Generative Advertising: Meta's AI goldmine

Generative advertising - which leverages AI to continuously create, test and optimise personalised content at scale that resonates with customers on a personal level - is emerging as the shortest pathway to monetising AI. And it's putting Meta in the pole position. It stands to reason that tech giants pushing the frontiers of generative AI will test the more promising business applications in-house. At this point, social media holds out the greatest promise of feeding their networks AI-generated content, and filling the extra ad inventory with algorithmic marketing. This gives a platform like Meta unprecedented power over both consumers and producers. It can train its AI machine on enormous amounts of data to precision target content and advertising, leaving little on the table for either buyer or seller.

The process is accretive, as gen advertising becomes more precise. But it's not without cost. Social media platforms are built around content created free (to the platform) by human users. But AI-generated content involves spending. The prospect of infinite content would defy the laws of economics. As the share of AI-generated content rises, it progressively alters the DNA of social media platforms in favour of publishing. Meta has made some of this switch already by moving from social media to content feed. The picture becomes muddier further down the line.

Social media platforms will face pushback from users and advertisers over gen content. The former will seek ownership over data, the latter over marketing control. Doubts are being cast, even within Meta, about AI's ability to arrive at 'better' solutions, be it through pattern-matching, sheer luck or hallucination. This has dialled down the AI hype across industries, making it more of an uphill climb for Microsoft, Alphabet, Amazon and Apple to monetise it. Meta may have obvious advantages, but it's not immune to the tech challenges. Its dominance in messaging, social media and content feeds will, however, continue to drive gen advertising and methods to profit from it.