The much-watched “AI business model”: Google takes the lead in introducing advertising in Gemini

# Source: Wall Street Insights

By Zhao Ying

Advertisers will be able to offer exclusive discounts to consumers who are ready to make purchases via Google’s AI mode. Google has also launched the **Universal Commerce Agreement**, enabling shopping agents to research products and complete purchases within its platform. The agreement was jointly developed with major retailers and marketplaces including Walmart, Target and Shopify.

Google is introducing new personalized advertising features into its AI shopping tools, marking a crucial step for the tech giant in the race to monetize AI.

Google announced on Sunday that advertisers will be able to provide exclusive offers to consumers preparing to buy goods through its AI mode, which is powered by the Gemini model. This move represents a significant shift from Google’s traditional advertising model.

“This is a new concept that goes beyond our traditional search ads model,” said Vidhya Srinivasan, vice president of Google Ads and Commerce. It allows retailers to deliver value to AI-mode shoppers at the most critical moment “to close the deal”. Google’s AI will determine when to display offers based on users’ shopping behaviors and purchase intent.

The initiative comes at a time when AI chatbots are threatening Google’s traditional “sponsored” ad placements, which generate tens of billions of dollars in annual revenue for the company. Meanwhile, Google is seeking to capitalize on the momentum of its latest large language model, Gemini 3, which has made progress in competing with OpenAI’s GPT-5.

Google has also rolled out the **Universal Commerce Agreement**, which allows shopping agents to research products and finalize purchases on its platform. The agreement was co-created with leading retailers and marketplaces such as Walmart, Target and Shopify.

## Moving Beyond Traditional Search Advertising

Google’s new advertising feature will enable brands to deliver highly personalized ads, such as discount codes, via its chatbot, putting it a step ahead of its AI rivals. The feature will leverage contextual information from users’ conversations with the AI-mode chatbot and trigger offers targeted at relevant products users have clicked on.

Retailers can set the offers they wish to provide, and Google will then use AI to decide the optimal time to present the deals to potential customers. Current Google Shopping partners include pet brand Petco, cosmetics retailer e.l.f. Cosmetics, and luggage manufacturer Samsonite.

Srinivasan stated that Google initially focused on discounts during the pilot phase and will expand to support the creation of offers with other attributes, helping shoppers prioritize values beyond price—such as bundle deals and free shipping.

## The AI Monetization Race Heats Up

Google is leveraging its massive market share in online search to showcase its AI model to billions of users through the “AI mode” added to search pages last year. Its standalone chatbot, Gemini, still trails ChatGPT in popularity.

Last month, OpenAI suspended internal discussions on advertising products after CEO Sam Altman announced the need to revamp ChatGPT’s “red teaming” protocols. The move stemmed from concerns that competitors are narrowing its early lead in the race to develop cutting-edge technologies.

Over the past year, AI companies including OpenAI, Microsoft and Perplexity have raced to roll out e-commerce features in their chatbots, seeking new ways to generate revenue from their popular yet costly AI products. As first reported by the Financial Times, OpenAI has been launching its checkout feature, through which the AI startup takes a cut of sales made via ChatGPT.

## Tech Giants Bet Big on AI Shopping

Microsoft launched Copilot Checkout on Thursday, a feature that also provides users with recommendations and checkout services within its AI chat. Microsoft said users who shop via Copilot make 53% more purchases within 30 minutes of interaction compared to those who do not use the feature.

At the National Retail Federation’s annual convention in New York, Google CEO Sundar Pichai said, “We need to work together. I think if we get this right, this will be an extraordinary moment of expansion.”

Google’s **Universal Commerce Agreement** will allow shopping agents to research products and make purchases without leaving its platform. The agreement was jointly developed with major retailers and marketplaces including Walmart, Target and Shopify.

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