From the companies to the governments, everything's coming up all digital. And yet not everything is on the up and up.
As previously reported by e4m, the slowdown of the digital ad revenue’s growth rate is attributable to various factors, but now that Gen AI has entered the chat, it behoves us to examine whether the growing investments in Artificial Intelligence are another cause for shrinking spends, or one of the few factors buoying up said spends.
Undeniably, the advent of advanced AI technologies has significantly revolutionized digital advertising by enhancing targeting accuracy, optimizing ad placements, and improving overall campaign efficiency.
“Today, ad placements, optimization and insights are all driven by advanced algorithms that can segment audience with greater precision, improve the creatives in real-time to personalize the messaging, and give better ROAS to advertisers with improved ad efficiency and limiting wastage,” says Nikhil Kumar, Chief Growth Officer, mediasmart by affle.
And while AI contributes to a more efficient allocation of ad spends, it also drives innovation in ad formats and delivery methods, making ads more engaging and relevant. This means an advertiser can achieve better results with less spending, effectively driving ROI higher without increasing the ad budget proportionally.
All in for AI
As stated before, AI implementation has facilitated the collection and analysis of vast amounts of consumer data, encompassing media consumption habits and online transactional behaviours.
“This capability allows these platforms to offer highly granular and targeted advertising solutions, reaching customers with unprecedented precision. Consequently, advertisers are drawn to the superior targeting capabilities provided by these walled gardens, further entrenching their market dominance and diminishing the share available to smaller, independent entities,” says Sajal Gupta, Chief Executive, Kiaos Marketing Pvt Ltd.
Even with a plateau or slight reduction in ad spending, revenues can grow as advertisers achieve more with their budgets. Indeed, we are now seeing record earnings almost across the board, not only for advertising companies, but also the tech companies that provide the former with the tools they need to upgrade their operations. According to the e4m-GroupM Programmatic Report, India’s digital ad revenue is likely to surge to nearly Rs 540 billion by 2024.
For instance, programmatic advertising, driven by AI, automates the buying process, minimizes waste, and ensures optimal ad placements, all of which contribute to cost savings and improved ROI.
“However, beyond the cost saving benefit, the rise of AI advertising tools also represents a new investment for businesses. It's like learning a new skill – it takes some initial effort. These investments might not directly translate to higher overall ad spend, but they are at least maintaining current spending levels, and potentially even causing a reallocation of those funds within the advertising budget,” says Arpita Dubey, Senior Director, Head of Marketing & Communications - India & APAC SBU, Innova Solutions.
Substantial investments in AI technology are crucial for maintaining and advancing these efficiencies. “Continued R&D and investment in AI, particularly within GenAI, hold immense potential to further enhance the efficiency and effectiveness of the digital advertising space. Affle has led this space with a strong R&D and developed futuristic use cases of GenAI, an area where we also filed 15 patents recently,” says Kumar.
And speaking of patents…
Enter the Walled Garden
The walled gardens of the internet dominate nearly 80% of digital ad spending, and their share continues to grow, which experts say is increasingly at the expense of other content producers and independent advertising networks.
“This expanding influence is largely attributable to advancements in artificial intelligence. AI has facilitated the collection and analysis of vast amounts of consumer data, encompassing media consumption habits and online transactional behaviors. This capability allows these platforms to offer highly granular and targeted advertising solutions, reaching customers with unprecedented precision,” says Gupta.
Consequently, advertisers are drawn to the superior targeting capabilities provided by these walled gardens, further entrenching their market dominance and diminishing the share available to smaller, independent entities.
Ruksheen Palia, Vice President - Business and Strategy at Social Panga, would say more than 50% of the plateauing of digital ad spends can be attributed towards AI. “And that specifically comes due to the efficiency and targeting Improvements, cost reductions, performance-based models and much more. I would say both together are influencing the spending pattern. While ad spends can be reduced due to better targeting and performance, the requirement to invest in AI technologies levels out the spends eventually.”
“In my opinion, AI is revolutionizing the way businesses spend advertising dollars; it may not necessarily be a reduction in total spending but smarter than ever before. The industry is shifting its focus from simply spending more to spending more effectively. It's like a seasoned professional learning to analyze the current market landscape and requirements before spending the big bucks – a data-driven strategic approach that proves to be far more effective than simply throwing money at the challenge,” says Dubey.
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