AI in advertising

Abstract

On a cozy winter day, you are sitting in your house, and you discuss with your parents that you want to go to Europe. Fifteen minutes later, you get a ping on your mobile that you can get 20% off for tickets to Europe. What used to feel like a fantasy a few decades back has become a reality in the current times with smart devices churning millions of data points every single minute. Advertising a few years back was all about spending hours thinking about a creative idea which can be further converted into an advertisement published either in newspapers or broadcasted on television. Though it used to work well for big established firms, early age companies used to struggle. But all this changed in the digital era. Now even small firms can make a creative and put it on social media sites where they are paid on a 'pay per click' basis. They even have access to smart systems built by social networking sites, which allow them to optimize their spend while reaping maximum benefits. In the end, AI has enabled companies to reach the right set of customers with the right message that resonated with them at the right time when they are most likely to purchase. There are two main developments that have led to this change. One, the entire advertising market that has been developed on digital platforms. This helps not only in targeting customer segments strategically but also allows us to measure the ROMS (Return on marketing spend) effectively. The second development has been the inter-connected world. The smart devices that customers use on daily basis have led to a lot more information about the customers that what was known a few decades back. Now, a company that came up with a new digital watch is not limited to launching the advertisements to a luxury segment based on demographics. But it can specifically target customers who are interested in watches and who are in an economic position to afford it. The impact of AI is not limited to customer selection and intelligent targeting, but it has disrupted the entire value chain. In the later sections of the report, we have talked in detail about how AI has disrupted each part of the value chain and how a change in one part affects the change in others. But before we go in detail into understanding the impact of AI on specific advertising activities, lets first understand what exactly comprises AI in this context, why there is a buzz around it, how the advertisement industry used to work earlier, and what are the specific parts of it.