How AI is changing advertising

By IBM Watson Advertising

Like in so many industries, the use of data and AI is transforming advertising at a rapid pace. Consumers are seeing these changes in the personalized ads on their web browsers, the chatbots that help them make buying decisions and the influencers who resonate with them. But what exactly is AI-powered advertising?

AI in advertising refers to 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 future. Advertisers can use AI to create more personalized experiences, target the right audience, select the right thought leaders and influencers, and make decisions faster.

The current state of AI

If advertisers are not currently implementing AI tools into their strategy, it’s probably time they start considering it. Recent studies show that AI technology is expected to grow significantly throughout this decade.  

AI in advertising can help organizations better segment audiences and target ads while measuring results. HubSpot* reports that today’s marketers are creating content for multiple audiences, with three audiences being the most popular. It’s not enough anymore just to target one audience and hope for the best. To drive real results, companies are using AI to carefully target niche populations and using contextual and behavioral targeting powered by AI to get the right ads in front of the right people.

Measuring campaign success is also an important component of any advertising strategy. Being able to measure how a campaign performs allows advertisers to put their dollars where it matters most. In Deloitte’s State of AI in the Enterprise, 3rd Edition,* AI success has proven easy to measure, with 26% of all respondents and 45% of seasoned AI adopters saying that AI technologies have enabled them to establish a significant lead over their competitors.

The AI advertising industry will continue to evolve as the world becomes increasingly digitized, and there are a lot of opportunities for advertisers to take advantage of the technology on the market. Let’s explore more in-depth how AI is changing the advertising field and how organizations can leverage these insights to create a more cohesive strategy.

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How is AI changing advertising?

AI is rapidly changing the advertising landscape due to its host of benefits and ability to get smarter over time. Here are just some of the ways organizations can leverage AI in advertising.

Personalization leads to better customer experiences

Personalization in advertising refers to the use of data or consumer insights to increase an ad’s relevancy to its intended audience. This can be data related to demographic information, interests, buying intents, or behavior patterns.

Increasing the relevancy of ads and making them personalized is becoming a top priority, with 80%* of those who classify themselves as frequent shoppers say they only shop with brands who personalize their experience. Forty-seven percent* (47%) of B2C consumers note that brands could do a better job aligning their engagement activities with their preferences and 56% of consumers expect all of their interactions with brands or vendors to be personalized.

A personalized AI-solution such as conversational marketing can help advertisers build these personal connections with consumers, improve the relationship they have with their brand, and create a better shopping experience. In fact, 71%* of customers expect companies to communicate with them in real-time, which is why using an AI conversational marketing solution to engage with customers and prospects has become increasingly popular. Personalized experiences help brands improve their ROI while strengthening customer loyalty and relationships.

Audiences can be segmented before ads are served

By leveraging machine learning, a form of AI, advertisers can find patterns based on audience behavior and message resonance. Machine learning does this by considering all information they have about a given individual, such as demographics and online behavior, to make an informed decision on the type of content a niche segment actually wants to see. Understanding an audience is imperative to increasing engagement, which is why irrelevant content is the number one reason* consumers don’t engage more often.

Proper segmentation and audience targeting lead to more relevant advertising, which is reflected in a recent survey by McKinsey Analytics that found 14%* of users adopted AI for customer segmentation purposes. By delivering messaging that relates to the end-user, advertisers can expect higher engagement rates and more conversions.

Ads created through AI convert better

By being able to look at past trends and performances, AI can make insights that inform advertising decision-making and ensure that budget isn’t spent on ad copy that doesn’t convert. AI does this by going beyond traditional A/B testing to make data-based predictions about how creative and messaging will resonate with customers. This allows advertisers to move from reactive to proactive in their approach to creative, in order to generate more qualified leads and conversions.

A recent Salesforce Research report, “Enterprise Technology Trends,”* found that 83% of IT leaders say AI and machine learning are transforming customer engagement and 69% say it is transforming their business. Advertisers are recognizing the importance of targeting the right person with the right ad to drive conversions.

Advertising decisions are more impactful, improving ROI

AI is an analytical approach to advertising. AI-powered tools take in a vast amount of information and data to predict future trends and insights with accuracy. The great thing about AI is that it’s always bettering itself—like a human. It continuously learns and adapts as needed to continue making better decisions.

While advertisers have traditionally struggled with measuring the success of their campaigns, analytics helps companies determine what’s working and what’s not. Therefore, in the future, advertisers can be proactive in taking steps that will positively impact their campaigns. According to research by Deloitte,* 73% of AI adopters believe AI is “very” or “critically” important to their business today and 64% said AI technologies enable them to establish a lead over competitors. Targeting the right audiences, with the right message, every time, helps ensure a reduction in advertising waste and greater ROI.

Trends to consider in AI advertising

The advertising industry is constantly changing and it’s important to keep a keen eye on what’s trending in the industry to stay ahead of competitors. Here are some trends to consider regarding AI advertising.

Traditional A/B testing is not the best or only way to create better ads

While A/B testing is the traditional way of testing an ad’s relevancy, leveraging predictive audiences can help your team create better ads and creative, before ads are served and measured for effectiveness. When AI can take in vast amounts of data to make recommendations before the budget is spent, you can save time and money on creating the right ads the first time around.

More businesses are investing in AI

Businesses are increasingly invested in AI and according to Forrester, the adoption of AI* continued to expand throughout 2020 due to the pandemic and the need for smarter, automated solutions. Investing in AI gives businesses a competitive edge, and if you haven’t already considered implementing AI-powered tools, you risk falling behind.

Customer behavior may change

According to Forrester, many companies experienced what they refer to as customer drift, where the patterns of behavior changed rapidly during the pandemic. Therefore, models that previously worked, may have changed. Advertisers must be able to take current information into their campaign models and have algorithms that can adjust to the changes in the market.

Cookies may be going away, but personalization isn’t

With new privacy regulations including the GDPR,* it can be difficult to target audiences without the additional information stored through cookies. Even with the loss of cookies, AI is still able to recognize patterns in a target audience, without needing to resort to identity-based advertising.

How Watson Advertising can support your AI advertising strategy

Ready to learn more about how AI can help you make better advertising decisions? Book a demo with Watson Advertising today!

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