Google Ads in 2026: AI Mode, Gemini & Conversational Ads

Google Marketing Live 2026 was held on 20 May 2026. In this event, Google formally signal that its entire Search and Ads ecosystem is now built on Gemini AI. Ads are no longer just placements beside results. They are designed to be the answer itself, embedded directly inside AI-generated Search responses.

According to Google, 75% of AI Mode users make more confident purchase decisions and 77% decide faster when using AI-powered Search. Users are reaching decisions sooner — and brands that are not present inside those AI conversations risk being overlooked entirely.

At GML 2026, Google introduced a new wave of dynamic, conversational ad formats — including Conversational Discovery Ads, Highlighted Answers, and AI chat agents — designed to engage users directly inside AI Mode. In this blog, we break down how these formats work, map out the Google Ads landscape in 2026, and share A&W Digital's perspective on how to adapt without losing what is already working: keep your core campaigns running, test AI formats in phases, and use technical front-end SEO to feed Gemini the data it needs to recommend your brand.

Two New Ad Formats in Google AI Mode

Search behaviour has fundamentally changed. People no longer type short keywords — they ask detailed, exploratory questions and expect thoughtful answers. Google recognised this shift at GML 2026 and responded with a clear goal: stop placing ads beside conversations, and make ads part of the conversation itself (Google Blog).

This is the thinking behind the two new ad formats launched in AI Mode. Rather than serving a pre-written static ad, Gemini now generates ad responses in real-time, tailored to the exact question a user asked — giving shoppers what Google describes as "product guidance that feels closer to a human advisor". The result is an ad experience that is less interruptive and more genuinely useful at the moment a purchase decision is being formed.

Conversational Discovery Ads

Instead of serving a pre-written static ad, Gemini generates the ad creative on the fly, based on the user's exact prompt. The result is a sponsored response that directly addresses what the user asked, using your brand's data and creative assets to highlight the most relevant features or services — not a generic headline.

Each Conversational Discovery Ad also comes with an independent "AI explainer" — a short, Gemini-written summary drawn from your product or service information, separate from the advertiser's own creative. This explainer is designed to make the AI's reasoning transparent: the user can see why your brand is being recommended, not just that it is being recommended. Both the ad and the explainer are clearly labelled "Sponsored".

Highlighted Answers

While Conversational Discovery Ads respond to specific questions, Highlighted Answers target the research and discovery phase — when users ask AI Mode for a list of recommendations. 

The sponsored entry is treated like any other recommendation in the list, accompanied by a Gemini-written explainer describing why the business is a good fit for the user's needs. The key distinction from traditional ads is eligibility: you cannot simply outbid your way into a Highlighted Answer. Relevance and content quality are what determine whether your brand appears — making strong website content and structured data more important than ever. 

New Ads format and Ads Asset for Search Ads

GML 2026 did not stop at AI Mode. Google also extended Gemini's capabilities directly into Search and Shopping — the channels where purchase intent is highest. Two updates define this shift: AI-Powered Shopping Ads for e-commerce, and the new Business Agent for Leads asset for service businesses. Together, they signal a broader change in how Google thinks about Search advertising: less about driving clicks, more about delivering decisions.

AI-Powered Shopping Ads

When someone searches for a high-consideration product, the old experience returned to a carousel of products with a price and a star rating. AI-Powered Shopping Ads replace that with something far more useful. 

Powered by Gemini, these ads automatically surface the most relevant products from your Google Merchant Center feed and generate a custom explainer for each one — describing not just what the product is, but why it is the right choice for that specific user's needs. The AI reads the user's query, cross-references your product attributes, and builds a personalised recommendation on the spot. These ads are available through Performance Max and AI Max Shopping campaigns. 

The experience delivers three key benefits for advertisers (Google's Blog): 

• Intelligent Product Identification — Gemini surfaces the most relevant products for the search, replacing generic carousel results with a curated, intent-matched selection 

• Expert Feature Summaries — Technical specifications are translated into plain-language highlights of the features that actually matter to the buyer 

• Immediate Decision Confidence — By providing the "why" behind every recommendation, the research phase is shortened and the path to purchase is faster

One important implication for advertisers: your Merchant Center feed quality is now your competitive advantage. Since Gemini builds its explainers directly from your product data — titles, descriptions, attributes, and specifications — a clean, rich, and well-structured feed is what determines whether your product gets recommended or overlooked. 

