How AI Is Reshaping the Advertising Industry

0:00Alex Ossola:This is a new era of American innovation. The National Cancer Institute is using Google AI to help cancer researchers collaborate, identify patterns, recommend research, and accelerate scientific discovery. Learn more at g.co slash American Innovation.

0:17Alex Ossola:Hey, What's News listeners. It's Sunday, February 8th. I'm Alex Ossola for The Wall Street Journal. This is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the world. the newsroom to help explain what's happening in our world. On today's show, artificial intelligence is reshaping the advertising industry. We get into the visible and subtle ways AI is changing commercials and what it means now that AI companies themselves are getting in on the action. It's Super Bowl Sunday, which means it's the advertising industry's, well, Super Bowl.

0:52Alex Ossola:This year, 30 seconds of Super Bowl ad time costs more than$8 million for many companies. And that's just for the time. They can spend tens of millions more on making the ads themselves. So increasingly, companies are turning to artificial intelligence to cut the cost of making an ad. At the same time, AI companies themselves are getting into the advertising game too. I sat down with WSJ journalist Katie Dayton and Suzanne Vernitsa, who cover advertising all year round, about what this year's game has in store and how the industry is changing.

1:29Alex Ossola:Katie, Suzanne, thanks for being here. Have you seen any of the ads ahead of this year's Super Bowl? And what are some of the big takeaways? Katie, let's start with you.

1:37Suzanne Vranica:Yeah, we have definitely seen the ads. We are getting this similar variety that we've had for the past few years. So a lot of tech brands in there, but also a lot of brands that people would probably think of as household names.

1:51Katie Deighton:We've seen probably everything. There are a few surprises. Companies can spend up to$50 million just to create the spot. If you include CGI, celebrities, you're going to see tons of celebrities. And we've seen this as a trend for the last five years.

2:08Alex Ossola:So it sounds like some things are definitely going to be the same this year. But over the past year, at least, it seems like something's been shifting, right? The amount of AI in advertising seems like it's really having its moment. So, Suzanne, I want to ask you a little bit about how AI companies themselves are getting in the Super Bowl this year.

2:26Katie Deighton:Every year there's a big category that comes out, and this year it's going to be the AI Bowl, definitely. You've got Anthropic that's making their Super Bowl debut. OpenAI is expected to air a spot. Microsoft is going to be pushing CoPilot, so that's a lot. Is it new that these companies are getting in on advertising like this? Over the last two years, there's basically been an ad battle that's starting to form. They're pouring billions of dollars into creating these companies. And now there's a death match going on for users because they have to make sure that users know which chatbot. Do you like ChatGPT?

3:03Katie Deighton:Do you like Claude? And so it's name recognition. And there's nothing better for name recognition in today's world than the Super Bowl Sunday. You're going to get 100 million viewers typically. and you can look back in history and companies have launched successfully year after year on the Super Bowl. Do the ads have to be good? The ads have to really be good because there's so many competing for attention, right? And so if they're not good, you're going to get negative stories the next day or worse, no one's even going to remember them. So there's a big competition on whose are going to be the most creative and like that's why you see lots of companies putting multiple celebrities, hoping that helps them stick out.

3:42Katie Deighton:And for these AI companies, are they using AI to make their ads? They are not in most cases. What they're using AI for is like the research or to brief their agencies or some of the grunt work that happens. Obviously, we've seen lots of companies put AI creative out there, and it doesn't look great in many cases. That's the future. There's no doubt. But right now, people are using it on the back end more than the front end. And I think Super Bowl, no one wants to risk the millions of dollars that it costs with people being upset about what it looks like.

4:12Suzanne Vranica:When we've seen companies use AI to produce their ads so far, they're making such a big deal about it, saying, hey, look at this ad. Doesn't that make us look like we're really on the cutting edge? I think when you stack ads up one after the other like it is in the Super Bowl, everyone's very well aware of maybe it doesn't look so good. But if you have Yorgos Anthemos directing a beautiful black and white spot starring Emma Stone and then right afterwards you put something AI produced, it's going to be really clear that it's not quite holding up creatively.

4:46Alex Ossola:Katie, why are companies turning to AI to make ads in the first place?

4:50Suzanne Vranica:Cost is pretty much it. The amount of money it does take to produce a 30-second ad is a lot. The location, the actors, the amount of times they have to rerun the same line, the catering, all of that adds up in a way that it adds up for a Hollywood production. If an agency can come along and go, you know what, we're just going to do that on a computer, they can save so much money. Anything that can demonstrate at the moment to shareholders that a company knows what it's doing, I think is a good investment.

5:19Alex Ossola:But even companies that I think of that spend a lot of money on advertising, like Coca-Cola, they're doing this. And Katie, I'm wondering, is this actually effective to make an ad with AI?

5:31Suzanne Vranica:Like, do people like it? It depends who you ask. Everyone who thinks of themselves as a little bit creative hates this. And I'm 100 % certain that's going to change soon. And we are not as smart as we think we are. And we are going to be seeing things that are AI. And we don't realize it very soon. With the Coca-Cola ad that came out at Christmas time, it actually tested very well with normal audiences. However, it's very important to point out it was using creative that we've all seen before. We're nostalgic for and it's got that music. It had the holidays are coming music. So up until now, I think it can be used to remind people of ads that have come before.

