AI Series 2: Artificial Intelligence and its potential impact for the advertising industry

The utilization of cutting-edge AI tools such as ChatGPT or "generative AI" has become increasingly prevalent across the advertising spectrum. Marketers now have a diverse array of capabilities to enhance their advertising campaigns. This capability spans from (i) content creation to (ii) lead generation (e.g. users following ads to brand websites and into online-purchases), email marketing as well as market research. Especially, AI empowers advertisers to create more personalized/targetted and also "engaging" experiences for their audiences (for instance advertisers can ask audiences to engage in polls or design artwork based on logos or designs of a brand owner).

Interesting practical examples

Take a look at www.lalaland.ai, a platform using advanced AI to create realistic avatars (i.e. models of every body type, age, size and skin tone). While this can be a fun-experience for individuals, it is widely used by fashion brands and –retailers to create more engaged and personal shopping experience for customers. Many people purchasing clothes online have noticed that such features are increasingly deployed to portrait fictitious models enabling them to gain a better imagination of how such clothes could/would look if they were to wear them. The potential of this technology is far reaching. For instance, a customer could enter his body height, weight, type of skin, hair color or even upload a photograph and then have a digital clothes copy "placed" on top of them. While such purchases might be erroneous and regretted later, the comfort of not having to walk in stores and trying clothes on is tempting and the mandatory withdrawal rights of customers in most European countries to send products back makes such regrets more bearable.

Take another look at www.adcreative.ai or www.creatopy.com, both of which are AI-based platforms enabling users to create advertisements within seconds. In its most basic/simple form, one only needs to add a picture of your branded product, the name, suggestions for an advertising message/text and will receive various suggested ads served on the plate. Taking this a few steps further, www.salesforce.com is taking AI-automated advertising to a next level. Not only does it enable you to build marketing tools directly into your own platform with an application interface and help you craft a personalized journey to guide your customers but also does it provide you with access to deeper customer insight analytics or adds a Chatbot to your Website to assist your customers during their online journey (e.g. a pop-up-window to chat "Questions? No problem, we can help. Just start a chat with one of our sales agents").

An even more inclusive/engaging AI-based advertising experience was e.g. when ad agency Ogilvy facilitated an ad campaign in Canada called "Mix Your Neighborhood" where special cocktails were created based on participating individuals to embody the spirit of Canada's diverse and distinctive neighborhoods (see more details here: https://www.ogilvy.com/work/world-absolut-cocktails).

Tendency to create own generative AI tools

Generative AI, with its ability to create novel content based on existing data input is a pivotal force in reshaping advertising practices. Companies like Meta and Google are at the forefront of leveraging generative AI to craft own dynamic, tailored ads that resonate with specific audience segments. Advertisers could then supply content, which the AI will in turn re-arrange (in a way of speaking "remix") to generate new ads depending on the audience a requestor claims to reach. In the realm of entertainment, platforms such as Roblox and TikTok are also leveraging generative AI to empower users in creating immersive, interactive experiences, fostering a new wave of creativity and engagement within virtual environments. While there is some concern/doubt as to the "creativity" of such outputs (the content will consist of re-arranged content based on pre-existing content which will propel a type of "remix-culture", a paradigm shift that has also been observed in the music industry and leaves missing the creative spark we knew from this industry roughly 20 years ago), this will undoubtedly revolutionize the way that advertisers and brand owners work. For instance, brand owners could be tempted to pre-design advertising results and may hire advertisers more for the use of their core competency, i.e. customizing, reviewing or perfectionizing advertising campaigns. On the other hand, advertising companies are likely to invest in AI-tools as well (be it proprietary or used by way of outsourcing) in order to speed up their initial delivery process and then to focus more on their core line of work.

New Media & Technologies

Changing business models through new technologies

Legal implications of using AI in advertising

The integration of AI in advertising also gives rise to a myriad of legal and ethical considerations, which require careful assessments and proactive measures. Concerns surrounding copyright infringement, consumer protection, and data privacy loom large in the era of AI-driven marketing, prompting regulatory scrutiny and calls for enhanced transparency from industry stakeholders. Initiatives by regulatory bodies underscore the importance of transparent advertising practices and compliance with legal standards in the digital marketing landscape.

• Depending on the degree of human involvement in pre-existing works, AI-generated works will sometimes infringe copyrights in another pre-existing copyrighted work. Since many AI-systems accumulate huge amounts of data and pre-existing works without a pre-filtering or rights compliance-check up, there is a tangible probability that such infringements will take place during the output-generation process;
• By reason of the above, most AI platforms do not provide representations and warranties that their materials do not infringe the rights of others. Moreover, users of such platforms may not always be able to obtain ownership of AI-generated content and/or not be able to transfer ownership rights to their respective clients. Certain AI-platforms do not even permit the commercial use of its AI-generated content. The latter should be reflected before investing in such development projects;
• The most pervasive legal risk likely to occur in AI-based advertising practices is that AI tools can spread misinformation. This can trigger claims against false advertising and deceptive practices. The most common unlawful practices known and detected so far have been the AI-based creation of deepfake videos, voice clones to personal features, placing ads within a widely used AI-tool in an attempt to have them placed next to search results or selling fake views, likes and followers;
• Regulators have warned businesses in public announcements not to use AI-tools in a manner, which could have biased or discriminatory impacts. While this is an implementation related matter, users of AI-tools in the advertising industry should be wary of creating advertisements which replicate biased messages that could bear discriminatory meaning to the exclusion of certain minority groups;
•  Since AI-based image tools enable the creation of deepfake photographs or videos (e.g. of persons not involved in a certain visual setting), this also raises questions on data privacy, since identifying features of a person are used without his/her consent or prior information. The creation and commercial use of such photographs or so to speak "doubles" of someone's face or other personal characteristics is relying on the use of one's personality traits. This can trigger personality claims of the involved persons (e.g. payment obligations for implicit "personality licensing"). The latter might in particular be relevant for celebrities who are used to commercialize their personality features in a wider sense (right of publicity).
• Influencer marketing is an advertising practice that has primarily evolved in the internet/Youtube-era during the last 10 years. It consists of individuals who praise or endorse products in videos without any apparent affiliation to the brand owner (the so called "influencers"). Swiss advertising and unfair competition law principles require transparency on such affiliations and any monetary benefit the influencers may have received from the brand owner. Unfortunately, influencers are also using AI-tools to enhance certain features when endorsing a product in a non-truthful manner (e.g. making their skin look overly clean after using a beauty cream or their muscles overly big after using an endorsed protein shake). Ideally, brand owners should add specific legal provisions into their agreement regarding the deployment of AI-tools in their influencer advertising agreements.

Outlook

In summary, the advent of AI in advertising represents a seismic shift in the industry. It offers marketers unprecedented capabilities to optimize advertisement, drive customer engagement, and to deliver a personalized brand experiences. By embracing AI technologies responsibly and transparently, organizations can harness the transformative power of AI while mitigating the legal pitfalls. From a conceptual perspective, one might also detect pitfalls in over-relying on generative AI, namely the risk of losing creativity and brand identity. The ideal outcome of effective advertising lies in balancing AI capabilities with human creativity to foster innovation but to also still maintain a unique and consistent brand in the market.