ongoing, and a deal is expected to be concluded.

Future outlook for advertising in AI

The integration of advertisements into AI chatbot conversations represents a significant evolution in digital advertising strategies. As user behavior continues to shift toward conversational interfaces and AI-assisted information retrieval, companies across the technology sector are adapting their revenue models accordingly.

For marketing professionals, these developments signal important changes in how advertisements will be delivered and consumed in the near future. Contextual relevance becomes even more critical when ads appear within conversational flows, requiring brands to reconsider their targeting strategies. Additionally, the metrics for measuring ad effectiveness may need to evolve beyond traditional click-through rates to account for the unique engagement patterns in AI-assisted interactions.

As Google and other major players continue to explore advertising within AI platforms, marketers should closely monitor developments in this space. The ability to effectively reach consumers within AI chat environments could become a crucial competitive advantage as these platforms gain wider adoption.

Timeline

• Late 2023 - Early 2024: Google conducts initial tests of advertisements in AI chatbot conversations with selected startup partners
• Early 2025: Google AdSense network officially begins showing advertisements within chatbot conversation flows
• April 2025: Federal judge finds Google violated antitrust law in advertising technology markets
• April 30, 2025: Sundar Pichai testifies in federal court regarding Justice Department's proposed remedies for Google's search monopoly
• April 30, 2025: Pichai reveals ongoing negotiations with Apple to integrate Gemini AI service on iPhones
• June 9, 2025 (Expected): Potential announcement of Google-Apple AI partnership at Apple's annual developer conference