6:10Suzanne Vranica:We haven't really seen AI ads that have done something like completely original that people have loved yet. And in the Super Bowl, one of the advertisers that is doing what they are calling the first predominantly AI-generated ad this year, which is the vodka brand Svedka, they're using a character which is a fembot robot, which has existed already. They're just putting that into an AI generator and getting it to produce an ad around that. So again, it's an example of a trope that's already been used that audiences may say that they like, but we'll see if AI can produce something really captivating emotionally that's completely brand new.

6:51Alex Ossola:Coming up, it's not just the visuals. AI is making its way into the entire process of creating an ad. We get into it after the break.

7:03Alex Ossola:This is a new era of American innovation. The National Cancer Institute is using Google AI to help cancer researchers collaborate, identify patterns, recommend research, and accelerate scientific discovery. Learn more at g.co slash American Innovation.

7:24Alex Ossola:Companies are playing up their use of AI right now, and they're making it very obvious, But is there anything that says they have to indicate that something was made by AI?

7:33Katie Deighton:There's no law in terms of what they have to say. But there are self-regulatory standards. Like when you do an ad, you have to be honest and you can't make claims. But if you think about AI, there are legal ramifications. Because if you're a beauty brand and your person that you're showing with the hair is done with AI, then that's actually a false claim in many lawyers that I've spoken to's opinion. the conversations that are happening at the tops of these companies to figure out as we move into this and we use it, what are the legal ramifications? Where can we get into trouble? And that's what's happening right now before this thing really takes off.

8:08Alex Ossola:Besides making the actual visuals with AI, how else is AI making its way into the process of creating an advertisement?

8:16Katie Deighton:When you set out to do an ad, you want to brief all the constituents. You want to put out a brief that says, this is what I'm looking for. You've got AI doing all of that grunt work right now. You've got AI doing production work. We used to have storyboards. Now you can get AI to basically create an ad. It's not going to run on air, but it's something that you can present to a client or you can get a feel for and you can tweak it and then really film it. So it's that underbelly that it's playing right now, but this technology is improving so quickly. There are companies like Mondelez and others that have spent the last two years feeding these bots all of their old advertising, all of their brand books and positioning so that these things get smarter.

8:59Katie Deighton:And those are the companies when they decide to turn it on and say, go create an ad. You're not going to be able to tell the difference between what's now called AI slop and what looks like a perfectly created spot. We're a little bit away from that at this point, but we're going to get there.

9:17Suzanne Vranica:It also goes back as far as audience research, something that has been the bread and butter of creative agencies, the strategy that we spoke to all these people and they told us, they thought this about your product. They can now do these things called artificial audiences where they can replicate what a real audience might be thinking so they can be testing ads not on real people but on a good assimilation of real people and that again saves so much time and money. So it's really going to change everything. Yeah.

9:47Alex Ossola:Do you have a sense of what it will mean to work in advertising in a world of AI?

9:52Katie Deighton:I think we're already seeing the fallout. We've seen a massive consolidation at the holding company level. The companies that own all these agencies, they're contracting at a rapid clip. Creativity in terms of that part of the business had already been in a contracting stage. Marketers weren't paying enough for that service because there was a glut of agencies out there. So you've already seen a contraction. You're going to see lots of layoffs. We're already seeing some of this. People will call this an AI-led thing. The problems had existed. AI is just going to exacerbate them.

10:24Suzanne Vranica:I think it also means that smaller agencies that have so far played on the periphery in a niche way, they can come in because they don't need the scale anymore of these huge holding companies to be able to go to a client and go, hey, we've got a very strong top-end idea for you that you can play with strategy-wise. So it opens up the playing field slightly, especially when the technology gets a little cheaper. But industry, like Sue said, is completely contracting already. And it will be interesting to see who comes out as the winners in all of this.

10:57Alex Ossola:Jumping a little bit from our future predictions to the present, specifically today, Super Bowl Sunday, what are you both going to be watching for? What do you think is going to be an ad that people are going to be talking about?

11:07Katie Deighton:I think Anthropics ad is definitely going to be one that generates a ton of water cooler buzz because it's this topical moment in the battle for AI users. And I think even though it's been done very coy without naming OpenAI, I can just imagine that people will see through it and actually this will get people talking.

11:31Suzanne Vranica:I'm going to take the toilet humour approach literally because I tried to coin the phrase the pooper bowl because we have three ads in one of which is national a couple of which are on regional buys that all have to do with the bathroom liquid ivy I think has a quite a funny ad involving toilet seats we have raisin bran in the super bowl this year I think as a counter to programming, to all the techno politics that's happening at the moment, that will be something that will bring a smile to people's faces.

12:08Katie Deighton:Toilets are actually very frequent on Super Bowl advertising. I guess because people actually don't go to the toilet during Super Bowl because they want to see the commercials.

12:18Suzanne Vranica:I guess also if there's a broad segment of people watching, lowest common denominator. Everybody poops, right? Yeah, everybody poops.

12:26Alex Ossola:Wall Street Journal reporters Katie Dayton and Suzanne Vernica. Thank you both so much. Thanks for having us. Thank you. And that's it for What's New Sunday for February 8th. Today's show is produced by Pierre Bien-Aimé with supervising producer Melanie Roy and deputy editor Chris Zinsley. I'm Alex Osola, and we'll be back tomorrow morning with a brand new show. Until then, thanks for listening.

13:00Alex Ossola:Americans innovate in ways both big and small. Using Google AI, Etsy is making it easier for shoppers to discover unique creations and helping sellers connect with the people who love them most. This is a new era of American innovation.

13:15Katie Deighton:Learn more at g.co slash American innovation.