ARTIFICIAL INTELLIGENCE Myth versus reality in the digital advertising world JULY 2018 europe in association withii A thriving digital ecosystem depends on digital advertising powered by innovation, creativity and efficiency. We are pleased to have worked with Xaxis on this research which highlights that the application of Artificial Intelligence in digital advertising can deliver better targeting, optimisation and business growth. Townsend Feehan, CEO, IAB EuropeExecutive Summary Introduction Methodology 43% of publishers and 53% of intermediaries. ° Furthermore, identifying better qualified users/ audience was cited by 30% of advertisers; 55% of agencies; 40% of publishers and 42% of intermediary stakeholders. °Respondents highlighted the key concerns for the future of AI as relying less on human control (47%), and gaining trustworthy insights (55%). THE KEY FINDINGS OF THE SURVEY ARE:2 This survey, titled 'The Understanding the Current and Future Impact of Artificial Intelligence identified that decision makers from all parts of the industry recognise the significant value AI can bring to achieve results across the digital advertising ecosystem. The core application of AI in digital advertising is currently in delivering better audiences and deeper and faster analytics. In terms of overall business outcomes, AI was seen to deliver improved productivity, faster innovation and growth. 53% of agencies believe AI delivers faster and deeper marketing analytics. Many respondents agreed with the statement that AI will be the next industrial revolution, with the potential to deliver instrumental change in the digital advertising industry. However, there is work to do in terms of reliability and trust; respondents highlighted the key concerns facing AI in digital advertising as relying less on human control, and the ability to gain trustworthy insights. Its about maintaining a positive and productive balance between AI, a human workforce, and end customers, the study found. The most powerful, and largely unfulfilled, potential of AI lies in the bigger picture, in its ability to optimise towards business outcomes rather than simple metrics.” John Wittesaele. President EMEA, Xaxis3 ° Defining artificial intelligence ° How artificial intelligence is being used and where it has the most benefit ° Challenges faced when using artificial intelligence The report draws on the results of this survey, from respondents understanding of AI, its applications and core business outcomes, through to the challenges of the future.THE SURVEY ASKED ABOUT: 3 INTRODUCTION Xaxis, in association with IAB Europe, conducted a pan-European survey to uncover the current and future impact of Artificial Intelligence in the digital ad tech industry. This included surveying all sides of the industry, from advertisers and their agencies through to publishers and intermediaries (ad tech partners). The objective was to learn how recent innovations in AI technology can impact business operations, with the goal of dispelling the myths around AI and provide a realistic view of how it is being used to achieve results. It aimed to illustrate how the advertising ecosystem and all of its stakeholders are currently using AI. 34 BREAKDOWN OF STAKEHOLDERS FIGURE 1 4 METHODOLOGY to deliver better targeting and identify better qualified users/audience. Almost one in three publishers report a drive in business growth as a result. Surprisingly, 80% of publishers in Italy are not using AI for any digital marketing purposes. In contrast, almost two thirds of German publisher respondents are using AI to drive more profitable acquisitions from marketing spend (60%) and to identify better qualified users/audience (60%). The primary use for AI among publishers in Spain is to enable the delivery of more relevant advertising. IntermediariesAcross Europe, just over a third of intermediaries cited better business outcomes as an area that AI helps to drive. Just over half of intermediaries stated that AI delivers better targeting, with 42% agreeing it identifies better qualified users/audience. Over two thirds of intermediaries in Poland use AI in digital marketing to enable full optimisation of the media buy (67%). Meanwhile, over half of intermediaries in Portugal use AI to drive more profitable acquisitions from marketing spend (57%). Its evident that AI is currently being utilised within digital marketing and with good results. Respondents say its proving successful in driving and delivering innovation. All respondents recognise that with AI there is improved audience understanding and therefore better targeting.With the delivery of more relevant advertising, there are improved business outcomes and ultimately growth.9 APPLICATIONS OF AI IN DIGITAL MARKETING FIGURE 4 910 BUSINESS OBJECTIVES All respondents cite improved productivity and increased competitive advantage as the greatest benefits of AI when it comes to achieving their core business goals. Advertisers Advertisers state that AI can improve productivity, deliver faster innovation and identify growth opportunities. Nearly three quarters (71%) of advertisers in Germany and more than half (56%) in Italy are using AI to deliver faster innovation within business. More than a third of advertisers in Spain say AI improves productivity (36%) and equally believe it increases competitive advantage (36%). Advertisers in the UK felt the main advantage of AI to their business objectives was by delivering increased profitability (32%). Agencies Agencies agree with advertisers and state that AI can improve productivity and deliver faster innovation. They also state that it can increase competitive advantage. Agency stakeholders in Germany believe that AI is helping to deliver increased profitability equally as much as it increases their competitive advantage. In Poland, almost one in three agencies (32%) state that AI delivers increased profitability while in the UK the number is higher with 46% citing increased profitability as a result of AI. ACHIEVING CORE BUSINESS AND DIGITAL ADVERTISING OBJECTIVES WITH AI 10 AI” is being used in product descriptions and marketing in the way “electric” or “wireless” were used in previous decades: a novelty until it becomes ubiquitous. Emphasizing the “AI” in systems that makes decisions from uncertainty in data will soon sound as unnecessary as saying “a wireless, electric, cellular telephone”. Jacob Grabczewski, Director Product Management, Xaxis11 Publishers Publishers said the main business objectives that are met using AI are improving productivity, increased competitive advantage, delivery of increased profitability and identification of growth opportunities. AI is successfully driving faster innovation in their businesses, according to 50% of publishers in Portugal with 40% in Italy and 33% in the UK agreeing. Just over a third (36%) of publishers in Poland say AI delivers increased profitability. Intermediaries Intermediaries felt more strongly about the AI benefits in their business over half saw an increase in competitive advantage and an improvement in productivity. Over 40% also felt AI helped to deliver faster innovation within the business. 11 BUSINESS OBJECTIVES THAT AI HELPS TO DRIVE FIGURE 5 11 12 DIGITAL ADVERTISING OBJECTIVES When looking at how AI is used to achieve digital advertising objectives specifically, many stakeholders see the benefit of AI as delivering better audiences, faster and deeper marketing analytics and improved conversion rates. Agencies Almost two thirds of agency respondents believe the application of AI can identify better qualified users/audiences with half saying it delivered faster and deeper marketing analytics and improved conversion rates. Agencies also believe that AI can deliver lower cost per acquisition (CPA) rates and increase leads. Agencies in Germany also highlighted that AI is instrumental in lowering CPA rates (43%) and equally in increasing leads (43%). Advertisers Delivering faster and deeper marketing analytics was highlighted as a key benefit of AI by 40% of advertisers, closely followed by identifying better qualified users/audiences and improved conversion rates. Publishers Publishers were less convinced about the power of AI for digital advertising objectives. While half said better qualified users/ audiences were identified, only 38% said it can deliver faster and deeper marketing analytics and even less said it can improve conversion rates. Intermediaries Intermediaries were more evenly split when considering the benefits. Similarly to agencies and publishers they state that is can deliver better qualified users/audiences, improved conversion rates and better and deeper marketing analytics. Intermediaries in Germany state that AI helps with improving marketing automation (63%) and lower CPA (63%). Meanwhile, they under index in stating that it helps with delivering faster and deeper marketing analytics (38%) and improving conversion rates (25%). Half of intermediaries in Norway believe AI helps increase sales volumes. 12