AI Has Come for Advertising

0:06When you think about the American advertising business, if you're like me, you think of the TV show Mad Men. Every great ad tells a story. Here to tell that story is Peggy Olson. The show's set in the 1960s and follows an ad exec named Don Draper. In nearly every episode, he and his team brainstorm creative new ads that play on people's imagination and emotions. My colleague Katie Dayton, who covers advertising, says Mad Men is pretty realistic. The way an ad has been made for the last 50, 60 years, you know, all the way back to the Mad Men era, the way it's made hasn't really changed that much.

0:53That series famously ends on a Coke ad. Can you sing me the song?

1:01I will not sing it. Just a little, just a little. But I can tell you, I would like to buy the world a Coke.

1:14Mad Men was fiction, but that Coke ad is real. Coke, for years, has been making influential, award-winning ads. They're known as leaders in the field, and decades of creative, unique ads have helped make them one of the most recognizable brands in the world. But recently, Coke has been changing its approach, working with fewer Don Drapers and more artificial intelligence. We are finally starting to see the specter of AI infiltrate our favorite ads. This is the first year for advertising generally in which we're seeing brands really embrace this technology. And instead of playing around with it and sort of using it as a test, they're really committing to it.

2:01Now, other brands are following Coke's lead. Would you say that the AI revolution has come? for advertising this year? Absolutely.

2:15Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Friday, December 12th.

2:28Coming up on the show, the era of the AI ad is here.

2:47Nearly every holiday season, Coke remakes one of its most iconic ads. It's called Holidays Are Coming.

2:57The ad changes a little each year, but always features a catchy jingle and a Coca-Cola truck driving through the snow. As the truck passes over bridges and through neighborhoods, Christmas lights turn on, spreading the holiday cheer.

3:13It's become part of the culture of Christmas, you know. I think when I grew up, the minute you saw Holidays Are Coming coming on TV, that was the watershed moment of, okay, Christmas is here now. Christmas is here, the holidays are here. We didn't have Thanksgiving, so there wasn't a point before that on the calendar. That was honestly how people would discuss, okay, we're in the Christmas season. Coke has put out many versions of Holidays Are Coming since it first debuted in 1995. But last year, the company decided to give its classic ad a new twist. They decided last year they were going to, in a pretty public experiment, use AI methods to create this ad.

3:57So they employed a number of studios and they said to them, we want an updated version of Holidays are Coming, but we want to not film anything. We don't want to use any archive footage. We want to make it entirely with AI, generative AI. It was really using this moment as a point in which it could say, look at us. We are ahead of this technology. technology we have been known to be on the cutting edge of advertising for decades this is coming whether you like it or not and we're going to take one of our most iconic ads and we're going to show you that we can do this with AI so I think if you were to watch last year's ad with your eyes closed you would probably think it was exactly the same one that you've seen before the music is such a huge part of it.

4:48That hasn't changed very much whatsoever. But there are some things that stick out about the ad. If you look closely at last year's ad, there are some telltale signs of AI. For one, the friendly neighborhood faces who smile as the Coca-Cola trucks drive by look a little unnatural. Yeah, very uncanny valley. Just that sort of real falsity that can creep people out. And online, people were open about the fact that they were creeped out indeed. To put out slop like this just ruins the Christmas spirit. Compared to Coca-Cola's old Christmas commercials, this just feels absolutely soulless. So Coca-Cola's ad this year is all by AI, and it shows, and it has no heart.

5:37This is what people were worried about. Besides the reaction to the ad's look, there were concerns about what using AI could mean for the creatives who usually make these ads. An animator, Alex Hirsch, he responded last year with the line, Coca-Cola is red because it's made from the blood of out-of-work artists. Wow. So it then became this representation of how AI is going to decimate the creative industries.

6:10But despite the ad's shortcomings and the criticism, this year, Coke decided to do it again. Holidays are coming, 100 % AI generated. This year, they had the same approach. They gave two different AI studios the brief, and it hadn't changed too much. but I think it is a complete representation of how different studios have learned to use the technology more and if you compare the two side by side I think it's undeniable that this year's ad is better. You don't get that weird uncanniness. One of the reasons is that this year's Coke ad has no people in it. Instead, animals watch and coo as the Coca-Cola trucks drive through the snow.

7:04But the AI-ness of it all is still there, which people were again quick to point out online. In particular, the wheels on the Coca-Cola trucks. They change in number and placement throughout the commercial. Why use AI to make these ads, right? Because Coke has plenty of money, and it seems like their ad strategy has worked all these years. They have been able to build that relationship with people, have been able to, like, be part of the culture in the way they want it. So why do this? There is one school of thought that Coke did this not for consumers at all, but for investors and for anybody watching the company betting on the company's future.

7:51The chief marketing officer, he was very proud. He's a very enthusiastic man. man. He is very much a company man. And, you know, he admitted if they had filmed this the traditional way, they would have had to start months and months and months before they did with AI. The company said that humans were still in the mix. Around 100 people total worked on this year's holiday ad campaign. But the CMO also told Katie that it was cheaper and speedier to produce than a typical non-AI production. Only five AI specialists were needed to prompt, turn out, and refine more than 70 ,000 video clips used in a version of the ad, according to Koch.

8:34And the CMO said that with AI, campaigns that used to start production a year in advance could now be done in a month. I think for a lot of brands, and not all of them, but a lot of them, It's just almost too difficult to resist. Just the ability to shed some expense and some time as well. And so as consumers, sounds like we should be bracing for more AI ads to come, not just from Coke, but from all over. Absolutely. And there is a very high chance that you will have seen an AI ad. Already. Absolutely. There's like no doubt about it. After the break, the AI takeover continues.

