AI Advertising Doesn’t Have to Suck

Since OpenAIamp8217s announcement that advertising is coming to ChatGPT there has been no shortage of buzz on this topic within the ad community While most people agree the initial ad examples and assurances about data privacy seem straightforward innocuous and familiar harking back to early Google search advertising nearly every conversation ends in skepticism and a general sense that the amp8220enshittificationamp8221 of the LLM experience has begun This sentiment is most vividly and publicly expressed by Anthropicamp8217s four new Superbowl ads entitled Deception Violation Betrayal and Treachery OuchHard truth this is the culmination of decades in which nearly every new product supported by advertising eventually went down the path of clutter annoyance creepiness and diminishing trust Itamp8217s also probably why OpenAI CEO Sam Altman just 18 months ago termed advertising a amp8220last resortamp8221And yet despite widespread complaints about advertising the economic reality remains that most consumers tolerate ads and prefer paying with their time and attention rather than their wallets Consumers expect digital services to be amp8220freeamp8221 or subsidized by advertising Itamp8217s why nearly half US streaming subscriptions are ad supported and FAST has been on a hot streak for yearsBut tolerance isnamp8217t satisfaction While the model of pushing more ads capturing more data and targeting more finely has created immense value for certain players and parts of the ecosystem too often itamp8217s been at the expense of consumersamp8217 experience and trust driving those who can easily afford it the very consumers advertisers most want to pay for adfreeIt Doesnamp8217t Have to Be Like ThisWe would be myopic to assume the only way to build a successful LLM ad business is to do it the Facebook Ads way or the Google Search way Are those wildly successful businesses Yes but that doesnamp8217t mean we stop innovating or seeking a better alternative The fastest way to get somewhere used to be a horse until Karl Benz finally threw away the model and started with a blank sheet of paperCan the ad business break the pattern that seems to define it I sure hope so and the start of ads on a gamechanging technology that touches just about everything feels like a momentous opportunityThe way forward starts with a simple brief Make it better than whatamp8217s been done beforeamp160 Maximize Customer Lifetime Value Prioritize consumer control Collect only data you need to make it work versus everything you can possibly getI39m willing to bet the LLM platform that chooses this path gains real differentiation and another revenue stream Higher consumer trust translates into greater reach engagement and quality consented signals all of which drives ad efficacy and revenue A thoughtful experience drives stickiness This is a bet that could pencil out meaningfully for the company brave enough to make itPlaying the Long GameNone of the leading AI companies with their multibilliondollar investments are building a shortterm business so why let shortterm thinking dominate the ad strategy Anthropicamp8217s Claude has a thoughtful 57page document about its soul Microsoft publicly released a detailed Responsible AI Standard inviting outside feedback to build better industry norms These companies are building platforms with serious intentionality why not the ad experiencePerhaps part of the reason is because many companies get into advertising in a hurry in response to financial pressure Anthropic CEO Dario Amodeiamp8217s comments remind me of Netflixamp8217s path into advertising Emphatic and extended resistance followed by a sudden reverse If the plan is to eternally sail the good ship amp8220Never Adsamp8221 through the calm waters of subscriptionenterprise revenue my counsel would be to plan now for financial headwinds and establish an internal skunk works to figure out a better way to do ads Thus when financial pressure ratchets upamp160 which may be inevitable they arenamp8217t scramblingRegardless of whether these companies move into ads now or later the thing is to be thoughtful and deliberate For once I want to see a company play the long game around advertising and unwind the shortsighted thinking where platforms benefit at the expense of consumers Iamp8217m not talking about altruism Companies exist to generate profit but strong profits and poor ad experience need not go hand in handWhat It Could Look LikeSo what to do Letamp8217s lower the cynicism and do what an industry that prides itself on creativity is supposed to Create something new This is a moment for innovation and perhaps even a new digital ad paradigm one that puts consumers in control gives them transparency and earns their trustImagine if as you set up your LLM account it flat out talked to you in lay terms about the value exchange inherent in its ad model and gave you some choice in your ad profile and ad experience You could permission or actively choose the categories of ads you are most interested in It could tell you what anonymized data age gender IP address was or was not being used for advertisingIt could offer you the choice to answer some specific questions to be used for ad targeting or measurement in exchange for some value like faster load times more queries access to deeper thinking or lower monthly feesCertainly it would be trustbuilding if the introduction of ads gave users more control over how their data is used what ads they see and the ability to change those settings later Not to mention the option to establish ground rules for the data they already shared prior to the launch of advertisingConsumers could initiate a conversation directly about a potential purchase and an agent could ask amp8220Do you want me to show you deals from some of my advertisersamp8221 Show a deal a consumer asks for that meets their needs and AI becomes a genuinely helpful assistant You might be surprised how much consumers value clear choices delineation between ads and content and being given a degree of respect control and empowermentA few years ago I ran a company called trueX that pioneered optin engagement ads Viewers were given the choice to engage with a brand and give better attention in exchange for specific value like removing an entire ad pod or getting preferred access The value exchange was transparent and directly tied to the experience the user intended to access On average these optin ads delivered 5x more brand lift than standard fullepisode video adsData Matters Just Not All Of ItBefore we assume LLM platforms will need to harvest reams of personal data to drive ad revenue it39s worth noting that in premium streaming CTV the most common programmatic signals remain relatively coarse IP addresses for householdlevel targeting and geography inventory authentication signals and device identifiers In other words ad effectiveness does not necessarily require deep behavioral surveillanceFurthermore driving ad efficacy and ad revenue does not always require precise targeting and personalization Some of the most effective and expensive advertising is about delivering the same message to massive audiences simultaneously Empirical research from Byron Sharp demonstrates that overemphasizing targeting can diminish a brand39s mental availability and ROAS over time Similarly amp160John Dawes showed that 95 of B2B buyers are outofmarket at any given time meaning narrow targeting misses the vast majority of future buyersThe Upsideamp160These are just a few ideas The tip of the iceberg Advertising is meant to be a creative business if more of us put our heads together there is so much more AI capabilities are advancing at a wild pace with new possibilities rapidly emerging The key is starting from a clean slate and with a consumerfirst perspective not retrofitting old advertising models onto new technologyThe upside to getting this right is realConsumers get something they want transparency and control over their ad experience and their dataMarketers and brands get the halo of supporting a platform that gives viewers control as well as access to permissioned clear userinitiated targeting and measurement signals A combination of the high engagement these LLMs create signal accuracy and consumer goodwill would drive ad effectiveness Not only that but it might even save on some of the ad tech tax of a thirdparty data brokerFor LLMamp8217s and soon to be hatched agentic ad businesses there is opportunity to drive business results and yes profits from transparency value exchange calibrated use of data along with innovation in ad measurement creative and ad format The challenge is to avoid short term thinking and the easy button of whatamp8217s been done before Outsize returns require differentiated effortThe LLM company that builds its ad business with transparency control and genuine value exchange could prove something remarkable that advertising can make things better and drive the bottom linePosted at MediaVillage through the Thought Leadership selfpublishing platformClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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AI Advertising Doesn’t Have to Suck

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Pooja Midha

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