Gen-AI's Role in Transforming Personalized Advertising

Current State of Personalized Advertising

Personalized advertising is rapidly growing, with companies like Amazon seeing significant revenue increases. Netflix and Meta highlight the demand for enhanced ad relevancy and AI-driven targeting. However, challenges remain, such as the need for advertisers to create their own content and concerns about AI's risks, as noted by Alphabet's shareholders.

"Advertising services is an important contributor to both our North America and International segments and continues to grow at a rapid pace, reaching $47,000,000,000 in net sales for 2023, an increase of 24% year over year. We continue to see many opportunities to grow our offerings, both in areas that are driving growth today like Sponsored Products and in areas that are newer like streaming TV ads." --- (AMZN, event transcript, 2024/05/22)

"So those demand sources is something we heard very clearly from advertisers that it was either a real improvement for them or it was a necessary point for them to be able to buy on Netflix. So then beyond that, we hear lots of enthusiasm for the things I mentioned before, increasing ads relevancy, targeting personalization, better measurement, incrementality, all these things that we'll be building over the next several years, lots of excitement about that." --- (NFLX, earning call, 2024/Q2)

"Right now, we already have AI systems that are basically effective enough at finding the right potential customers for an advertiser that we generally recommend that advertisers don't restrict how we can target ads, because we believe that we can basically, in most cases, deliver better results than the advertiser will be able to find themselves. But today, advertisers still need to produce their own creative and images and text. So I think that we're moving towards a world where advertisers one" --- (META, event transcript, 2024/05/29)

"Since 2021, Share has been engaging with Alphabet on AI Driven Target Advertising and the risks that such technology may pose to the company and its shareholders. In 2022, we filed a similar proposal at Alphabet, which received support from over 47% of independent shareholders." --- (GOOG, event transcript, 2024/06/07)

"They have over 500,000,000 fans globally that they have been challenged to reach in near real time in a personalized way." --- (MSFT, conference, 2024/05/21)

Technological Advancements Enabling Generative AI

Advancements in generative AI are driven by flexible models, responsible adoption, and workforce preparation (NVDA, MSFT). Collaborative AI solutions accelerate enterprise adoption (IBM), while ethical principles ensure content safety (GOOG). Open enterprise alternatives and increased uptake in AI deployment further enhance technological progress (INTC).

"And so each one of these advances in generative AI and the advancement of AI really begs for not having a widget that's designed for one model." --- (NVDA, earning call, 2025/Q1)

"To ensure that the adoption of generative AI is managed responsibly and in a way that cultivates trust, skilling programs, such as Cognizant's Synapse, will play a key role in preparing the modern workforce to thrive in the age of enterprise AI, and help reduce friction in changing roles as the technology changes the nature of work." --- (MSFT, press release, 2024/04/22)

"The second announcement was the NVIDIA AI Computing by HPE, a portfolio of AI solutions and joint go-to-market integrations that enable enterprises to accelerate adoption of generative AI, co-developed with Hewlett Packard (HP)." --- (IBM, press release, 2024/06/21)

"Our commitment to the design generative AI principles developed by nonprofit organizations Thorn and Alltech is Human is a recent example of how we collaborate to prevent the creation, dissemination and promotion of AI generated CSAE. On the issue of content safety more broadly, we are unwavering in our dedication to providing useful and high quality information to our users, especially in the crucial areas like health and elections." --- (GOOG, AGM, 2024/06/07)

"All of those taken together, the industry is looking for open enterprise alternatives for generative AI deployment and Intel is quite well-positioned and we're starting to really see that uptake in our accelerator and Xeon pipeline now. John Pitzer: Thanks, Ben. Jonathan, can we have the next question, please?" --- (INTC, earning call, 2024/Q1)

Applications of Generative AI in Advertising

Generative AI is revolutionizing advertising by enhancing tools and features (META), boosting marketing productivity (ADBE), improving search ad results (GOOG), leveraging customer data for personalized ads (CRM), and integrating AI into apps globally (META).

