Google launched Conversational Discovery ads, Highlighted Answers, Business Agent for Leads, and AI-powered Shopping ads at Marketing Live 2026. Here is what service businesses need to do before these formats scale.
Ido Cohen · Published 2026-05-25 · Paid Advertising
Google just rewired how ads work inside its AI-powered search engine, and service businesses running Google Ads are sitting at the center of the change. At Google Marketing Live on May 20, 2026, the company unveiled four new Gemini-powered ad formats that place sponsored placements directly inside AI Mode conversations — not alongside them. If you run ads for a plumbing company, dental practice, law firm, HVAC contractor, real estate agency, or med spa, the way a prospect discovers and qualifies you is changing right now.
Here is what actually launched, what is still in testing, and the six things you should do this week before these formats scale.
Four formats came out of Google Marketing Live 2026. Two are in active U.S. testing. One is in open beta. One is coming later this year.
According to Google's official announcement, the company introduced Conversational Discovery ads, Highlighted Answers, AI-powered Shopping ads, and Business Agent for Leads at the event. Here is the breakdown:
As Search Engine Journal reported, Conversational Discovery ads and Highlighted Answers are currently being tested in the U.S. on mobile and desktop, while Business Agent for Leads is already launching in open beta for U.S. advertisers.
The big context number: according to Google at I/O 2026 the week before, AI Mode has surpassed one billion monthly users — making this a monetization layer bolted onto a surface that is already at massive scale.
Conversational Discovery Ads are the most structurally different from anything that existed before. Google's Gemini model reads the user's specific question and builds ad creative dynamically in response to that exact query. There is no pre-built static banner. The AI writes the headline and copy on the fly, pulling from your campaign assets and matching them to what the user literally typed. Search Engine Land described it this way: rather than relying on static creative and keyword matching alone, advertisers will increasingly need to optimize for conversational discovery and AI-generated explainers.
For a service business, the practical meaning is this: a user who types "best way to unclog a drain without calling someone who will oversell me" and still clicks your ad is a different, higher-intent user than someone who clicked a traditional search ad for "plumber near me." The query is longer, the intent is more specific, and the AI is matching your creative to that exact emotional context.
Highlighted Answers are simpler. When AI Mode returns a list-style response — say, "best HVAC companies in Austin that offer same-day service" — your ad can appear inside that list as a labeled recommendation. According to Google's own blog, when AI Mode provides a list of recommendations, highly relevant, high-quality ads are eligible to appear on that list as a Highlighted Answer. This format is less about competing on keywords and more about being eligible when Gemini constructs a recommendation panel.
Business Agent for Leads is the format service businesses should care most about right now, because it is the only one live in open beta today. According to Google's official product description, Business Agent for Leads changes the dynamic by enabling a real conversational exchange directly within Search ads. A prospective client can ask specific questions about your business at any hour, and get accurate answers grounded in your website content. It captures lead data even when your team is offline, filters for better prospects through interactive dialogue, and removes the friction of finding out more.
Instead of a prospect clicking your ad and landing on a contact form, they click and get an AI agent — trained on your website — that answers their questions conversationally. The lead who completes that exchange has already self-qualified. They know your service area, your pricing range, and your process before they submit a form. That is structurally different from how lead generation has worked for the past decade.
AI-powered Shopping Ads matter less for pure service businesses, but if you sell products alongside services (a med spa selling skincare, an HVAC company selling equipment, a contractor selling materials), watch this format. Gemini pulls relevant products and generates a custom explainer about why that product fits the user's query. The explainer is part of the ad itself.
Most service businesses running Google Ads today are still optimizing against traditional Search results. That is a problem, because the search surface is changing underneath them.
According to Marketing Dive's coverage of the Google I/O and Marketing Live announcements, AI Mode — which has over 1 billion monthly users — is now powered by the more advanced Gemini 3.5 Flash model globally. And the company debuted a revamped search experience that further deprecates the traditional 10 blue links approach.
Here is what that means practically: a growing share of your target customers are not scrolling a list of ten results anymore. They are asking a question, getting a synthesized answer, and deciding based on what that answer says. If your competitors are in that answer layer — organically or through paid placements — and you are not, you have already lost the lead before anyone has clicked anything.
The commercial implication of the new ad formats is that Google is explicitly monetizing this AI answer layer. As getpassionfruit.com's analysis noted, AI Mode ads are a paid layer that sits alongside the organic AI answer, not inside it. The ad does not change which sources AI Mode cites in its organic response. That means you need both: paid presence through the new formats AND organic presence through content and entity signals that earn citation in the AI answer itself. One without the other is half a strategy.
There is also a buried feature that barely made headlines but is enormous for local service businesses. Per Google's I/O 2026 Search announcement, for select categories like home repair, beauty, or pet care, users can now ask Google to call businesses on their behalf — and these capabilities will roll out to everyone in the U.S. this summer. That is not a paid format. That is an AI agent calling your phone on behalf of a customer. If your staff is not equipped to handle AI-initiated calls, or if your Google Business Profile data is wrong, those bookings will fall through before you even know they happened.
This is the shift that most coverage is burying. Under the old model, you wrote an ad. You controlled the headline, description, and call to action. You built the landing page. A click connected the ad to the page, and your conversion rate depended on how well they matched.
Under the new model, Gemini is generating your ad creative based on your campaign assets and your website content. As Blayzer Digital's analysis of the GML 2026 formats put it: your job shifts from managing every tactical variable to making sure the AI has what it needs to represent your business accurately and compellingly. It creates real problems for businesses with vague websites, thin product feeds, or unclear value propositions.
