Microsoft is testing a new AI-powered tool that could change how advertisers interact with consumers. The company is launching a pilot product for brands to create AI agents on their websites. 

These AI agents are software programs that can perform tasks, answer questions, and even engage in conversations with people and other AI agents. The tool is currently in the testing phase with select clients. 

With this feature, Microsoft could change customer engagement from traditional chatbots to more intelligent AI-driven interactions that support lead generation, provide product details, and even offer promotions in the future.

Microsoft expands Copilot ads with new formats

Microsoft is also investing in advertising within Copilot, its AI assistant. The company confirmed that Copilot ads are now fully live in English, French, and German, with Spanish and Japanese launching this month. More languages are expected to follow.

But it isn’t stopping at traditional ad placements. It’s rolling out new ad formats built for Copilot, including:

Microsoft Showroom ads

Starting in April, Microsoft will test Showroom ads, an interactive format designed for Copilot. These ads create a digital experience similar to a physical showroom, where users can explore products in detail.

For example, when users research a product in Copilot and signal purchase intent, they may be invited to enter a Showroom ad experience. This showroom will provide sponsored content that displays the product and its benefit.

Microsoft says brands will be able to integrate AI brand agents into these ads in the future. This means consumers can interact directly with a virtual brand representative.

Dynamic filters

The company is also launching Dynamic filters to narrow down search results. This feature eliminates the need for users to type additional questions. It automatically reduces options based on the user's intent.

Dynamic filters will start rolling out in English-language markets this March.

Dynamic ad generation

Another update is Microsoft’s push for dynamic ad generation. The company has already been using query signals to create ads in Dynamic Search Ads (DSA) but is now expanding personalization efforts.

It will integrate location-based signals and seasonal event data to tailor ads even further. This will soon apply to ad copy and image selection, ensuring that the ads align with each user's context.

Microsoft is also bringing this approach to new campaign types like Performance Max. This could provide advertisers with more automated ad experiences.

Microsoft expands ad placement to gaming and Windows

Microsoft is also expanding its advertising reach in gaming and Windows. Brands can now leverage King and Microsoft Casual Games through Microsoft Advertising. They will have access to placements on popular games like Candy Crush across Android, iOS, and Windows.

App campaigns are now piloted in  Microsoft's Windows Start menu and Microsoft Store. This could give brands new ways to promote apps directly within the Windows ecosystem.

The App campaigns pilot has already started with select clients and will open to more advertisers soon.

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