I hope you had a happy Independence Day. Hopefully you were able to get outside, soak in some sun and maybe, just maybe, not talk about AI for a day.
It’s unlikely though. I imagine most of you still found a way to weave in the topic du jour somewhere through the course of the day. It’s understandable. It’s a huge topic. Now that you’re likely back at work (if you’re reading this, I assume you are), let’s dive back into our favourite subject. Specifically, let us drive into the costs and returns on your investment in AI within the media and advertising world.
First off, AI has been spoken of often in ad tech’s DMP, CDP, DSP and SSP landscape. Every company in these categories has professed to have at least some element of AI or ML (machine learning) integrated in their stack for years.
The fact is most of them are being a bit “loose” with the terminology and were likely using some basic decision-making algorithms that fall woefully short of true AI or ML capabilities.
True AI
Rules-based decisioning is not AI, though it can be the basis for ML. True AI works off data that informs the system how to make decisions, rather than simply laying out the parameters for decisions that have to be made.
Any partner you work with should probably be looking to build AI into their toolsets now that the foundation models are more equipped and prepared, but you should not be forced to pay extra for that integration.
As a media buyer, I would stress AI is now table stakes for any platform I work with, and the benefit of the technical integrations that any partner is taking on should be the reason I choose to work with that vendor. AI has quickly become a requirement, and not an added-value cost to pass through.
AI should increase performance and warrants me increasing my budget with a true partner.
The flip side
On the flip side, AI can be used within an agency or within your internal teams to create efficiency that was not there before this technological revolution arrived. I would argue the investment in AI tools on the services side should be intended to allow agencies to finally gain some margin.
Agencies are being pushed harder and harder each year, and they need to innovate to find ways to stay in business, much less succeed. AI is that innovation.
As a marketer, and one whom I like to think my agencies believe is fair, I should recognise that an agency can be more efficient and has likely earned the right for finding a way to increase their margins. If the agency can utilise AI technology and still deliver a high-quality product in a timely fashion, then I would hesitate to push on their fees as a result.
The reason I bring this up is that far too often, agency fees are negotiated by procurement, and procurement loves the FTE+ (full-time employee-plus) model. In this model an agency is compensated based on the number of heads they put on a business, plus a kicker for “profit”.
Finding efficiency
Having been an agency person, I know that kicker rarely results in profit. The margin comes from finding efficiency in the business. If that efficiency can be found without sacrificing quality of work, they should be permitted to do so.
Each side of the relationship is being forced to make an investment in AI, and rightfully so. The promise of the technology is high, and the return is very close to immediate. It is not an investment that will take years to pay out.
The ROI for those investments should be felt sooner rather than later, allowing all parties to succeed and grow. The ROI for AI is something the advertising industry needs in order to make the turn into the next chapter of the business. Much like 2007 was the year of mobile, 2023 is the year of AI.
This story was first published by MediaPost.com and is republished with the author’s permission.
Cory Treffiletti is SVP at FIS. He has been a thought leader, executive and business driver in the digital media landscape since 1994. In addition to authoring a weekly column on digital media, advertising and marketing since 2000 for MediaPost‘s Online Spin, Treffiletti has been a successful executive, media expert and/or founding team member for a number of companies, and published a book, Internet Ad Pioneers, in 2012.
