AI’s evolution in the ad space

The data and addressability of digital combined with the reach of linear is a powerful advertising proposition – albeit one media publishers have yet to master. One challenge is managing the complexity of distributing linear and VOD content onto multiple platforms. Adding AI into the mix promises to streamline the whole system and even to make ads more personalised and targeted than ever.

“AI is nascent in the industry,” says Rhys McLachlan, Director of Advanced Advertising at UK commercial broadcaster ITV. “There’s a lot of hype around it. In some respects, rightly so. In other respects, it’s a classic Gartner lifecycle curve. We need to be wary that the opportunities are maybe slightly overinflated versus what it can practically deliver in terms of value.”

With advertiser spending on digital video expected to grow 16% to U$63bn in 2024 (IAB), the time is ripe for media companies to implement AI across their major advertising functions including proposals, ad operations and reporting.

“Equally we are acutely aware of the long-term value proposition that AI will bring to our business. There’s efficiency, there’s optimisation, there are workflow improvements,” McLachlan adds. “There is automation. There’s a whole bunch of processes that are currently manually orientated that over the course of time will become much more sophisticated and much more machine-based.”

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AI has the potential to automate point tasks in the existing ad management chain and, some would argue, to transform the entire way media is transacted.

To understand this we need to appreciate the boost to linear TV afforded by the rise of viewing on connected or converged TV platforms.

“The bottom line is that linear content whether distributed conventionally or through streaming services on CTV is growing, not declining, and it will continue to grow at 23% CAGR to 2030,” says Ben Tatta, Chief Commercial Officer at advertising management platform Operative.

In the last couple of years, the business model of streaming has flipped from pure play SVOD to advertising-supported services. This year for the first time, ad revenue associated with media will surpass revenues generated through paid content. That’s all forms of paid content including theatrical box office, pay TV and streaming subscriptions.

“That is monumental,” says Tatta. “The trend going forward is that advertising will be the dominant source of revenue for media.”

But only if media companies revamp their ad-tech stack from one built on media siloes to one which treats media viewing as truly omnichannel.

“Until now most ad-tech platforms were built in silos,” Tatta says. “There was a linear technology stack and a digital technology stack with streaming a fusion of the two, but the bottom line is that they were separate. The marketplace for planning, buying and selling advertising was also historically segmented by platform. It didn’t matter whether you were a cable operator, broadcaster, local TV station or digital seller, the whole workflow was verticalised and didn’t necessarily connect in any way to adjacent platforms.”

He continues: “Now we see this evolving to an audience-first approach in which viewing devices are really just a mechanism to reach the audience. It means that a client buying an audience-based campaign can plug in the audience they want to reach first and then figure out how that audience is going to be delivered across CTV, FAST, TV and digital.”

Operative has built a platform called AOS around these principles. It automates workflows across planning, inventory management, stewardship, and billing of linear and digital assets used by Sinclair Broadcast Group, TelevisaUnivision and Fox, among others.

Nonetheless, a single campaign could be made of thousands of line items with hundreds of different creative assets across tens of different properties. Creating proposals, uploading and managing campaigns and delivering accurate reporting has become a mind-bending exercise.

Optimising the workflow

Integrating AI into the mix can optimise the workflow. “Regardless of how streamlined the software is, this process can still create friction and inefficiencies in day-to-day ad sales and operations,” Tatta says. “AI will comprehend the context, access the relevant data, perform the necessary analysis, and provide insights or execute the desired actions.”

AI ad management tools will even understand and respond to natural language queries and commands. A seller could simply voice a prompt to build a proposal in a few minutes. According to Operative, that proposal will accurately reflect availability, pricing and audience reach, pulling from a media company’s entire technology stack across linear, digital and streaming.

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If more of the heavy lifting is solved by AI, there is more time to analyse proposals or make creative improvements. Analysts can review the total cost and create smarter discounts. In theory, the entire company gets faster, smarter, and as a result, more attractive to more advertisers.

ITV is considering deploying AI to speed up workflows and create efficiencies in several areas. “Obviously, we have a lot of contracts in place with customers and we have an evergreen contracting process because we’re always attracting new-to-television customers and new-to-ITV customers,” explains McLachlan. “The exchange of contracts and NDAs required can certainly be improved through the use of AI and ML to bring efficacy to the process.”

McLachlan also hints at ambitions to use AI around advertising scheduling. “We are actively observing that space,” he says, suggesting announcements may come by the end of the year.

More broadly, he says, AI is only as good as the inputs or variables that go into the rules of its operation. “The challenge is ensuring that in the very first instance, we have the most high fidelity inputs so that the AI can produce recommendations and outcomes that are of value to the business.”

He notes: “I’ve seen some instances elsewhere in the digital world where the inputs to AI have been a little loose so the output recommendations are not fit for purpose.”

Respecting GDPR

While consumers are willing to share their data with companies for a better customer experience, they also have concerns. Recent studies have found that 71% of consumers expect companies to deliver personalised interactions, and 76% get frustrated when this doesn’t happen. On the other hand, 63% of consumers say companies aren’t transparent about how their data is used; 54% say companies do not use the information to offer consumers any benefits; and 48% have stopped buying from a brand or using a service due to privacy concerns.

“We are not in the business of doing personalised advertising,” says McLachlan. “Some studies at the outset of addressability presented it as the Holy Grail but the general consideration from the public is that it can be intrusive. You still see businesses that seem to chase you around the web with ads for brands or products that you may have looked at on one website. That’s not a good customer experience and does feel like it crossed a Rubicon that shouldn’t be crossed by our industry.”

“As addressability becomes much more sophisticated, as the data signals become much more granular, of course, we will be able to do [personalised ads]. But as a public service broadcaster, we take the responsibility of choosing where to draw the line. That is appropriate in terms of understanding and respecting where the privacy boundaries are.”

Voice-activated advertising

The introduction of voice-activated ads marks a new frontier. This taps into the growing voice technology trend, enabling companies to reach audiences through smart speakers and assistants. Sky Media reported that voice searches on its platforms had risen 400% in the year to December 2023, prompting it to develop advertising opportunities where a user can give voice commands via remote or Sky Glass during an ad, signalled by an on-screen prompt. The user would then be taken to a page dedicated to the advertiser, hosted in the interface.

ITV has also evaluated the tech but has held off from activation. “We’ve not yet been able to make a really strong value case for the amount of development work that we would need to do to harmonise it and with all parts of the ecosystem,” says McLachlan. “I’m aware of the businesses that are pioneering in that space and I’ve seen some good examples but we’ve not been able to establish a robust value case that warrants us making the investment in the resources needed to stand it up.”

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