This is the plan. Once google have verified the advertisers, they can ‘help users understand the source of the advert’ by replacing the mini Ad icon with the advertisers’ favicon, to increase transparency..
Increased transparency would be having "Advertisement" (no abbreviation) and the advertiser's icon.
Replacing "Ad" with advertiser's icon is simply a method how not to display "Ad". I expect that many icons will not be company logos, but rather something that seems like it would normally appear in a web page: a small arrow, a tiny dot, a thumb-up, etc.
Then the Google will have credible deniability: hey, we didn't make the icon, the advertiser did, blame him. But of course they are the ones who refuses to display "Advertising" clearly.