Microsoft released several updates on Copilot and ads in October this year.

Following that, at the recent Microsoft Advertising Partner Pulse meeting*, Microsoft dove deeper into the updates, including results of research, enhanced Copilot ad integration, and optimization best practices for Performance Max campaigns, among others.

These updates mark more steps forward in Microsoft’s effort to refine the AI search experience and integrate the ad platform into conversational search.

They provide businesses with a way to stay ahead in AI technology advancements while effectively managing their Microsoft Ads.

Consumer Perception Of AI Search Results

The updated Microsoft Copilot clearly separates organic content from sponsored ads.

Ads are now integrated into entire conversations during a session, rather than just appearing after the last prompt, aligning with their simplified design.

As Copilot enters its first year, Microsoft has taken a closer look at consumer perceptions of AI-driven conversational search, often referred to as “chat.”

Its latest study reveals a growing trust in chat platforms for search, offering insights into how this technology reshapes user behavior and expectations.

The research focused on U.S. consumers who have experience with a conversational search platform. It found that users view chat as both complementary and, in some cases, superior to traditional search.

Users particularly value the speed and relevance of chat results, finding the results easier to understand compared to sifting through traditional search results.

Key findings:

• Trust in Generative AI: 38% of U.S. consumers report being “very trusting” of results from generative AI, while 50% of current Copilot users describe their trust level as “very trusting” or “completely trusting.”
• High Engagement Levels: Among Copilot users, 50% engage with the platform multiple times per week, and 16% use it daily. This indicates that many users have moved beyond experimentation and integrated Copilot into their daily routines.
• Accuracy Levels: 77% of users believe that chat and traditional search are equally accurate, with 38% finding chat results more precise for their needs.

Microsoft believes this shift marks a fundamental change in how people interact with search technology.

As traditional keyword-based search gives way to conversational queries, users like the more detailed and relevant results.

Consumer Perception Of Ads In Chats

Consumers are becoming more comfortable seeing ads in their chat experiences because the ads feel relevant and personalized.

According to Microsoft, the data shows:

• Ad Recall: 38% of users recall seeing ads during their chat sessions.
• Positive Sentiment: Of those who remember seeing ads, 75% reported that the ads had no negative impact on their experience. In fact, 42% noted that the ads improved their experience, enhancing their journey by providing useful and relevant information.

Why This Works

The success of ads in chats lies in their alignment with user intent. Chat users perceive these ads as being relevant to their searches.

This hyper-relevant targeting allows ads to blend seamlessly into the chat experience, earning trust and confidence in the results.

The Opportunity For Advertisers

As chat usage grows, so do the opportunities for brands to connect with consumers.

The research shows that a third of chat users already use these platforms to research products or brands they want to purchase. They also use chat beyond just researching products and brands.

Consumers are turning to chat platforms for a variety of tasks, including:

• Finding recipes and meal ideas.
• Planning trips and finding travel deals (17%).
• Searching for gift ideas (19%).
• Learning about health conditions.

The variety of use cases presents new opportunities for advertisers to connect with consumers at different stages of their decision-making journeys.

Because the ads are served based on sessions rather than individual queries, they can be more timely and relevant.

PMax Is The Best Performing Ad Format In Copilot

Looking at ad opportunities in Copilot, Microsoft’s data shows that Performance Max (PMax) is the top-performing format.

Ads within Copilot outperform traditional search ads in click-through rates (CTR).

Another critical metric is the rate of “quick click backs,” where users click an ad but quickly return because the landing page content didn’t meet their needs.

Microsoft found that Copilot ads result in fewer quick click backs than traditional search ads.

These performance benefits are attributed to the previously mentioned deeper engagement and conversational context in Copilot.

Why Performance Max Stands Out

According to Microsoft, Performance Max campaigns consistently outperform their other ad formats:

• Responsive Search Ads (RSA): PMax delivers higher engagement compared to standard responsive search ads.
• Shopping Campaigns: PMax shopping campaigns drive more conversions than traditional shopping campaigns.
• Multimedia Ads: PMax shows with fewer quick click backs and more engaged users.

Microsoft highlights that this higher level performance comes from PMax’s ability to analyze the context of conversations within Copilot, serving more relevant ads.

Best Practices For Optimizing For Copilot In Microsoft Ads

Microsoft Ads recommends three key best practices to help advertisers maximize the potential of Copilot in the Microsoft Ads platform:

• Use PMax for Maximum Coverage: PMax integrates assets and optimizes them across various formats, making it a good fit for reach, engagement, and conversions in Copilot.
• “Optimize Once, Benefit Twice”: There’s no need to create separate campaigns for Copilot because it is enabled in existing search campaigns. Instead, Microsoft takes your optimized search campaigns and finds opportunities to display them within the Copilot chat experience.
• Productivity with New Tools: To further improve campaign management and performance, Microsoft highlights the importance of using its latest tools, Performance Snapshot and Diagnostics, to get AI-powered insights and recommendations for the account.

The better the existing search campaigns are optimized, the better chance those ads will perform well in Copilot. Focusing on efficient search strategies now carries over to ads in Copilot.

Performance Max: Microsoft’s Best Practices For Setup And Optimization

Microsoft shared recommendations on how advertisers can get the most out of PMax, detailing deeper best practices for setup with key levers to drive better performance with advanced AI automation.

• Audience Signals: These signals are crucial for directing the AI toward high-value prospects. Use tools like remarketing, custom audiences, and customer match, which provide signals and guidance to the algorithm.
• Search Themes: These keyword-based signals provide important context to the AI, improving targeting accuracy and relevance.
• Brand Exclusion Lists (Pilot): This feature, currently in testing, lets you exclude branded queries where you don’t want your ads to appear. It’s also useful for strategic targeting, such as avoiding competitor terms or focusing on conquesting opportunities.

Other areas to optimize for success include:

• Budgets.
• Bid strategies.
• Goals and targets.
• Web exclusions.
• Assets.
• Product feeds.
• URL expansion.

Recommendations For Setting Up PMax Campaigns

To achieve the best results, Microsoft offered several actionable tips and outlined expectations for advertisers:

Time To First Impression

• Retail campaigns typically show results within three days.
• Non-retail campaigns may take up to four days.

Learning Period

• Allow two to four weeks for the AI to fully optimize.

This phase requires patience and depends on factors like:

• A conversion volume of 30+ in the past 30 days.
• Conversion cycle length.
• Industry type and seasonality.

Budget Recommendations

• Allocate 25-30% of your Google Ads budget to Microsoft Advertising.
• Provide two to three times the budget of historical standalone search campaigns for PMax to maximize effectiveness.

Best Practices

• Ensure adequate budgets to avoid constraints.
• Leverage audience signals and search themes for precise targeting.
• Use the bid landscape tool to make informed decisions on target bids.
• Strategically manage constraints like product or location focus during testing phases.

What’s Next For PMax

Microsoft continues to enhance PMax with new features on the horizon, including:

• Goals focused on acquiring new customers.
• Improved audience insight reports.
• Expanded support for video assets.

Summary

Microsoft’s recent updates to Copilot and ad integration reflect a strategic push to redefine the advertising landscape with AI-driven conversational search.

With rising consumer trust in generative AI and enhanced ad relevance within chat experiences, businesses have an opportunity to connect with their audience in more meaningful ways.

Microsoft stands firmly behind Performance Max campaigns and their new AI tools to deliver efficiency and engagement in the ad platform.

By exploring these advancements, advertisers have the potential to stay ahead in an evolving AI ads ecosystem.

*All the data and information above are taken from the Microsoft Advertising Partner Pulse meeting in November 2024.

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