Advertising companies are poised to benefit from widespread adoption of artificial intelligence. Macquarie Senior Media Technology Analyst Tim Nolen joins his Yahoo Finance Live to discuss how AI can help advertising agencies optimize their budgets.
Nolen acknowledged that AI has “already been a factor for many years” in the world of advertising and media. But he also highlights the “broader implications” of language models like ChatGPT, which could fundamentally change the way consumers conduct searches. This change could have a major impact on revenue in the search market, which is already a $200 billion industry, Nolen said.
He points out that AI could open up opportunities for advertisers who allocate their ad spend to search engines, allowing them to diversify their budgets and explore alternative avenues. Nolen points to companies like AppLovin (APP) as potential beneficiaries. The company could use its data to “make its automated ad buying platform more effective,” potentially delivering a better “bang for the buck” for advertisers.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor's note: This article was written by angel smith
video transcript
Josh Lipton: Topics important to the market. It's all about AI. we know that.
And it's not just about chip manufacturers or internet names. Macquarie has released a new note highlighting opportunities amidst the hype for a range of software and hardware stocks. Now we're joined by Tim Nollen, Senior Media Technology Analyst at Macquarie. Let's take a closer look at the advertising space here.
Tim, it's great to have you on the show. Maybe let's start, Tim, look at the big picture. Because, Tim, you're pointing out the way advertising and marketing companies do things.
They are already integrating and benefiting from AI. Why, Tim? Could he provide some examples of these seen in the two industries?
Tim Nolen: of course. thank you. As you mentioned, AI is a big topic across so many industries. In media and advertising, think about media companies using AI as part of image and video generation, and ad agencies using AI to help create multiple versions of advertising creative content. And this has already been an important factor for many years. .
For example, you can throw in a local reference for your product. And, you know, I think about broader implications as well. AI could change the search market.
AI-powered ChatGPT will have a broader impact on how consumers conduct searches. Explore a $200 billion industry. This is equivalent to one-fourth of all advertising costs. We wonder how this situation will change in the future as consumers interact more with his AI applications.
Julie Hyman: Hi Tim. This is Julie. This means, frankly, if searches got better, more targeted, and didn't require you to go to as many places, your advertising costs would go way down, right? Is it?
Tim Nolen: No, I don't think so. As the search marketplace itself — ChatGPT and other features — begin to do the searching itself, the way consumers conduct searches may begin to change. That's why there are applications like Search, where you can just talk to your phone about topics of interest.
Maybe you want to book a hotel room or wonder about the weather in Beijing. And you can just get a reply. It may or may not be generated to serve advertisements with it.
But I'm thinking broader here too. Advertisers, who spend around a quarter of their advertising dollars around the world on search, now have another way to leverage that spend. Therefore, we will highlight a few companies in the ad tech field.
For example, AppLovin and Trade Desk, which are heavily involved in ad trading, have automated their ad buying. Trade Desk's work spans multiple industries and media, while AppLovin's focus is on mobile games.
And both of these companies are exposed to vast amounts of transactional data. You can feed that data into your AI engine. And you can use that to make your automated ad buying platform more effective.
The more this proves effective, and AI generates better responses to ad buys, the more advertisers will be able to improve their access to search at a time when search is changing. You will start to think that you should be advertising as much as you are. You can put more money into other areas, like these other demand-side driven platforms.
So it's not necessarily more or less. It could even be more as advertisers look for a return on their spend. The better returns you get, the more you are willing to spend.
And these new types of tools give advertisers even more ways to market to consumers.