9:32Back in the warmer days of summer, Katie went to the ad industry's annual gathering in the French Riviera. The Can Lions International Festival of Creativity, to give it its full name, is a week-long boozy meetup in the south of France. Naturally. We have to live up to the reputation of the industry somehow. And every CMO goes there. Every ad agency goes there. All the trade journalists that report on the industry go there. And everyone hires out yachts that they probably can't afford. It's always been a real party. And what were people saying about AI there this year? Well, this year, it was funny because I went to Cannes in 2023, and that was around the time people were trying to either put it down and say this is never going to replace what we do.

10:27It's never going to replace the craft of producing advertising. Or they were trying to say, it's not there. It's nothing to worry about. We can still figure this out. And now you cut to two years later and it was literally the only topic anyone talked about. Every company pretty much that works in this industry has invested somehow in AI this year. They have all this technology, they've been sat on it, they're training their people in it. And now is where we're starting to see that shift of, okay, well, we need to produce something with all this investment that we've made.

11:06Katie says that's starting to show up in commercials on streaming services like Hulu, on social media, and elsewhere online. Almost a third of all of those videos have now been touched by AI in some way, according to the Interactive Advertising Bureau. That's a bigger number than I expected this soon. It's huge. And I think a lot of that is to do with the fact that it's getting quite good. They can sneak it in a lot easier, and the technology's getting great, and it's right under our noses. A few of the season's ads that have gotten attention for leaning into AI come from some well-known companies.

11:44Google just put out an ad a few months ago that was all made with AI, and it's an animated turkey, and you would never know. I would never have picked up that it was AI. In the ad, the turkey is trying to get out of town before Thanksgiving. Planning a quick getaway? Just ask Google. McDonald's also recently released an AI-generated ad in the Netherlands, showing a frenzy of people having holiday mishaps. It's the most terrible time of the year. Though, McDonald's pulled the ad this week after online backlash. Other brands have used AI to make their ads artsy. Valentino, the luxury fashion house, released an ad that was clearly AI, showing one of their bags turning into human body parts.

12:33The company called it a surreal encounter with the bag, which seemed to be a commentary on the idea of AI slop itself. All this is happening at a moment when the ad industry was already going through a lot. Last month, two advertising agency giants, a company called Omnicom and a company called IPG, completed a$9 billion merger. As a result, some legacy agencies will shudder, and 4 ,000 people are expected to be laid off. We have seen the large advertising holding companies really go through one of the most tumultuous periods that they've ever been through. As investors just start to question what this industry is going to look like in two, three, five years' time.

13:20And while those changes are not all about AI, Katie says the technology is shaking up the industry in totally new ways. Up until now, any kind of disruption we've had in the industry has tended to be around the media side of the business, which is, you know, digitally, how are you buying and selling ads? Now with AI, the panic is how you're actually creating the ads. And that's something that these agencies always could rely on. They could go, we're the ones with the creatives, We're the best in the world and we know how to make and we're going to make you a Hollywood style production. And only we can do that.

13:56And now with AI, that's kind of really not the case.

14:02What does the resistance within the industry look like here? Like, are there people in the industry who are trying to fight these changes or slow them down or do something about it? Yeah, we're seeing from the brand side, and I think we will be seeing this so much more in the future, is the brands that really prize authenticity that are coming out and saying, we're not going to be using any AI. We're just going to tell you this now. One example of that is the underwear brand Aerie. Back in October, Aerie posted a statement that said, quote, no AI-generated bodies or people, real people only. Although Aerie is a brand that has long said it won't use photo editing to change models' bodies.

14:49Still, Katie says that AI and advertising is likely here to stay, in part because of the way ads like Coke's have been testing among regular viewers. The Coke ad scored out of all of the Christmas ads that came out last year very, very well. And then they did it again this year with the, you know, quote-unquote better AI. And it scored a 5.9 star rating, which is the maximum possible score an ad can get through the model that they were using. Wow. So it just does beg the question of, do, you know, real audiences, Do the people that are watching TV every night, are they paying attention enough?

15:32And if they don't care, then what is to stop a brand using this all the time? Even if a subset of people think it looks worse, if it's going to still test the same and it's going to cost them a lot less time and money, then all roads are pointing to them using AI more. will there still be the Don Draper madmen jobs in advertising moving forward? The line that everyone falls back on right now is that you still need the big idea. So a lot of the ads that you're seeing 100 % AI generated right now, I think the thing that's sort of the commonality among them is that they're iterative. You know, they're based off an idea that somebody else had 30 years ago.

16:18Holidays are coming looks very much like the original Holidays are Coming ad. So the question is, well, if you're going to remain fresh, you still need somebody to be in touch with culture and come up with a fantastic idea that's going to really turn people's heads. Otherwise, they're going to get bored. And that's not yet something a computer can necessarily come up with. Not yet. Not yet.

16:51Before we go, we're working on our year-end episode, and we want to hear from you. Send us a voice note sharing your favorite episode of the year and any other questions you want us to answer. That's all for today, Friday, December 12th. The Journal is a co-production of Spotify and The Wall Street Journal.

17:38The show is made by is by So Wiley. Additional music this week from Katherine Anderson, Marcus Begala, Bobby Lord, Emma Munger, Peter Leonard, Nathan Singapok, Griffin Tanner, So Wiley, and Blue Dot Sessions. Fact-checking this week by Kate Gallagher and Mary Mathis.

17:57Thanks for listening. See you on Monday.