Sorry, Mad Men. The Ad Revolution Is Here.

Open AI is going to send a giant cyborg to break into my office some morning, "off me" and take over the Report. The worst part? You won't notice. Except my content will begin to sound like it was written by Trotsky.

Sorry, Mad Men. The Ad Revolution Is Here.

Two advertisers are combining into a $30 billion behemoth to harness the data, tech and AI expertise now dominating Madison Avenue—and all the marketing you see

By Suzanne Vranica, WSJ

Dec. 13, 2024 9:00 pm ET

During an hour-long call this past week to sell investors on the virtues of a $30 billion merger of two advertising giants, data and technology came up a dozen times each. AI, eight times. “Creativity” was uttered once.

The speakers were the leaders of Omnicom Group OMC 0.18%increase; green up pointing triangle and Interpublic Group IPG 0.37%increase; green up pointing triangle, who plan to combine into the world’s biggest advertising business, one known for bold creative icons and legendary campaigns like Apple’s “Think different” and Mastercard’s “Priceless.”

Madison Avenue has been rapidly changing for over a decade, but the threats to an industry once centered on creatives have never been so great. Tech giants control more than half of the $1 trillion ad market, and quants armed with reams of data direct ad buying. Now, generative artificial intelligence is sending shock waves through the marketing world, promising to create and personalize ads cheaper and faster than ever.

Many industries talk about preparing for AI. With this blockbuster deal, the ad industry is trying to transform for it.

Omnicom argues that the scale from the acquisition and $750 million in cost savings will allow it to plow more money into experimenting with new technology like AI. Some in the ad business see AI helping creative agencies’ copywriters and art directors go wilder with their ideas and iterate quickly to win new clients.

The technology “will allow us to dream bigger,” said Susan Credle, global chair of Interpublic agency FCB, who helped create M&M’s iconic spokescandies. “Sometimes we limit our imaginations to what we think is possible and AI can push what’s possible.”

Spending on data-driven digital advertising overtook TV commercials in the past decade, and companies including Meta Platforms and Alphabet have moved further into the territory once dominated by ad companies. Global ad spending is expected to surpass $1 trillion for the first time this year, with digital platforms accounting for 71%, according to ad buyer GroupM. Google, Meta, ByteDance, Amazon and Alibaba will get more than half of that revenue, the agency said.

Along the French Riviera, where advertising leaders have gathered for decades, there was a new attendee rubbing elbows at this year’s Cannes Lions International Festival of Creativity. Kroger—the supermarket chain that caters to suburban shoppers and price-conscious customers—set up a beachfront cabana with cream-colored cushioned armchairs and a bar overlooking the Mediterranean Sea. Executives from Kroger’s ad division were there to convince brands that its data on shoppers’ behavior can reveal their lifestyles, aspirations and life stages, allowing for more targeted, effective ads. Kroger sells ads on its websites and sells its anonymized consumer shopping data so brands can target users on third-party sites and apps.

The festival, like the advertising industry, has been filling with new faces. More than a decade ago, tech giants descended to woo ad dollars from big brands. Then the marina started filling up with yachts from consulting firms and ad-tech companies, the behind-the-scenes players responsible for the technology that automates ad selling and buying. This year brought an onslaught of retailers with extensive data. Walmart’s chief growth officer and grocery-delivery company Instacart’s head of global ad sales were among the VIPs invited to the iHeartMedia and MediaLink executive dinner, with a performance from singer Lenny Kravitz.

The original ad executives were cultural architects, shaping emotional connections between brands and their audiences. Think Nike’s “Just Do It” (1988) from Dan Wieden, Coke’s “Things Go Better with Coke” (1963) from Bill Backer or De Beers’s “A Diamond Is Forever” (1947) from Frances Gerety.

In exchange for their clever taglines, catchy jingles and cinematic storytelling, creative directors were treated like rock stars. They commanded jaw-dropping salaries and first-class perks.

Cheryl Berman, the former chief creative officer of Leo Burnett US, recalls one agency trying to lure her in the ’90s with a stunning oceanfront house in Rye, N.Y., enough money to afford it and a limo service to and from the office.

Instead, she stayed at Leo Burnett in Chicago and helped craft memorable campaigns for McDonald’s, including the 1993 commercial with Larry Bird and Michael Jordan betting on increasingly difficult shots to win a Big Mac.

Those heydays are over. With AI, “creatives are moving further down the totem pole,” Berman said.

Some salaries for chief creative officers have fallen roughly 20% over the past 10 years. Automation and generative AI could eliminate some 32,000 jobs, or almost 8% of the workforce, at agencies by 2030, estimates research firm Forrester.

Creative talent is being shed “at a speed I have never seen,” said Anne-Marie Marcus, a veteran ad industry recruiter.

The hot hires instead crunch numbers, run experiments and use algorithms to analyze data and predict what kind of message will resonate, where it should appear and even when someone is most likely to click “buy.”

The creative core of the ad holding companies has been slowly squeezed by a raft of new entrants such as consulting firms, boutique agencies, media companies and tech platforms that often offer to do creative work for less money when a deal is tied to ad spending. At the same time, advertisers’ procurement departments have continued to push to reduce the fees they pay for creative services.

There already has been some contraction. WPP retired legendary ad-agency names like Young & Rubicam and J. Walter Thompson, brands that date to 1923 and 1878, respectively. Interpublic recently sold the New York office of Deutsch, as well as Boston-based Hill Holliday.

The Omnicom-Interpublic tie-up is also a gambit to keep pace with rival Publicis, which adapted faster to the technological revolution. Paris-based Publicis has spent billions buying consumer data and e-commerce companies and moved swiftly to streamline its offerings and wring costs out of the creative side of the business.

