When the chatbot becomes the salesman

There was a time when an advertisement was easy to recognise. It appeared between two overs of a cricket match, filled a newspaper’s front page or flashed at the top of a search page with a small “sponsored” tag. Consumers knew they were being sold to, and that understanding was part of the deal.

Artificial intelligence is beginning to blur that line. People increasingly ask machines what to buy, where to travel, which course to pursue and how to insure their families. As AI assistants become part of everyday decision-making, the old question of where to place an advertisement is giving way to a more difficult one: how should a brand appear in a conversation that consumers believe is happening only between them and a machine?

A market in transition

The scale of this change becomes clearer when viewed against India’s advertising market. The industry is expected to cross Rs 2 lakh crore in 2026, with digital media accounting for roughly two-thirds of total spending. Industry estimates also suggest that India’s digital advertising market could nearly double to around $22 billion by 2030. Advertising has already moved decisively towards the screen in the consumer’s palm. Now, the way consumers interact with that screen is changing.

The last decade belonged largely to search engines and social media feeds. The next could belong to AI assistants. In August 2025, Google began showing advertisements in AI Mode and AI Overviews in India, placing sponsored results alongside AI-generated responses. Meta subsequently announced changes to how interactions with its AI assistant would inform advertising personalisation across its platforms. More recently, OpenAI has introduced advertising in ChatGPT, opening another route for brands to reach consumers during their decision-making process. These developments point towards a new phase in digital advertising, with India emerging as an important market to watch.

AI is transforming advertising in three connected ways. First, it is changing production. Generative tools can create hundreds of versions of an advertisement in multiple languages in the time a creative team might once have spent finalising a headline. A regional consumer goods brand can speak to audiences in Bhojpuri in Bihar and Tamil in Coimbatore without requiring the budget of a multinational company. Yet, when content becomes cheap and abundant, meaning becomes more valuable. Brands that mistake volume for a distinctive voice may find themselves producing more content without making a lasting impression.

Second, AI is changing how advertisements are bought and targeted. Automated systems can decide in milliseconds which advertisement should reach which user and at what price. The marketer’s role is gradually shifting from selecting advertising placements to defining objectives, supplying reliable data and checking whether automated decisions serve the brand responsibly.

The third change is more profound: AI is altering the setting in which advertising appears. A search query may contain only a few words, but a conversation with an AI assistant can reveal a person’s needs, budget and anxieties. Someone asking whether they can afford a term insurance plan after taking a home loan is sharing information about their financial circumstances. Such context can be valuable to advertisers, but it is also deeply personal. The opportunity for brands is therefore inseparable from the responsibility to protect consumers.

From placement to conversation

To understand this shift, consider how advertising can work inside a conversational AI platform. Unlike a television advertisement purchased for a scheduled slot, a sponsored placement may be selected when a relevant conversation takes place. Advertisers can compete through bids, while platforms may also consider relevance and targeting criteria. The precise mechanics vary by platform and are not always publicly disclosed, but the underlying principle is important: the highest bidder need not necessarily be the most suitable advertiser.

Consider a consumer asking, “What can I eat for under Rs 100?” Brand A bids Rs 10 per click for an advertisement promoting a premium meal. Its relevance score is 0.4, giving it a simplified score of 4. Brand B bids only Rs 8, but its Rs 99 meal directly matches the consumer’s request. With a relevance score of 0.9, its score is 7.2. Brand B wins despite bidding less.

This simplified illustration captures an important lesson: in conversational advertising, relevance can matter as much as, or more than, money. However, the actual auction rules, payment model and ranking formula depend on the platform. The larger point remains that brands must understand the consumer’s immediate need rather than simply compete for visibility.

Early Indian experiments suggest that businesses are beginning to recognise this opportunity. Industry reports have identified KFC India, Bajaj Life, UNIVO Education and the ixigo group among brands exploring advertising on ChatGPT. Their interest reflects a broader shift in consumer behaviour. Students increasingly use AI to explore courses and educational opportunities, while consumers turn to digital assistants for everyday recommendations. An advertisement that addresses a genuine need at the right moment could be more useful than one interrupting an unrelated activity.

