Microsoft Plan To Transform Its Digital Ad Business With Chatgpt AI

Karen Sainsbury-Carter, the new CEO of Microsoft Corp.'s MSFT -1.28%decrease; red down-pointing triangle digital-advertising division, has a bright new toy to play with artificial intelligence conversation.

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Ms. Sainsbury-Carter, a 17-year Microsoft veteran, was elected the company's first female president of its $18 billion ad division in March. Her hiring occurred only a few weeks after Microsoft integrated the viral chatbot ChatGPT into its Bing search engine and began testing paid advertising links in conversation results. OpenAI, a business in which Microsoft has a 49% investment, created ChatGPT.

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Microsoft has launched a fresh campaign to grow its portion of the digital-ad industry under CEO Satya Nadella. The corporation has bought several ad-related startups, including Xandr from AT&T Inc., which earned a prized customer when it became the only partner to sell and power advertising for Netflix Inc. Microsoft is now attempting to complete its proposed $75 billion acquisition of gaming giant Activision Blizzard Inc., which will provide them with another property on which to sell advertisements. The transaction is subject to regulatory approval.

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Since February, Microsoft has started testing advertisements in Bing Chat answers. Microsoft said customers will see advertising on occasion during the test period, but it does not indicate how many people will view the ads.

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The traditional search involves consumers entering a query and marketers bidding for the privilege to display their links in the results. The ad-based results are generally tagged with a phrase like "ad" or, in the case of Alphabet Inc.'s Google, "sponsored" and show at the top of the pages or among the answers.

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Bing Chat, on the other hand, responds to user inquiries with conversational comments and links to more information-rich webpages. Bing may connect to a brand that has paid for search advertisements in some situations. While such links aren't recognized as adverts in the conversation, if a user hovers their cursor over the link, the ad icon—the word "Ad" in a circle—will display in the link's pop-up Advertisers are not bidding on advertising a la carte during the pilot period.

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Bing is adding sponsored links to relevant conversation results for advertisers that already pay for search advertisements. Nonetheless, regulations for sensitive categories, such as no sponsored links for prescription prescriptions, will continue to be enforced in the chat experience, according to a Microsoft spokesperson.

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Bing is also experimenting with photo and video advertising that would show underneath a user's chatbot interaction.

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Transformational moment

MS. SAINSBURY-CARTER: If you think about traditional search queries they tend to be very explicit like, “Show me Microsoft’s stock price or the weather or a brand, or show me this product.” With the new chat experience, we’re starting to see more conversation, multi-query engagement, more in the realm of, “I sort of know what I want,” versus “I want this. Show it to me.”

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So I love the example of, “I need to throw a dinner party for six, and one person is a vegetarian. Can you recommend a three-course meal?” If you put that in a traditional search, you get all kinds of mostly non-useful results. If you put that in the new Bing, you get something very specific that you can then engage with and go look for the products. And so our ability to really understand user contact and intent is deeper.

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The power of this technology is to help our customers be more efficient in a time of doing more with less, improving not just the return on ad spend but also the return on time spent in using our platforms. This is a tremendous opportunity for us.

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When I talk about the new Bing and conversational chat, the term I’ve been using internally is that it’s like “shiny practicality.” It’s a major transformational moment. And it is also immediately practical. And that isn’t always the case with innovations. With a lot of innovations, you spend years sort of in the shiny stage trying to figure them out.

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