For Business Agent for Leads specifically, the AI agent that prospects interact with inside your ad is drawing answers from your website. If your site has no FAQ page, no clear service area description, no pricing transparency, and no "how it works" section, the agent will either make things up or fail to convert. Neither outcome is acceptable when you are paying per click.
The same logic applies to Conversational Discovery ad eligibility. According to getpassionfruit.com's breakdown, Gemini generates ad creative per query instead of serving a static asset, which makes structured product data, asset diversity, and landing page quality the levers that matter — not pre-built creative.
This is the uncomfortable news: if your website reads like a brochure from 2019, you are not just behind on SEO. You are behind on your paid ads. The AI is reading your site to build your campaigns.
Google is not moving in isolation. The competitive picture is important context for how to allocate your attention and budget.
OpenAI opened its self-serve ChatGPT Ads Manager to all U.S. advertisers on May 5, 2026, dropping the previous $50,000 minimum spend requirement and adding cost-per-click bidding alongside the existing CPM model. According to trade reporting confirmed by PPC Land, recommended starting bids are between $3 and $5 per click, making ChatGPT ads now genuinely accessible to small and mid-size service businesses.
ChatGPT ads appear at the bottom of responses as clearly labeled sponsored cards, below the organic AI-generated answer. They are targeted based on the topic of the user's active conversation, past chat history, and past ad interactions — not keywords.
Here is the honest comparison for service businesses right now:
My honest take: Google is the priority. The intent quality of Google AI Mode queries is higher than ChatGPT for service searches, the user base is dramatically larger, and the Business Agent for Leads format is already in open beta. ChatGPT Ads is worth a small test budget if you have clean campaign infrastructure — but do not move Google budget to ChatGPT. They serve different moments in the decision process.
You do not need to wait for these formats to fully roll out. The prep work you do now is exactly what determines whether your ads perform when Conversational Discovery and Highlighted Answers scale.
1. Enable AI Max on your existing Search campaigns. Business Agent for Leads only runs inside AI Max and Performance Max. If you are not using AI Max yet, you cannot access the open beta. This is the single most time-sensitive action on this list.
2. Audit your website for question-style content. Go to your five highest-traffic service pages and ask: does this page answer the specific questions a prospect would ask an AI? If the page is just a service description and a contact form, the Business Agent will not have enough to work with. Add an FAQ section with at minimum 8–10 real questions prospects ask before booking.
3. Add a dedicated service-area page with specific cities and zip codes. AI Mode heavily weights geographic relevance. Gemini needs to know exactly where you operate to serve your ad for local queries. A vague "serving the greater metro area" line is not enough.
4. Diversify your creative assets. Conversational Discovery ads generate creative dynamically, but they pull from your uploaded headlines, descriptions, and images. Upload at least 15 headlines, 4 descriptions, and a variety of image assets — including before/after, team photos, and credential shots — so Gemini has raw material to assemble relevant combinations.
5. Set up first-party conversion tracking before the new formats roll out at scale. According to Search Engine Land's coverage, as searches become longer, more conversational, and less tied to traditional keyword behavior, measurement and optimization will become far more complicated. If your conversion tracking is broken or relying on last-click attribution, you will not be able to optimize Conversational Discovery bids meaningfully. Get Google Tag Manager and your Ads conversion tags audited now.
6. Claim and update your Google Business Profile for the AI-calling feature. This summer, Google AI will call local service businesses on behalf of users for categories including home repair and beauty. Your GBP must have an accurate phone number, current hours, accurate service category, and recent reviews — because the AI will be reading that data to determine if it should even attempt the call.
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What are Google Conversational Discovery ads and who can access them?
Conversational Discovery ads are a new Gemini-powered format that generates ad creative dynamically in response to each individual search query inside AI Mode, rather than serving a pre-built static ad. As of May 2026, they are being tested in the U.S. on mobile and desktop, but access is not yet open to all advertisers — they are expected to roll out more broadly later in 2026. To be ready when they do, your campaigns should be running AI Max and have diverse creative assets uploaded.
What is Business Agent for Leads and how does it work for service businesses?
Business Agent for Leads embeds a Gemini-powered AI chat agent directly inside your Search ad. When a prospect clicks, instead of landing on a static form, they can ask questions and get answers pulled from your website content. Google's product description says it captures lead data even when your team is offline and filters for better prospects through interactive dialogue. It is currently in open beta in the U.S. and requires AI Max or Performance Max campaigns.
Do these new Google AI Mode ads change the organic AI answers users see?
No. According to multiple sources including Google's own blog and independent analysis, the new ad formats are a paid layer that sits alongside the organic AI answer — not inside it. Ads do not change which sources AI Mode cites in its organic response. This means you still need both a paid strategy and an organic strategy (structured content, citations, entity signals) to fully compete in AI Mode.
Should service businesses also test ChatGPT Ads now that the $50K minimum is gone?
If you have clean conversion tracking and at least $500 to test, it is worth exploring — but do not cannibalize your Google budget to fund it. OpenAI dropped the minimum spend requirement on May 5, 2026, and added cost-per-click bidding, making the platform genuinely accessible. However, Google AI Mode has a larger user base with stronger local service intent, and Business Agent for Leads is already live. Prioritize Google, then test ChatGPT as an incremental channel.
What happens when Google's AI calls my business on a customer's behalf this summer?
Starting this summer, Google Search will allow users to ask AI to call businesses in categories including home repair, beauty, and pet care on their behalf, per Google's I/O 2026 announcement. Your staff will receive a call that was initiated by an AI agent on behalf of a human prospect. The call may be flagged or the AI may identify itself, but you should brief your front desk or answering service on this scenario now. Make sure your Google Business Profile hours are accurate — if the AI believes you are closed, it may not attempt the call at all.
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