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How artificial intelligence is going to transform digital advertising

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This year so far has been the year of artificial intelligence. Al is already in use all around us – the way Gmail completes our sentences, Alexa and Siri respond to requests or how Spotify “knows” which tunes we will love. Like in the early days of mobile phones, the momentum has gathered and the speed at which AI is being incorporated in all business aspects is growing exponentially.

A good example is ChatGPT, which managed to gain one million users within the first five days of going live and now has over 100 million users.

“The rapid growth of AI, as demonstrated by tools like ChatGPT, is a testament to the transformative potential of this technology,” says John Regan, CEO of London-listed cash shell, Electric Guitar, which has been targeting opportunities in the advertising technology space. “In advertising, we are just beginning to scratch the surface of what can be achieved when we harness the power of machine learning to engage with consumers in more personalised and meaningful ways.”

Here are some essentials about AI in advertising, how it is already being used, and which companies, big and small, to keep an eye on.

AI can help to fine tune advertising

AI is basically an umbrella term for the algorithms, technologies, and techniques used for more intelligent interactions with the user. It works hand in hand with large sets of data, digesting them as it learns and improves over time. This is particularly important for marketing and advertising as hundreds of thousands of demographic and behavioural points can be used to fine-tune advertising to a far greater extent than ever before.

No wonder, then, that AI is already being used in all aspects of the advertising process: budgeting, creative or sales. Companies using AI can tailor ad campaigns to better target consumers and hyper-personalize ad messages and images to individual consumers. They can also test-run different campaigns to find out which one receives the best consumer response.

Programmatic advertising platforms

Looking at the advertising “infrastructure”, advertising targets and delivers ads in real-time across the internet using programmatic advertising. Programmatic ad deals, a mainstay of digital advertising, are being made on ad exchanges, bringing together demand side and sell side platforms in real-time bidding. The whole process is done without any intermediaries.

Adobe Advertising Cloud, MediaMath, AdRoll, PubMatic, Google Ad Manager and Criteo are some of those programmatic platforms which use AI for real-time ad buying, selling, and placement. AI is also widely used in third-party networks, and advertising on platforms like Facebook, Instagram, and Snapchat.

Companies in the advertising space are using AI to calculate and allocate advertising budgets across channels and audiences, and to adjust budgets automatically to hit KPIs. Using data points gathered from customers the AI can find new advertising audiences and conversion opportunities. It can be used to determine and hit campaign goals, or, as per the above-mentioned ChatGPT, to create ad copy. Tools to create ad visuals are also multiplying, some of the most successful ones being Omneky, Ad Creative, Luna and Smartly.io.

“AI is enabling us to optimize advertising like never before,” says Regan at Electric Guitar. “It’s helping us fine-tune campaigns, discover new audiences, and unlock untapped opportunities. But it’s more than just a tool – it’s a paradigm shift that will transform how we approach data and advertising.”

There’s a growing consensus that generative AI, especially models like GPT-4, are poised to radically transform the advertising landscape. By enabling the generation of dynamic, tailored content, real-time optimizations, and the application of advanced predictive analytics for deep consumer insights, this technology heralds a new era of highly individualized marketing strategies.

The potential of this nascent technology to comprehend and influence consumer behaviour could substantially reshape customer interactions and the entire purchasing process. However, this tremendous potential also raises concerns. Key among them are issues related to data privacy, the risk of algorithmic bias, and the need for transparency, all of which need careful consideration as we navigate this new frontier.

“As an industry, we have a responsibility to ensure that the power of AI is used ethically and responsibly,” Regan explains. “Data privacy, algorithmic bias, and transparency aren’t just buzzwords – they’re the pillars that will define the future of advertising technology.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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