For an industry that makes money telling clients how to tap into future trends, the world’s top advertising executives that gathered in Cannes for the annual Lions festival this year were unusually conflicted over what was coming down the track for themselves.
Advertising agencies are facing immediate pressures as clients look more carefully about how they spend marketing budgets — with a need for greater effectiveness as a result — given tougher economic conditions in key markets.
Much of the debate in the hotels, cafés and beachside tents of Cannes, which hosts the Lions International Festival of Creativity, was also centred on the longer term and potentially existential set of opportunities and challenges from the rising use of AI to create and target advertising.
“This is the first year in my career where I’m like: ‘I don’t know how this year ends’,” said the boss of a major US advertising agency.
Like many rivals, he still expected the industry to grow this year but at a slower rate, and with a greater sense of uncertainty given the changing economic backdrop.
“Some projects are getting cut, some getting delayed, some waved through,” he said. “It’s not going to be easy unless you’re counting on a big rebound in China. Which I don’t see.”
According to GroupM, a WPP-owned media agency, global advertising revenues are expected to rise 5.9 per cent to $874.5bn, excluding US political advertising, slower than 6.4 per cent last year and 24.8 per cent in 2021.
Growth will be supported by the use of connected TVs, retailer-owned advertising models and other digital channels, it said. In Cannes, many of the biggest tents and parties were hosted by tech groups such as Microsoft, Amazon, Netflix, Yahoo and Spotify, underlining how digital advertising has taken over the industry over the past decade.
Kate Scott-Dawkins, global president of business intelligence at GroupM, said the industry had been a beneficiary of venture capital-fuelled tech spending running up to the pandemic, with a second burst of spending since after the lockdowns ended. But now, she said, “we’re coming down off of that . . . the cycle is at a point where we’re moderating and back to some sort of normalcy.”
Another UK advertising chief agreed this year was “not getting easier but is much more of a sort of year of normalisation”, but added that brands wanted more “bang for their buck”.
“You need to show the effectiveness of the work, to verify at every point and quantify, with budgets under so much scrutiny,” agreed one British executive.
Dan Clays, chief executive at Omnicom Media Group UK, saw the rest of the year improving, however, saying that “in an inflationary economic environment, marketing budgets have proven to be broadly resilient as brands continue to pursue growth”.
The first half of the year saw caution from clients in some sectors, he agreed, but the second half of the year was looking positive. “The overall impact is heightened focus on effectiveness, particularly capitalising on analytics capabilities to understand short and long term impact on marketing spends.”
There was also a backlash from some marketers against more socially driven advertising campaigns that dominated the previous year’s awards.
Earlier this year, sales of Bud Light fell sharply after an advertising campaign that featured a transgender influencer caused a conservative consumer boycott. One advertising boss admitted: “It’s easy to forget that we are basically here to sell beer.”
Another said that company executives were now more aware of the risks, particularly of touchpaper political issues in the US in the run-up to the election, while a third said that since the Bud Light campaign marketers have been “freaked personally . . . your life will be ruined if you get something wrong”.
Other executives said that brands were still conscious of the need to support issues of wider societal importance, from the environment to gender issues — but added these needed to be in line with the brand “identity” as customers were more savvy now in spotting when companies attempted to awkwardly ride a popular cause.
Sitting above these immediate concerns was the debate about the effects of AI — almost literally at Cannes given the extent of the billboards over the main Croissette boulevard proclaiming various technological advances from the different global advertising groups.
AI is likely to be involved with at least half of all advertising revenue by the end of 2023, said GroupM. But while it has long been used extensively across media buying, the impact of generative AI technology in creating advertising has only started in practice.
Google plans to introduce generative AI into its advertising business over the coming months to help generate creative campaigns, while Meta is exploring similar tools.
“Computers can create things that look like they come from humans, it’s a pretty fundamental shift,” said one advertising boss, who predicted that this could hit jobs that were in effect the “plumbing” of the industry doing basic creative work. But he added: “The computer is not going to come up with that killer idea — they are going to tell you what’s been used before.”
Multiple executives raised concerns about how AI would change how ad agencies charge for their work, with the concept of being able to bill according to the hours of work incurred likely to be under threat as campaigns may now take hours to produce rather than weeks. This could put more value on truly original creative work, said one ad boss.
Yannick Bolloré, chair of Vivendi’s supervisory board and boss of French agency Havas, compared the impact of AI on the industry to the invention of photography on painters.
“This did not kill the painters, but it killed the average painters. AI will never kill the great creative directors. But it could kill the average creative director.”
Another UK agency said that AI-generated advertising was already impressive but added: “It’s all fishing from the same pond of past advertising. And it always looks a little bit dead behind the eyes. There’s no humanity to it. There’s no feelings.”
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