Clients, including chocolate company Hershey, which recently awarded Publicis its U.S. ad-buying duties, say they have been impressed with how well Publicis agencies understand consumers and can tie that knowledge to decisions on when and where to serve them personalized ads.

Omnicom’s all-stock acquisition of Interpublic, which is expected to close in the second half of 2025, will create a combined entity with more than $20 billion in net annual revenue, based on 2023 figures. It will bring together storied ad agencies such as TBWA and McCann.

Omnicom Chief Executive John Wren said the deal will let him “take greater investment risks in testing new technologies and platforms.” The acquisition “allows us to take control of our own future, rather than wait for technology to impact it in ways that you can’t anticipate today,” he said.

The rise of generative AI—which can create images, text, audio, video and code—threatens a whole new wave of upheaval, though it is still in the early stages and may prove to be a costly and messy transition. Generative AI often spits out distorted or unusable visuals, and it takes time to feed the technology curated images and prompts to improve the quality. Ad agencies, like Hollywood studios and publishers, also have to ensure they aren’t drawing on copyright material.

But in the long run, the efficiency of AI is likely to reduce the number of people and hours required to deliver for clients—a big impact for agencies that have long made money by billing hourly for employee work.

Omnicom agency 180 Amsterdam helped create a campaign for PepsiCo’s fruit-flavored soda Mirinda this year with the help of Adobe Firefly, a generative AI tool. The agency input the rules for creating the right look and feel for Mirinda ads, as well as photos that Mirinda drinkers submitted of their pets, art and vacations. The AI tool then created over 500,000 personalized images of the unique can designs in five days. Consumers could download the images and share them on social media.

Omnicom is rolling out an AI tech platform that will house AI tools from different providers to help creatives churn out personalized ads on a massive scale. The beta project is being led by Omnicom’s chief technology officer, Paolo Yuvienco, a 51-year-old engineer who got his start working at Bell Labs and AT&T Labs.

“Being able to customize and tailor the message and content to individuals is the promise of one-to-one marketing,” Yuvienco said. With generative AI, “we’re getting closer to being able to do that now.”

He said the Interpublic deal, which includes data broker Acxiom, will give the company access to more data. Acxiom has “a much better understanding of the consumer, given the number of consumer attributes that they bring to the table,” he said.

Many agencies are already using AI to handle internal tasks and streamline workflows. They have developed tools that use ChatGPT and other AI technologies to help with the time-consuming task of filling out so-called request-for-proposals from brands that are seeking to hire a new agency. And some are using it to brainstorm ad ideas.

Some longtime agency clients such as Progressive, Unilever and Apple now handle some creative tasks in-house. Ten years ago, less than half of U.S. advertisers had an in-house agency; now, about 82% of brands do some of that work, said Greg Paull, co-founder of R3, a consulting firm that helps match advertisers with agencies.

Rather than grant lucrative and long-lasting “Agency of Record” status to their creative agencies, many of the world’s leading marketers move agencies every two or three years.

Brands enlist creators to pump out a steady stream of ads and content on social media. Some ad-holding companies are chasing that business by buying up agencies that specialize in social media creators and influencers.

Swiss fintech firm Klarna is saving money by using AI to generate images for its marketing efforts. Photo: Klarna

Google and Meta, which already dominate the buying and selling of digital advertising, are using generative AI to handle more of the creative development—the foundation upon which Madison Avenue’s largest agencies were built.

“In the coming years, AI will be able to generate creative for advertisers as well, and will also be able to personalize it as people see it,” Meta CEO Mark Zuckerberg said during an investor call earlier this year. “Over the long term, advertisers will basically just be able to tell us a business objective and a budget, and we’re going to go do the rest for them.”

Meta, which works with millions of small businesses, said in September that more than a million advertisers have used its generative AI ad tools and created 15 million ads with the technology over the prior month.

Brands such as Coca-Cola, Toys “R” Us, L’Oréal and Mars are rushing to experiment.

Mondelez, the maker of Oreo, Ritz Crackers and Sour Patch Kids, is working with Google, Accenture and Publicis’s tech consulting arm, Sapient, to build an AI platform to improve the performance of its marketing. Mondelez is allocating $100 million to this three-year initiative, aiming to save 20% on agency fees and production costs—approximately $40 million.

“Generative AI is revolutionizing the creative process,” said Jonathan Halvorson, Mondelez’s global senior vice president of consumer experience.

Mondelez and its agencies have spent more than a year training AI models with historical ad and marketing content, from logo designs to food photography styled to make products like chocolate chips appear irresistibly delicious. It is currently developing ads using generative AI for its Chips Ahoy cookie brand that feature its cookie-mascot Chip.

Ad development for Chips Ahoy historically relied on weeks of brainstorming sessions, manual storyboarding, design iterations and then animation. The entire process would take at least three months. Mondelez believes using AI in creative development can cut that down to a few weeks.

It recently used the technology to create a storyboard for its Belgium chocolate brand Côte d’Or in just three days, work that otherwise would have taken three weeks. The two-dozen frames progress from images of a woman backstage at a comedy club to a close-up of an elephant and then a herd running in the savanna. Returning backstage, a glass of water tumbles, then a nut splashes into chocolate and an elephant-logo Côte d’Or bar snaps into pieces.

“Whether we like it or not, the ‘Mad Men’ era is receding in our rearview mirror while we drive at full speed into the age of the ‘Math Men and Women,’” said Jon Miller, a digital-media veteran and Interpublic board member.