What would conversational advertising mean for retail media, and can it succeed?

Generative AI chat tools like ChatGPT, Claude, and Gemini have taken on the role of go-to research and information aids for many – including when making buying decisions.

At the same time, many retailers have launched their own in-house chat agents to provide shoppers with on-demand support and product recommendations, such as Sparky, a shopping assistant from Walmart, or Rufus, launched by Amazon in 2024.

These conversational segments of the buying journey are understandably of interest to advertisers, who want to understand exactly what their role is in influencing shopper journeys and how brands can show up there.

No doubt recognising this, Amazon has been testing a sponsored experience within Rufus with select ad partners, and news leaked recently that a full rollout was on its way. The experience appears to place Q&A-style prompts within a product detail page that, when selected by the shopper, will open a chat within Rufus where the shopper can learn more and potentially receive specific product suggestions.

With the news that OpenAI is also developing a conversational ad product for ChatGPT in partnership with ad automation platform Smartly, it seems like retail media opportunity may be moving in a distinctly conversational direction. We reached out to a number of industry thinkers to get their take on how they view Amazon and OpenAI’s moves and what they mean for advertisers.

Conversational ads will be more about persuasion than visibility or scale

Bostjan Spetic, Head of Supply Labs at Teads, views sponsored placements on Rufus as a strong middle-of-the-funnel opportunity for advertisers. “We have to assume that Amazon users are migrating from browsing the endless pages of product specs into conversational mode, and these sponsored prompts will essentially make advertisers pay for what was previously ‘organic’ or ‘editorial’ attention,” he says.

“These ads complete Amazon’s ad portfolio and make a vision of full-funnel advertising campaigns within a controlled environment within reach.”

Charlotte Crook, Carat UK’s Chief Digital Officer, argues that, “Amazon’s move to roll out advertising in Rufus is significant because it places brands directly inside conversational, decision-led shopping behaviour, rather than around it.” Unlike Amazon’s existing ad formats, she adds, “this is not just about visibility, [but] more about persuasion at the point of purchase.”

Crook points out that when compared to broader formats like Sponsored Products or inventory within Amazon Prime, the scale of Rufus ads is likely to be more limited, “as conversations are distributed across individual SKUs and highly specific questions.”

Nevertheless, “as a lower-funnel format, Rufus could be disproportionately powerful, particularly for brands with strong data foundations and well-structured product information.”

This assessment chimes with a report from The Information that those advertisers who have trialled Rufus thus far have found the volume from Sponsored Prompts to be limited, with one senior director at a media agency reporting that they make up fewer than 1% of total clicks in sponsored product campaigns.

However, two ad execs interviewed said that shoppers seemed more likely to click when they did receive the prompts – and they are also regarded as a potentially useful insight into how Amazon surfaces products in Rufus generally.

ChatGPT conversational ads could blur the lines between media placement and digital experience

Much has been discussed about generative AI’s introduction into search – or in some cases, its supplanting of search – collapsing the traditional marketing funnel.

In some cases, brands and retailers are responding to this by moving the potential point of conversion higher up the funnel and introducing interactive, even shoppable, experiences into ads. Some examples of this can be seen in Boohoo trialling PayPal’s shoppable ads and Diageo introducing interactive video cards into brand ads.

Crook highlights that OpenAI’s partnership with Smartly “signals something bigger than a new ad format”: it is “a move to merge media and digital experience” within ChatGPT. “[It] collapses the traditional separation between media that influences and digital experience that drives interaction and purchase.”

As conversational ads within ChatGPT would, unlike Rufus, not be attached to a product page or other buying signal, Crooks imagines them becoming “more of a brand awareness and consideration play”, something that will require a mindset shift from marketers who are used to say, search advertising, which sits closer to the bottom of the funnel.

Another key point is that conversational ads represent “a shift away from one-way messaging and towards dialogue, something many brands will need to adapt to quickly.”

Teads’ Bostjan Spetic points out that OpenAI has shown its dedication to experimentation with different concepts, but this doesn’t mean that all of them will be implemented long-term. (OpenAI’s recent decision to phase out Instant Checkout as a standalone experience in ChatGPT springs to mind there).

“There is no reason to assume this experiment will work any better or worse than all the others before it,” he says. “What is different, though, is that they increasingly try to work with third-party experts, but I would expect it will take one more round before they nail the use cases and technology stack necessary to operate a scaled ad programme.”

What will it take for conversational shopping ads to succeed?

Conversational ad formats offer brands the prospect of being able to engage consumers in a way they’ve never been able to accomplish before, offering them more information about a product or service while at the same time nudging them along the funnel.

Conversations, however, are famously a two-way street – and it’s yet to be seen whether consumers will take to the format. What do our experts believe are the necessary ingredients for success?

“They can’t just be chatty billboards”

James Taylor, CEO at Particular Audience, asserts that, “Functional ad units are the bleeding edge of adtech.” However, “For these functional or conversational formats to really take off across the industry, they can’t just be chatty billboards. They have to genuinely solve a shopper’s problem in real-time.

“Amazon and OpenAI pushing into this space proves the market is aligned on the future, but the real opportunity lies with retailers who can enable that same interactive utility across AI interfaces,” he concludes.

Carat UK’s Crook agrees: “Success in conversational advertising will favour brands that focus less on grabbing attention and more on being genuinely useful at an individual consumer level.”

The value must be clear – for consumers and for brands

Trust will be critical to getting users on board with ads in conversational experiences. “If conversational environments lose credibility with users, adoption will stall,” says Crook. “Transparency around what is paid, why it appears, and how it can be questioned will be essential.”

It’s not just users who need to see the value, either, as Crook makes the point that advertisers must be clear on where these fit into the overall advertising picture and how they can track returns.

“[T]here’s an open question as to whether these formats should be treated as brand-building or performance media,” she says. “Incremental impact and better insight will be critical. Amazon’s promise of prompt-level reporting in Rufus is interesting here, as it could unlock a new layer of understanding around consumer decision-making that helps both marketing and product teams.”

“Advertisers are definitely interested in participating in active testing of these new formats, and nobody has given them enough access to really benefit from the immense amount of creativity and experience that’s available on the client/agency side,” adds Spetic.

However, advertisers may want a level of control that goes beyond simply guiding the prompts that are used. “It is hard to expect advertisers to blindly trust the chatbot operated by the network … Until they make it possible to “bring your own bot” into the ad unit, adoption will be experimental.”

The right foundations need to be laid

“[B]rands will need the right foundations underneath the media: well-structured content, up-to-date product and stock data, and agentic systems that can scale accurate, brand-safe responses across large inventories,” says Crook. “This isn’t just a media challenge; it’s an organisational one.”