Microsoft on How AI is Reshaping Search

What role will first party data play in strengthening advertiser performance in an AI driven search environment?

High quality permissioned, recent deterministic signals (such as site actions, purchases, subscriptions) gives our paid model a stable anchor to complement our existing data sets giving better information for targeting and bidding to return not only improved outcome in performance but also unlock additional insights into customer/media performance. 

To ensure effective AI-driven experiences using your first party data, it's crucial to follow best practices for data structuring.

Key recommendations:

• Clean and Inclusive Data: Ensure that your data is clean, reliable, and inclusive. This means removing any noise or inaccuracies and making sure that the data represents diverse perspectives. Clean data is foundational for AI models to perform effectively and deliver accurate outcomes
• Data Integrity: Trust in AI systems starts with data integrity. It's essential to maintain high standards for data quality to avoid delivering irrelevant, inaccurate, or biased outcomes. This helps in building and maintaining customer trust
• Privacy and Confidentiality: Use technologies like clean rooms and confidential computing to enable secure, privacy-respecting data collaboration. These tools allow multiple entities to collaborate on personalization without exposing raw data, ensuring that data remains encrypted even while being processed
• Ethical AI Design: Incorporate ethical AI principles into your data structuring practices. This includes ensuring transparency, accountability, and security at every touchpoint. Ethical AI design is crucial for building long-term loyalty and brand integrity
• Data Management Practices: Invest in robust data management practices. This includes using innovative and cost-effective services to manage and analyse data. Effective data management is key to reaping the rewards of AI initiatives

When large language models (LLMs) have access to comprehensive brand information, they can accurately interpret user intent and deliver highly relevant experiences that enhance performance. Internal data from Microsoft Copilot advertising experiences show a 69% increase in click-through rates (CTR) and an improvement in conversion rates. Higher fidelity first party signals plus conversational search accelerate users from query to action. The winners will be the brands that leverage their first party data alongside responsible AI systems and test relentlessly where people are already searching, comparing, and deciding.

How are you preparing to educate brands and agencies on the opportunities and risks of AI in search advertising?

Responsible AI is the first step on the ladder to any conversation. Microsoft has six core guiding principles: fairness, reliability/safety, privacy and security, inclusiveness, transparency and accountability. We help our partners understand what guardrails exist within our platform as well as operating a test and learn mantra. AI is accelerating at a rapid pace within search advertising, whether this is partners utilising AI generated ad copy, the development of Copilot ads or even partners utilising agentic to drive a desired outcome. 

AI in search advertising in 2025 impacts the majority of the existing workflows and structures so whilst a year ago it was okay to have an ‘AI search specialist’ role within your teams, it’s now essential that the entire team is leveraging AI and learning the capabilities and limitations. This change management in skillsets is arguably the most important transition you can make. In July 2025, Microsoft Advertising established a new AI team dedicated to guiding brands and agencies.

If you could suggest one thing advertisers, agencies, and clients should do immediately to prepare for the future of search advertising, what would it be?

Get comfortable with AI. Put your hands on the tools in order to discover where the value is for YOU – in your workflow and your role. You do this by designing experiments and being curious (whilst, of course, ensuring you follow responsible AI principles). Work with partners like Microsoft Advertising to guide you through the things you can do now. The future of search isn’t tomorrow; it’s already happening today. There are pilots that exist where you can lean in and be able to see for yourselves what is on the horizon.

For Paid Search practitioners leverage available solutions within AI innovations such as the Copilot Ad Studio and conversational ads through products like PMAX and taking advantage of using as many multimodal formats as possible.

For SEO professionals, this search shift means visibility is no longer defined by ranking position alone. To be surfaced and used by AI agents, focus on your content being fresh, authoritative, structured, and semantically clear. And at the centre of it all is content itself — without clear, current, comprehensive content, there’s nothing for AI systems to surface, no matter how strong the supporting signals are.

What skills and capabilities will your teams need to future proof your search offering as AI evolves?

A new organisational blueprint is emerging, one that blends machine intelligence with human judgment, building systems that are AI-operated but human-led. Like the Industrial Revolution and the internet era, this transformation will take some time to reach its full potential, but the shift is clear: from keywords to signals, from clicks to business outcomes, and from manual ops to automation and agents.

Adopting an AI-first strategy means teams need to work with the latest industry tools and also create their own AI agents so they stay competitive. It’s also not just for coders; no code and low code skillsets are just as valuable now the barriers to AI entry are lowered.

The real question isn't "how do you use AI in advertising” but "how do you build an ecosystem of advertising agents that can out-learn, out-adapt and out-compete everyone else?”