New Search Ads Asset: Business Agent for Leads 

At GML 2026, Google introduced what industry experts are calling the first wave of "agentic commerce" — a shift where AI agents help users evaluate and qualify themselves before they even click through to your website. Leading this shift for service-based businesses is the Business Agent for Leads, an interactive, Gemini-powered chat agent that lives directly inside your lead-generation ads (Google's Blog). 

Instead of clicking an ad and being sent straight to a static landing page form, users can now have a real-time conversation with your "brand agent" right on the search results page. Gemini powers these conversations by drawing entirely on content from your website and other configured data sources. Once the user has their questions answered and is ready to take the next step, the AI automatically pre-fills the lead form and passes the information back to you. 

For agencies and B2B companies, this solves one of the biggest pain points in search advertising: lead quality. By answering specific questions and handling early objections up-front, the Business Agent acts as a front-line qualifier. This ensures that your sales team receives warmer, highly-informed prospects rather than cold, low-intent form fills. 

Overview of Ad Formats in 2026

As Google transitions toward AI-driven conversational ads, it is critical to understand how these new formats fit alongside—and in some cases replace—traditional campaign types. Most notably, legacy Call-Only Ads are being completely sunsetted by February 2027 to make way for more interactive, AI-powered solutions.

Types of Google Ads in 2026

• Conversational Discovery Ads (new)

• Highlighted Answers (new)

• AI-Powered Shopping Ads (new)

• Performance Max

• Search Ads

• Demand Gen

• Display Ads

• Shopping Ads

• Video Ads

• App Ads

• Call-Only Ads (sunsetted by February 2027)

The A&W Digital POV: How We Are Approaching AI Ads

While Google’s GML 2026 updates are impressive, jumping blindly into new formats without a strategy is a fast way to burn through ad spend. Plus, it is worth noting that Google has not yet announced a timeline for when these specific AI Mode features will roll out in Hong Kong. Even so, here is how our team at A&W Digital views these changes, and how we are advising our clients to prepare for when they do arrive. 

The Reality Check: Concerns and Risks

The biggest trade-off with the new AI Mode formats is limited control. Because Conversational Discovery Ads and Highlighted Answers are generated dynamically on the fly by Gemini, advertisers lose the ability to dictate exact phrasing or lock in specific headlines.

For brands in highly regulated industries, or those with strict brand compliance and messaging guidelines, this lack of manual control can be uncomfortable. Furthermore, because these formats are still in testing, we do not yet have years of benchmark data to predict exactly how they will perform across every niche.

Strategic Recommendations for 2026

A Phased Rollout and A/B Testing

We do not recommend turning off your proven campaigns to chase the latest AI trends. Instead, keep your core acquisition engine running on well-structured Performance Max, Search, Standard Shopping, and Demand Gen campaigns.

For the new AI formats, we suggest a phased testing approach. Allocate roughly 20–30% of your experimental budget to AI Mode-eligible campaigns. Run structured A/B tests using Google's native experiment tools to compare the new formats against your baseline. Crucially, establish clear rollback conditions: if your Cost Per Acquisition (CPA) spikes or your sales team reports a drop in lead quality, pause the test and rely on your core campaigns.

Feed the AI: Front-End SEO Support

Here is the most critical takeaway for website owners: Gemini builds these new ads by scraping your website's content and product feeds. This means your front-end SEO is no longer just for organic ranking — it is literally the raw material for your paid ad creative.

To ensure the AI accurately recommends your business, you need to "feed" it correctly. This requires writing clear, "answer-first" content and implementing robust Schema.org structured data (like FAQ, LocalBusiness, and Product markup). If your website content is thin, or if your Merchant Center feeds lack rich attributes, Gemini will simply not have the data it needs to write a compelling AI explainer for your brand.

Conclusion

Search is evolving from a list of links to a conversation, and Google Ads is moving right alongside it. The updates from GML 2026 make one thing clear: if your brand wants to remain visible during the most critical moments of the buyer's journey, you have to be ready to participate in AI Mode. Success in 2026 will not just be about how much you bid, but how well your website, feeds, and structured data communicate with Gemini.

Search is evolving from a list of links to a conversation, and Google Ads is moving right alongside it. With AI taking over and older formats retiring, keeping your campaigns running smoothly takes continuous tuning and a fresh approach.

Keeping up with Google's constant changes can feel overwhelming, but you don't have to navigate them alone. If you're not sure how these updates impact your current setup, or just want to make sure your SEM strategy stays ahead of the curve, we'd love to help. Contact us to see how A&W Digital can keep your campaigns updated and growing in 2026.