• by Laurie Sullivan  @lauriesullivan, February 21, 2025

Conversational interactions that create dialogue between a consumer and chatbot or AI agent strengthen intent signals, and analysis behind the sequence of words becomes the next phase in audience engagement and ad targeting.

GAI can analyze words, as well as the sequence used, to deeply understand intent, giving marketers and advertisers insight into the approach they should use to connect with consumers.

Microsoft’s guide -- A marketer’s guide to chatbots and agents: from generative AI to ROI, released Friday -- walks through strategies and best practices to extend a brand’s reach through chatbots and agents.

It offers tips on fine-tuning search engine optimization (SEO) and paid media strategies to identify new opportunities for connections with customers. It also covers tips on improving performance and leveraging conversational AI-powered tools to build and optimize ad campaigns.

There were several trends identified in the report, such as the collapse of the marketing funnel. However, the relevance of queries used to find information and then served back to consumers will become the most important -- especially for targeting content and ads.

Microsoft notes in the report that “when large language models (LLMs) have access to comprehensive brand information, it can accurately interpret user intent and deliver highly relevant experiences and data to improve performance.

Internal data from Microsoft Copilot advertising experiences shows a 69% increase in click-through rates (CTR) and a 76% improvement in conversion rates. This is because the technology is returning information based on analysis of the way the consumer asks questions and words used to query it.

Brands need to be careful to avoid limiting consumer choice through AI Agents and Chatbots, always giving customers the ultimate decision. For example, query results should always include more than one option, so the consumer can ultimately make the final choice.

Some 90% of people will rely on GAI search as their primary tool by 2027, Statista estimates.

They also will rely on AI-based conversational ads. Research from the American Marketing Association shows 85% of marketers using GAI report improved productivity. Some 38% use AI for writing ad copy, 33% for content creation, and 28% for lead generation and storytelling.

Microsoft notes that advertisers can gain efficiencies through chatbots and agents. Microsoft 365 Copilot users are seeing a 70% productivity boost and finishing tasks 29% faster.

GAI can generate images in minutes, speaking directly to  eco-conscious millennials in one campaign, then shifting to a bold, playful message for Gen Z in another. From a creative perspective, GAI also helps develop strategic planning and campaign ideation.

Microsoft believes AI will improve authenticity in ads to foster loyalty and improve ad targeting, driving results through analysis. Through conversational ads or AI agents, analysis will take over and serve the best ad to the consumers.

Internal data from Microsoft shows that ads on Copilot achieve 1.7x higher CTR compared with traditional search ads, and 40% of people report that these ads enhance their overall experience.