Google Ads in 2026: How to Optimise Your Campaign Set-Up

We’ve been managing Google Ads campaigns for Australian businesses for years, and 2026 is shaping up differently than most people expect. Not every new feature deserves your attention, and some “game-changing” updates are overhyped. Here’s our take on what actually matters, and what you can safely ignore.

Performance Max Is No Longer “Set and Forget”

Most Google Ads specialists are using PMax or have been using it in some way or another for the last few years. With recent changes in the backend and the new controls given to advertisers, it’s no longer the set and forget campaign type that Google used to claim. It’s much more akin to a standard campaign where you routinely moderate and pull levers to gauge performance.

Google rolled out significant transparency and control updates throughout 2025. Campaign-level negative keywords arrived in January. Channel performance reporting launched in beta globally by November. Age-based demographic exclusions and device targeting are now available. They even added Waze ads inventory for store goals campaigns.

Analysis of over 4,000 Performance Max campaigns shows performance peaked in May 2024, with cost share dropping approximately 6% since then. This is a clear signal that the “black box” approach is losing effectiveness.

What this means for you:

• Use campaign-level negative keywords immediately. If you’ve been running PMax for months without excluding irrelevant searches, you’re likely wasting budget on queries that will never convert.
• Check channel performance reports weekly. You now have visibility into which placements (Search, Shopping, Display, YouTube, etc.) are actually driving results.
• Test Standard Shopping campaigns alongside Performance Max. The data suggests PMax isn’t the universal solution Google claimed. For many businesses I work with, traditional Shopping campaigns are delivering better efficiency.
• Plan for active management. Allocate time each week to review and optimise. Performance Max requires the same attention as any other campaign type now.

What About AI Max for Search?

Google launched AI Max for Search in May 2025, and the early results look promising, Google’s internal data shows advertisers typically see 14% more conversions at similar CPA/ROAS, with some campaigns reporting 27% uplifts.

AI Max is obviously newer but is still in its infancy stage. Generally, new targeting options require time to iron out the kinks before you can implement at scale. It’s not quite there yet, but it could be great later on down the track in Q3 and Q4 2026.

If you’re managing tight budgets or can’t afford performance volatility, wait. If you’ve got the budget to experiment, test AI Max on a small portion of spend and measure rigorously. Just don’t bet the farm on it yet.

Google’s Big Push: Demand Gen Meets AI Creative Tools

Google wants Demand Gen campaigns to be the next big thing, badly. After sunsetting Video Action Campaigns in September 2025, every video advertiser was automatically migrated to Demand Gen whether they liked it or not.

Google’s data shows Demand Gen advertisers are seeing a 26% year-over-year increase in conversions per dollar spent. Nielsen analysis suggests Demand Gen delivers 58% higher ROAS than the old Video Action Campaigns.

But Google isn’t just pushing Demand Gen, it’s pushing it specifically as a vehicle for AI-generated creative. Asset Studio launched in August 2025, enabling advertisers to generate professional-quality images and video using text prompts. In November, Google added Nano Banana Pro for advanced image generation in Performance Max campaigns.

I’m hesitant to say that AI-generated imagery/video is going to be the hot new trend, as it was more a trend in 2025/2024. We’re already starting to see a lot of pushback from general audiences on generative content online (ie AI slop). Several big advertisers have had blowback, but it’s more to do with the quality of the AI than anything.

Google’s automation tools are getting better, but consumer sentiment is souring on obviously AI-generated content. We’re seeing influencers push “analog” and “digital minimalism” (they get those terms entirely wrong most of the time, but the feeling of getting away from technology is there). AI being the current pinnacle of technology could be an issue.

We may see a world where it will be considered virtuous to use IRL content, and brands leaning into authenticity will have an advantage.

What this means for you:

• Test Demand Gen, but don’t abandon what’s working. If your Search or Shopping campaigns are performing well, Demand Gen is supplementary, not a replacement.
• Use AI creative tools strategically. Asset Studio can help small businesses compete on creative volume without hiring a full production team. But use it for background generation, image variations, and testing, not as your only creative approach.
• Monitor creative fatigue more closely. AI makes it easy to generate dozens of ad variations, but that doesn’t mean they’re all good. Quality still beats quantity.

AI creative tools level the playing field. Just don’t let them make your ads generic.

Wondering if your current Google Ads setup is delivering the ROI it should? These changes might be affecting your campaigns more than you think.

Ads in AI Overviews: The New Prime Real Estate

On December 19, 2025, Google expanded AI Overview ads to desktop and 11 countries including Australia.

AI Overviews now appear in AI-generated search summaries, creating entirely new ad placements above traditional organic results. When AI Overviews are present, organic click-through rates drop dramatically. Seer Interactive’s research shows organic CTR for informational queries has fallen 61% since mid-2024, with paid CTR dropping 68% when AI Overviews appear.

This is a no-brainer. AI Overviews are becoming increasingly prevalent and if you’re running Google Ads, you need to know their way around them if you want to stay competitive.

What this means for you:

• You cannot currently bid specifically for AI Overview placements. Ads appear automatically if you’re running AI-powered campaign types (Search, Shopping, Performance Max).
• Eligibility is the real gate. Make sure you’re using AI-powered campaigns to even have a chance at these placements.
• Track brand searches and direct traffic. If users see your brand in AI Overviews, they may search for you directly later rather than clicking immediately.

Value-Based Bidding: The Gold Standard

Smart Bidding has been around for years, but Google launched Smart Bidding Exploration in 2025, changing how campaigns discover new high-performing queries. High Value Mode allows the algorithm to increase bids when it predicts high lifetime value customers, not just conversions, but valuable conversions.

What this means for you:

• High Value Mode is best for businesses where customer lifetime value varies significantly. If a $50 sale sometimes leads to a $5,000 customer and other times leads to a one-off purchase, this helps Google optimise for the former.
• You need conversion volume. This isn’t for tight-budget campaigns or businesses with only a handful of conversions per month. Google recommends 30+ conversions monthly minimum (ideally 60+).
• Assign conversion values accurately. If you’re tracking conversions without values, or if all conversions have the same value, you’re leaving money on the table.

Value-based bidding rewards businesses that understand their customer economics. If you don’t know the difference between a high-value and low-value customer, that’s the work to do before you worry about Smart Bidding features.

The Bottom Line

Google Ads in 2026 isn’t about jumping on every new feature. It’s about understanding which changes genuinely matter for your business:

1. Treat Performance Max like any other campaign. Active management is now required. Use the new controls or watch budget disappear into underperforming placements.
2. Test Demand Gen, but keep it balanced. Google will push hard, but AI-generated creative isn’t a silver bullet. Blend automation with authenticity.
3. Get comfortable with AI Overviews. They’re not going away. Make sure your campaigns are eligible and your content is citation-worthy.
4. Graduate to value-based bidding when ready. If you have the volume and understand your customer economics, this is where the platform is heading.

The common thread? Google is pushing automation hard, but the businesses seeing the best results are the ones using automation strategically, not blindly. Know when to let the algorithm explore, and when to pull the levers yourself.

Want to know if these trends apply to your business? At Distl, we run Google Ads for Australian businesses who want strategic partners. Get in touch to discuss your campaigns.

Zac Fitzpatrick

PPC Service Lead