AdTech: Sector Update
Digital AI Ads
- On April 5, 2023, Andrew Bosworth (CTO of Meta) shared that he expects to ship tools to create ads with AI by the end of 2023. Bosworth described giving advertisers the ability to use multiple images that work best for audiences, increasing the effectiveness of ads and saving time and money. Mark Zuckerberg noted on his April 26, 2023, Q1 2023 earnings call that AI has already improved monetization in both Instagram by 30% and Facebook by 40% QoQ.
- Microsoft has also been testing out advertising within their Bing Chat product since February 2023. In the advertising feature that Bing Chat is testing, conversational responses will include links that may be paid for by sponsors. While the link isn’t marked specifically as ads as search results are, once user hovers over the link with a mouse, the word “Ad” appears in the link’s pop-up. Bing is also reportedly testing photo and video ads that will appear below a user’s chat conversation.
- Advertisers are already experiencing tangible benefits from employing AI into their creative. Drinks conglomerate Diageo is embedding AI with CreativeX’s assistance in analyzing and optimizing their creative, which are reduced the price of 1,000 advertisement impressions (CPM) by 50%.
Streaming AVOD Adoption
- Advertising Video On Demand (AVOD) implemented on OTT streaming services’ major subscriber bases such as Netflix is another key theme in 2023. Netflix aims to push personalized, programmatic advertising content and formats to the technological limit. Netflix disclosed in their Q1 2023 shareholder letter that their Average Revenue per Membership (ARM), which includes subscription + ads revenue is greater than their standard plan, in the US. Due to this success, Netflix announced upgrading the ads feature to included 1080p, from 720p video quality and two concurrent streams in all 12 of their ad markets, beginning with Canada and Spain.
- “…further subscription fee hikes in a general inflationary environment will force more consumers to tighten belts; we believe prices of most popular services could potentially double. On the other, streaming companies are realizing that higher prices alone are not enough to generate the profits Wall Street demands from cable TV providers…”
– Scott Purdy (Principal, Deal Advisory & Strategy, KPMG)
- “… But then when you think about like from a technology and product experience perspective, what am I excited about there, that's again where I think we have an opportunity to bring the specific characteristics of a premium, fully addressable, fully targetable, fully deterministic ad streaming system to this world…So, there's just a whole amazing line of innovation that we can go after, and we'll be going after for, frankly, for years.”
– Gregory K. Peters (Co-CEO, Netflix), Q1 2023 Earnings Call, 4/18/2023
US Ad Market Value By Channel
($ in Billions)