Google has begun testing several new ad formats in both standard search results and AI Mode as the race to turn artificial intelligence into ad revenue picks up, Patrick Coffee reports for The WSJ Leadership Institute.

AI-generated ads for brands and products will now appear below the responses to some users’ prompts in AI Mode, while Google’s existing “direct offers” ads for discounted products will expand from AI Mode to standard search results.

The formats won’t appear in Gemini, but Google has said formats that work in AI Mode ought to transfer successfully to the Gemini app.

Tech companies are hoping their ads won’t alienate generative AI users, who may have different expectations for responses to their prompts than they do for standard searches.

“In a world where AI provides a direct and conversational response, will users still find value in ads?” said Shashi Thakur, vice president and general manager of Google search ads and ads on Google experiences. “Our answer is, it’s definitely yes, but you have to rethink how to approach ads and what an ad is.”

I asked Patrick to break down the news for brands.

What do marketers need to know about Google’s new ad formats?

Patrick: I see two key points. The ads are going to be showing up everywhere except Gemini, and they’re going to be drawing almost entirely from your brand’s own content. I’d bet that a lot of people who started optimizing their websites and marketing materials for crawlers and LLMs two years ago are feeling pretty smart right now. Google, in my mind, is also kind of saying that AI-generated ads don’t have to mean impossibly cute kittens or models with four fingers. So maybe you shouldn’t worry about slop or hallucinations. Google would certainly make that argument.

Google says it’s trying to be thoughtful about these ads because people using AI Mode may really just want answers, in conversational style, as opposed to the list of resources you expect from a traditional search result. Is there any risk for advertisers in these experiments?

Patrick: One of the biggest recurring themes when we talk about AI is that marketers really don’t like giving up control, especially when it comes to how potential consumers encounter their brands. That’s the antithesis of marketing as we know it, right? But in this case you can’t directly shape the final product, so you could simultaneously worry that all the work you put into positioning your brand will be lost or that the resulting spot will have those classic AI tells, like most of the comments people leave on LinkedIn. In a worst-case scenario, both of those things will happen at once.

Google’s guardrail tool is meant to assuage these concerns, but the company also says your ads won't be any good if you try to put too many restrictions on the AI creating them. If any readers have thoughts on this point, I'd love to hear them directly.

“The Breakfast Club,” the influential morning radio show co-hosted by Charlamagne tha God, will stream live on Netflix, making it the service’s first daily live program, Anne Steele reports.

The show, known for celebrity interviews and its hosts’ unvarnished takes on culture and current events, will stream in real time for three hours each weekday starting June 1, Netflix and radio and podcast company iHeartMedia said Thursday.

Netflix has been moving more into live programming over the past few years with an eye toward driving more subscriptions with a broader content portfolio.

​​Target reported its strongest quarterly sales gain in years Wednesday, the first sign that new strategies to attract shoppers are starting to bear fruit, Sarah Nassauer reports.

Shoppers gravitated to some of the company’s refreshed product assortment and customer-service changes, executives said on a call with reporters.

New products and store layouts in its baby, toy and health departments led to big sales gains in those categories, Michael Fiddelke, Target’s new chief executive, said. “So that’s early evidence to us that we are on the right path,” Fiddelke said.

Company executives set a cautious tone for the rest of the year, however, noting that the current period has a tougher year-ago comparison.

Some shoppers also likely spent more freely at the start of this year because of tax refunds, executives said, and the macroeconomic environment remains unpredictable overall.

“While consumers have proven to be resilient so far, sentiment has been declining recently and we’re keeping a close eye on their spending behavior,” Target Chief Financial Officer Jim Lee said.

Teamwork: Collaborations with Roller Rabbit, Parke, BTS and Pokémon in the quarter helped get shoppers through the doors, according to Target executives, who noted the company’s long history of partnerships but said they’re trying to do them more often.

The new Pokémon collection across categories including clothes, electronics and beauty set sales and social-media engagement records for Target, said Cara Sylvester, who was named chief merchandising officer in February, on the earnings call to discuss results.

“We are working on increasing the cadence,” Sylvester said, adding that not every collaboration has to be large.

“We actually had four launches in Q1 where we drew lines out of our stores,” she added. “What we’re working on is consistency.”

More retail: Walmart sales grew in the most recent quarter as shoppers looked for value and bought more online. Its e-commerce sales, which include advertising revenue, grew 26% in the most recent quarter. [WSJ] 

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