By Patrick Coffee

Advertisers are grappling with trade-offs of AI-powered ad planning and buying tools for automating nearly every step in digital ad campaigns.

The tools work by asking buyers for parameters for campaigns, such as budget limits and sales goals, then allow algorithms to decide where ads will run, who they target and, in some cases, how ads appear.

Buyers often can't find out exactly what decisions the artificial intelligence implements, but they can essentially press a button for campaigns to run on their own.

AI tools can make a campaign more efficient, according to their developers, which include pioneers Google and Meta Platforms. TikTok, Amazon and Pinterest have also released their own such tools over the past year.

The tools can also help developers sell advertising more effectively to small and midsize businesses that provide a majority of their ad revenue and that can't develop complex campaigns on their own, said Karsten Weide, an advertising technology consultant.

For many advertisers, however, the lack of control is disconcerting.

"It's almost like a necessary evil," said Nicole Fisch, senior vice president of marketing at baby products brand Lalo, which uses Google's AI-fueled Performance Max campaigns to run ads online. "You see the numbers and it does drive sales, but...at what cost?"

Reports from Google sometimes show higher returns for Performance Max campaigns than non-AI efforts. But Lalo's team can't tell if their ads reached the company's core audience of design-focused parents, nor can they actively target specific websites and apps those people may frequently visit, according to Fisch.

Many marketers -- Lalo included -- are using the tools nonetheless.

"AI buying agents are going to be directing upwards of 80% of digital media buys by 2030," said Ben Hovaness, chief media officer at ad buying firm OMD, part of ad giant Omnicom.

Less control, less transparency

Marketers have for years responded to the proliferation of platforms and media formats by demanding greater control and transparency in allocating budgets. The tech giants dominating digital advertising now appear headed in the opposite direction.

The particulars vary. Meta's Advantage+ places ads only within Meta apps such as Instagram and Facebook, for example, while Google's Performance Max campaigns run on Google properties and elsewhere.

Some marketers now call Google and Meta's AI tools "black boxes" because, depending on the platform, they may not be able to control key factors such as the consumers they're targeting, the platforms and webpages that run their ads, and whether the final ads look like they want. In many cases, marketers may have limited visibility into how well specific campaigns performed, and why.

"The idea is to relinquish control and trust the algorithm," said Zach Thompson, director of ad operations at digital planning and buying firm Arm Candy.

Arm Candy initially spent around 45% of some clients' e-commerce ad budgets on AI tools but now advises using them only in special cases, Thompson said. The tools improved outcomes such as clickthrough rates and costs per click, but in the agency's experience didn't increase sales, and clients lost a certain level of control, he said.

Buyers using Meta's Advantage+ targeting tools can make "baseball" a theme the algorithm may or may not use, for example, but can't ensure ads reach specific audiences such as baseball enthusiasts, Thompson said. The tools also can't pick which Meta platforms brands' ads run on, and buyers who use Meta's creative AI tools can't determine how they may alter the way these ads look, he said.

Online event marketplace Event Tickets Center has seen its images and text appear in other brands' ads when buying through Advantage+, said Chief Marketing Officer Ben Kruger.

Some OMD clients have shied away from AI buying altogether due to a lack of control over audiences and inventory, according to Hovaness.

Marketers considering AI-driven campaigns aren't confident ads for restricted products such as alcohol will appear only in appropriate places, Hovaness said. Other brands can't accept not being able to select where their ads may run online, he added.

Sales above all

Despite such complaints, many marketers have embraced the "black boxes."

Event Tickets Center found Performance Max campaigns deliver higher traffic numbers than traditional search ad buys, which is more important for the ticket seller than transparency, according to Kruger. "As long as it's delivering profitable sales to us, I don't really care where it's running and what it's doing," he said.

The company now spends around 10% of its roughly $100 million annual Google budget through Performance Max, Kruger said.

Advantage+ has reduced the time Saxx spends identifying leads and setting up campaigns, said Kevin Meikle, director of digital marketing. That gives the underwear brand's marketing team more time to test other marketing channels and work on creative strategy, Meikle said.

Saxx currently spends 20% to 30% of its Meta budget on Advantage+, but that share has run as high as 50% to 60%, depending on fluctuations in ad prices, Meikle said.

Google and Meta have gradually updated their AI products. Performance Max advertisers since March 2024, for example, have been able to block their campaigns from running on up to 20,000 sites or apps.

Many marketers, however, would prefer to choose where ads run rather than where they won't, because even a list of 20,000 sites, pages and apps accounts for only a fraction of the billions of places where digital ads may appear.

No matter how marketers feel about "black boxes," the approach appears to work for tech companies offering them.

Meta Chief Financial Officer Susan Li said on the company's most recent earnings call that adoption of its Advantage+ shopping tool, which automates ad campaigns tied to online sales, increased 70% year-over-year. Li also said the product could bring in $20 billion annually.

Meta has received overwhelmingly positive feedback about Advantage+ and is testing a new campaign setup that will turn AI tools on by default for certain kinds of campaigns to simplify the process for buyers, according to a spokeswoman.

Google will continue to develop AI tools for creating and buying ads, Philipp Schindler, chief business officer and senior vice president at Google parent Alphabet, said on the company's most recent earnings call.

"When advertisers succeed, we succeed, and so we have very common interests," Brendon Kraham, vice president of global search ads and commerce, business and product strategy at Google, said in an interview.

As AI takes up larger shares of brands' budgets, the ad industry must push tech platforms to ensure AI tools keep those interests aligned, said Hovaness.

The tech giants' priority is retaining and growing their positions in an increasingly volatile market, according to Weide.

"They do what's good for them, and to the extent that what's good for them is predicated on what they do for advertisers, they will do it, but that's about it," Weide said.

Write to Patrick Coffee at patrick.coffee@wsj.com

(END) Dow Jones Newswires

March 06, 2025 06:00 ET (11:00 GMT)

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