The news: Google is testing a new ad format in Search’s AI Mode that lets retailers feature products alongside organic shopping recommendations, according to a blog post by Vidhya Srinivasan, vice president and general manager of ads and commerce.

The format is clearly labeled sponsored content and aims to help shoppers find buying options while giving retailers another tool to reach consumers using AI Mode.

Users can now also buy products through Gemini from Etsy and Wayfair, per Bloomberg, building on its Direct Offers pilot, which lets advertisers deliver targeted promotions within AI Mode based on the tool’s analysis of shopper intent and context.

Google is also experimenting with similar AI-driven ad placements beyond retail, including travel, signaling a broader push to monetize conversational search.

How we got here: Google is creating the infrastructure needed to integrate AI agents into the shopping experience.

• Last year, it launched the Agents Payments Protocol to facilitate agent-led checkout for merchants.
• More recently, it rolled out the Universal Commerce Protocol, which spans the shopping journey from discovery to checkout and post-purchase. Developed with Shopify, Etsy, Walmart, Target, and other retailers, the initiative is endorsed by more than 20 companies, including American Express, Macy’s, and Visa.

Why it matters: Google is hardly alone among AI platforms in turning to advertising as a revenue stream.

OpenAI recently introduced ads inside ChatGPT for adult users on its free tier and the $8-per-month Go plan. The ads are limited, clearly labeled, and confined to certain plans.

Payment providers are also getting involved. PayPal and Google notched a multiyear research partnership for commerce solutions focused on AI last year, and the payment platform was an early adopter of UCP. It’s likely PayPal and other payment providers will begin to vie to be the payment infrastructure behind shoppable ads to capture a new source of volume.

Implications for retailers and marketers: AI-powered shopping is in its early days, making this a time for testing and iteration. Retailers and brands should treat these formats as experimental channels, measuring engagement, conversion, and incremental sales before the space matures.

What works in traditional search may not translate directly to AI-powered search. Conversational interfaces shift visibility toward contextual relevance, structured data, and feed quality over pure keyword strategy. Retailers will need to optimize product feeds, pricing, promotions, and loyalty integrations to increase their chances of surfacing in AI-driven recommendations.

As platforms like Google and ChatGPT mediate more of the discovery process, they’re likely to gain greater influence over which products are surfaced and ultimately selected. That raises the stakes for marketers to understand how AI interprets intent and to use that knowledge to adapt before best practices harden and competition intensifies.

Implications for payments: In-platform shoppable ads within Google AI Mode offer a new coverage area for payment providers to consider. As shoppable ads proliferate users' AI-backed search experiences, the underlying payment providers stand to capture volume from consumers looking for truly low-effort, low-friction shopping. One-click checkout and biometric-backed payment solutions can simplify the jump from discovery mode to checkout in less than two clicks.

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