Artificial intelligence (AI) is transforming the world of advertising in many ways. AI is the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions based on the information that is fed to them. They use historical data to learn from past experiences and use it to make smarter decisions in the future1. Advertisers can use AI to create more personalized experiences, target the right audience, and optimize their spend—all automatically, in real-time, at scale. In this blog post, we will explore how AI is reducing the cost of advertising and increasing its effectiveness.
One of the main benefits of AI in advertising is that it can help advertisers identify and segment their audiences based on various factors, such as demographics, behavior, interests, preferences, and intent. This allows advertisers to tailor their messages and offers to each individual customer, rather than using a one-size-fits-all approach. By doing so, advertisers can increase their conversion rates, customer loyalty, and retention, while reducing their waste and inefficiency.
Artificial intelligence can also help advertisers build and test their ad creative faster and easier, reducing marketing costs.Using AI assisted marketing a new industry of generative AI designers can generate ad copy, headlines, images, videos, and other elements based on the data and goals of the campaign more efficiently. AI can also analyze the performance of different ad variants and automatically optimize them for the best results. This way, advertisers can save time and money on manual tasks and focus on more strategic aspects of their campaigns.
AI analytics can help advertisers improve their ad performance and optimize their spend by monitoring and analyzing various metrics and indicators, such as impressions, clicks, conversions, revenue, return on ad spend (ROAS), and customer lifetime value (CLV). AI can also adjust the bidding, budgeting, and targeting of the ads based on real-time data and feedback. This way, advertisers can maximize their return on investment (ROI) and minimize their cost per acquisition (CPA).
Importantly, much of this is already being done. AI in advertising is not a futuristic concept. It is already being used by many leading brands and platforms across various channels and formats in online digital marketing . For example, IBM Watson Advertising uses AI to create cognitive ads that engage customers with interactive conversations and personalized recommendations. HubSpot uses AI to help marketers create content for multiple audiences, segment them based on their behavior and interests, and deliver them relevant ads across different platforms. Wayfair uses AI to determine which customers are most likely to be persuadable and show them products based on their browsing histories. According to a report by Markets and Markets, the global AI in marketing market size is projected to grow from USD 12.7 billion in 2020 to USD 107.0 billion by 2025. Advertisers who embrace AI will have a competitive edge over those who don’t. Moreover, according to a survey conducted in February 2023, chief marketing officers (CMOs) in the United States said that their digital spending grew by 8.2 percent, relative to the preceding 12 months. On the other hand, traditional advertising spending decreased by 2.6 percent in the same period*. This suggests that digital marketing is becoming more popular and preferred than traditional marketing among businesses.
* Digital vs. traditional marketing budget changes according to U.S. CMOs 2023 | Statista