These early experiences, however, should be treated with caution. Initial results from a new advertising channel can look impressive before competition increases and costs rise. The real test will be whether such campaigns continue to deliver meaningful conversions when hundreds of brands compete for the same conversations. Advertisers must also establish whether AI-generated recommendations create new demand or merely capture consumers who were already close to making a purchase.

Trust cannot be an afterthought

The biggest challenge facing conversational advertising is not technological. It is trust. People turn to AI assistants because they expect useful information, clear explanations and reasonably impartial guidance. If they begin to suspect that an assistant is recommending a product because someone has paid for the privilege, they may start questioning its answers altogether.

Platforms have an obvious responsibility here. OpenAI has stated that its advertisements are labelled and do not influence the assistant’s answers. Such commitments are important, but they must be supported by visible safeguards and consistent practices as advertising becomes a larger source of revenue. The history of digital media offers a cautionary lesson: the distinction between sponsored and organic content can become harder to recognise as commercial incentives grow.

Meta’s approach to using interactions with its AI assistant to personalise advertisements across its platforms raises a related concern. A person discussing a health worry or financial difficulty with an AI assistant may not expect that exchange to influence the advertisements appearing in their social media feed. Even when information is processed within a platform’s stated policies, consumers deserve a clear understanding of how their conversations may be used.

This is where regulation must keep pace with innovation. India has an opportunity to establish sensible standards before conversational advertising becomes deeply embedded in everyday digital interactions. The Digital Personal Data Protection framework provides an important foundation for addressing consent and the purposes for which personal data is processed. Seeking advice from an AI assistant and agreeing to the use of that interaction for advertising are not necessarily the same thing. The distinction deserves clear treatment in applicable rules and platform practices.

The Advertising Standards Council of India, which has addressed issues such as influencer disclosures and dark patterns, could also develop specific guidance for conversational advertising. Advertisements should carry clear, unmistakable labels. Sensitive conversations involving health, mental distress, minors and financial hardship should receive stronger safeguards against commercial targeting. Users should be able to understand why an advertisement has been shown to them, while paid placements must remain clearly separate from the assistant’s substantive answer.

These safeguards need not obstruct innovation. On the contrary, clear rules can help build consumer confidence, encourage responsible investment and make the market more sustainable. An advertising model that earns attention by exploiting private conversations may deliver short-term returns, but it risks undermining the very trust on which its long-term success depends.

What marketers must do

For marketers, the implications extend beyond buying advertisements on a new platform. Brands must learn to earn a place in the consumer’s decision-making process. Clear, accurate and accessible information about products, prices, features and limitations will become increasingly important as AI systems help people compare options. A brand that communicates honestly is better positioned to be understood correctly when consumers seek recommendations.

Equally, brands must focus on being helpful rather than simply being loud. As the earlier example illustrates, an advertisement that directly addresses a consumer’s question may be more effective than one that merely attracts attention. This does not mean every conversation should become a sales opportunity. Sometimes, respecting a consumer’s need for independent information is more valuable than pushing a product.

Marketers must also demand honest measurement. They should use controlled experiments to determine whether AI advertising generates additional sales, improves customer acquisition or simply redirects spending towards consumers who would have purchased anyway. Early conversion figures alone cannot establish the long-term value of a channel.

Finally, businesses must retain human judgement over their brand identity. AI can produce content, personalise messages and automate placements at remarkable speed. It cannot independently determine what a brand should stand for, which compromises are unacceptable or how much consumer trust is worth. Those decisions remain the responsibility of the people running the business.

Every major shift in media has changed the relationship between buyers and sellers. Print gave brands reach, television added emotion, search captured intent and social media connected products with identity. Conversational AI introduces another dimension: the consumer’s context, expressed in their own words at the moment of decision.

As Indian consumers increasingly turn to AI assistants for advice and recommendations, many may encounter brands through a chatbot before visiting a website or speaking to a salesperson. Whether that encounter feels like helpful guidance or an invisible sales pitch will depend on the choices made by platforms, advertisers and regulators.

Advertising has always competed for consumer attention. In the age of AI, attention alone may no longer be enough. The industry’s future will depend on whether it can earn the consumer’s trust without turning every conversation into a commercial opportunity. Trust is far harder to buy than attention, and far easier to lose.

The author is an assistant professor, IIM Bodh Gaya; Views presented are personal.