Posted in Business, Media

This business is driving tech industry to the era of AI

Follow the money. It is the traditional advice for everyone who wants to understand why someone is doing something that is not obvious. If I ask: why are big and small technology businesses collecting personal data of people and tracking their activities? The answer is: that’s where the money is for online services and for many hardware companies as well – in advertising. Advertisers want to learn what people like to do, and which things they like. A large corporate advertiser Mondelez, owner of many successful food and candy brands, claims that personalized ads deliver 20% higher results than non-targeted ads.

That is the reason why Mondelez aims at a digital advertising system where 70% of their ads will be personalized in the near future. It is quite a remarkable objective. For a company of its size that is in the business of daily consumer brands it may mean profiling millions or even billions of people. Think about it: a single advertiser may manage records and profiles of billions of people. Naturally, Mondelez is not the only one doing so. Big advertisers are applying all the latest technologies known to mankind for achieving the goal of profiling the majority of the people of the planet.

This is exactly where artificial intelligence (AI) will be extremely useful for corporations. Advertising business strategist Thierry Cellerin regards AI as disruptive technology that will transform the entire ad industry. He expects AI to deliver four key benefits for the ad industry:

  • Personalized ads. AI can be taught to profile people faster and more accurately than ever before was possible. And as they know, accurate targeting delivers results.
  • Copywriting costs will drop, the amount of output will increase, and clients have more ideas to choose from. The quality of advertising content may improve.
  • Social media powered by AI will interact with customers, brand fans, and with brand haters quickly, politely, and accurately. The anticipated result: improved brand loyalty, larger customer base and customer satisfaction.
  • Content marketing (for instance, articles, videos, and podcasts that are published in ordinary media content format, but are sponsored) quality improves because AI can be utilized to analyze trending topics and sentiments of a specific market or the entire digital world. Content that addresses these topics can be quickly produced with the help of AI.

If we agree with advertising experts’ expectations for the AI-powered future, what does it mean?

Let’s take a look at the statistics that show how closely intertwined tech and ad industries already are.

The world’s biggest advertiser is Amazon. Today, it is one of the biggest tech corporations in the world. Amazon started as an online book store, then developed a massive cloud computing business, now produces its own hardware products, publishes books and movies, just to mention a few of its businesses. Amazon has its own advertising system within the online store, but it also spends the largest amount of money on advertising in the world.

Amazon, however, is not the largest ad publisher in the world because that honor goes to Alphabet (Google). Meta (Facebook) is a distant second, followed by other online tech and media platforms Bytedance (Tiktok), Alibaba, Amazon, Comcast, Microsoft, Tencent, Baidu, and Disney.

Without advertising, big tech, social media and cloud services would be very different from what they are now. They would have a number of different business models unlike now when both the tech and media industries depend on advertising for revenue. It is impossible for them to pull the plug and say goodbye to ads anymore. More likely future scenario for tech and media is that they need more ads, and particularly more personalized ads to keep growing and being able to develop new products and services.

It is easy to understand why even hardware companies like Apple and software companies like Microsoft are developing their own ad networks. Alphabet (Google) knows it: that’s where the money is.

If the ad industry believes in AI, is the inevitable conclusion that the ad industry is driving the development of AI, instead of the tech industry?

No, it can’t be so straightforward that ad tech corporations tell AI developers what they want next. Yet, Google is developing Bard and Meta / Facebook its own AI system. The vast amounts of money these corporations can invest in AI development primarily come from advertisers. Advertisers are their VIP customers. For Alphabet and Meta, requirements of advertisers inevitably have impact on what they do, how they make business and product decisions. For corporations, like Amazon, Apple, and Microsoft that have other, bigger revenue sources advertising shouldn’t (yet) have direct impact on decisions.

So, let’s follow the money: inevitably, the dependence of certain big tech corporations on advertising revenue will have an impact on the development of AI. Corporations that have multiple significant revenue sources have more options to plan their strategy – also regarding AI.

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