Ad buying in an AI age

I have a feeling the theme of most newsletters for a while will be AI, as it will be in most areas. AI is a classic horizontal story, which is why I don’t think most AI publications will make it. Even within the media industry, the impact will be varied across sectors.

Today, thoughts on recent conversations from both sides of the media ecosystem: the buy and sell sides.

Send me feedback to: bmorrissey@therebooting.com. 

Ad buying in an AI age

Earlier this week, The Rebooting held a private dinner for agency and brand executives with our partners at 1440, which is a good counterpoint to the idea that news has to be a terrible business. The conversation focused on what the world of ad buying looks like in a world of AI. I found a lot less existential dread than often permeates publisher gatherings.

Some takeaways from the discussion:

Clients will slow the adoption of AI tools. One agency executive voiced the familiar lament: clients are often stuck in the past. Well, more to the point, marketing executives at brands have bosses who are still asking about how much is going to brand vs performance (it’s all a mix nowadays) and for reach/frequency numbers in digital. (I can remember when there was a push for a digital GRP, which never made sense.)

Creative is an opportunity and roadblock. An agency exec recounted how a client came out of a meeting about Google’s AI-driven ad buying system All Advantage by saying their creative agency would never get on board. (Media agencies lamenting creatives is perennial.) The big near term opportunity lies in versioning and localization. The hope is this turbocharges the overdue development of dynamic creative optimization, since advertisers have often been able to pinpoint an untold number of audience segments yet often with just a few pieces of creative.

AI will automate away lots of low level tasks. The present uses of AI are unsurprisingly focused on efficiency gains. Agencies use a vast number of software tools to execute campaigns. The business is a long ways from when I started covering advertising and people were still sending I/Os by fax. (This was in this century, I assure you.) Every business has their “cognitive manual labor,” and in agencies it is often moving data from one place to another, compiling reports and audience segments. The concern voiced by many that applies across many fields: Where will the training take place since those tasks are usually proving grounds?

Get ready to B2A. The AI story is about to fragment. The focus to date has been on the foundational models. That’s now moving to agents that perform all kinds of tasks on behalf of their supervisors (that’s us, hopefully). But wait a second, advertising is in the business of winning hearts, minds and wallets of people who make thousands of decisions daily. This means a new field will open to influence agents who will often be key decision makers.

Thanks again to 1440 for its support. 

Scaling video

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Winners of the AI era

During the early pandemic period, a veteran agency executive pushed through the gloom to make a salient point to me: During times of upheaval, “the league tables change.” Volatility brings with it opportunities. 

The dueling announcements by OpenAI and Google this week marked an important moment. The development of AI tools is picking up momentum and will affect every publisher in profound ways, some of them existentially. And yet, new opportunities will present themselves. Here’s a look at those best positioned to thrive:

The smallest. At The New Growth Agenda last week, I asked my table if they really believed people would be hitting a back button on webpages in five years. I don’t know what the future holds, but this seems a far-fetched proposition after watching a droid do real time translation to Italian and trigonometry homework. Times of disruption favor those with optionality. The newer, leaner models are far better positioned than big publishers built for different eras that are mired in sunk costs, union battles and the unappealing prospect of managing decline.

Private equity. A veteran media exec mused to me how a person owning a 100-person ad agency would be worth $10 million. A person with a 100-person PE firm is worth $6 billion. Note to the young: If money is important to you, consider private equity. Now is the time for PE to shine. The pressures exerted on big publishers will lead to mass consolidation, and maybe even a new version of the portal era. I’m a sucker for comebacks: Apollo-backed Yahoo could end up re-emerging as a consolidator as the price of assets falls.

Specialists. A newspaper exec at NGA began their report of the discussion at their table with the remark that everyone should be in B2B. It’s telling that the area of media historically treated as a backwater is now its most vibrant. This is beyond B2B, which will also be challenged as AI does for email what it is doing to search, as specialist media with strong audience connections. Nobody is entitled to a media company. You need to prove your value in the world.

The data rich. Ad dollars are flowing from publishers to retailers who can provide closed-loop attribution. The ongoing loss of signal will continue to bleed publishers who rely on cookie data. The reg wall will become a common element of what remains of the open web since without audience data, it will be exceedingly difficult to make money. The era of “surface area” is over; the shift is from breadth to depth. This favors those with the strongest understanding of their core audiences, not those most eager to jump on the latest arb scheme that reeks of desperation.

The human. I often return to the Jeff Bezos dictum about how to think of the future: Think of what won’t change. The shift to favor individuals will accelerate as we are surrounded by synthetic content and synthetic friends. Real world experiences will thrive. We will remain social animals, even if our social circles will be joined by assorted droids with “personalities.” It’s hard to imagine it, but I would assume a new generation will become as comfortable going from talking to humans to talking to droids. Weird stuff ahead.

For more on the OpenAI and Google announcements, including AI overviews coming to search, and what publishers need to do to respond, listen to the latest episode of People vs Algorithms.

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