"These efforts include significant investments in AI initiatives, including to recommend relevant content across our products, enhance our advertising tools, develop new products, and develop new features for existing products using generative AI." --- (META, sec filing, 2024/Q1)

"We released AEP AI Assistant to enhance the productivity of marketing practitioners through generative AI, while expanding access to native AEP applications." --- (ADBE, earning call, 2024/Q2)

"With these updates, Google bolstered its already massive search advertisement business improving its generative-AI powered search results, and building up on the more than $46 billion in revenue the company made last quarter." --- (GOOG, press release, 2024/05/30)

"Because for all companies, including ours and others who want to deploy generative AI internally, it's not going to be Times Magazine that's going to give you the intelligence, it's going to be our customer data and your transaction history and how you're -- how your company operates in your workflow and your metadata." --- (CRM, earning call, 2025/Q1)

"We're also introducing deeper integrations of Generative AI into our apps in the US and more than a dozen other countries." --- (META, earning call, 2024/Q1)

Impact on Customer Engagement

Gen-AI technologies are significantly enhancing customer engagement in personalized advertising. Companies like Google, Salesforce, Meta, and Amazon report increased user engagement and ad efficiency through advanced AI functionalities, data processing, and visual recognition technologies, driving more targeted and engaging ads.

"We see an increase in engagement, but I see this as something which will play out over time, but if you were to step back this moment there were a lot of questions last year, and we always felt confident and comfortable that we would be able to improve the user experience." --- (GOOG, earning call, 2024/Q1)

"Another key part of it is, as I mentioned, 8 trillion records were ingested into Data Cloud in the first quarter, that was up 42% year-over-year and 2 quadrillion records were processed, that's up 217% year-over-year, and over 1 trillion activations driving customer engagement, up 33% year-over-year." --- (CRM, earning call, 2025/Q1)

"2023 was our year of efficiency where we focused on making Meta a stronger technology company and improving our business to give us the stability to deliver on our ambitious long term vision. And not only did we achieve our efficiency goals, but we also returned to strong revenue growth, saw strong engagement across our apps and shipped a number of exciting new products like threads, Ray Ban Meta Smart Glasses, Mixed Reality and Quest III and established a world class AI effort." --- (META, AGM, 2024/05/29)

"By leveraging visual recognition technology, companies can create highly targeted and engaging ads, maximizing return on ad spend and driving customer engagement to new heights." --- (AMZN, press release, 2024/05/08)

"This functionality optimizes ad spend efficiency and elevates customer engagement to unprecedented heights." --- (GOOG, press release, 2024/05/16)

Ethical Considerations and Challenges

Meta and IBM emphasize the importance of ethical practices in AI, with Meta focusing on user protection and human rights, and IBM advocating for responsible AI development through global collaborations. Both companies highlight the need for transparency and ethical considerations in advancing Gen-AI for personalized advertising.

"In closing, we urge our fellow shareholders to support proposal 8. And we urge the Board to demonstrate leadership so that Meta will not only lead in innovation, but also in ethical practices, protecting the users and upholding human rights globally." --- (META, event transcript, 2024/05/29)

""Delivering on our commitments is of paramount importance, and through efforts such as the Rome Call and the AI Alliance, we're uniting developers, researchers, industry leaders and advocates to transparently advance responsible AI rooted in open innovation." As a longtime industry proponent in ethical AI development, IBM has worked with organizations around the world to ensure that powerful technologies – like AI – are created responsibly and ethically from the start." --- (IBM, press release, 2024/07/10)

Future Trends and Potential Developments

Larger and more advanced AI models will enable more engaging interactions, while milestone agreements like Microsoft's with Hitachi will accelerate innovation. The transformative potential of AI is becoming evident, and companies are shifting focus to new initiatives, indicating a promising future for Gen-AI in personalized advertising.

"And I think basically the larger models and then the more advanced future versions that will be smaller as well are just going to enable much more interesting interactions like that." --- (META, earning call, 2024/Q1)

"In other industry developments and happenings in the market this week include: Microsoft Corporation (NASDAQ:MSFT), global leader in developing and supporting software, services, devices and solutions, recently announced it has entered a milestone agreement with Hitachi to accelerate business and social innovation with generative AI over the next three years." --- (MSFT, press release, 2024/06/05)

"We are now beginning to realize the immense transformative potential before us." --- (NVDA, event transcript, 2024/06/26)

"We're seeing a few trends right now. First, companies have largely completed the lion's share of their cost optimization and turned their attention to newer initiatives." --- (AMZN, earning call, 2024/Q1)

"We think that that's going to be a really important platform for the future." --- (META, earning call, 2024/Q1)