Fast Wisdom - Vol. III

This week’s AI headlines: More harm than good?

(from The Guardian, the BBC, The Next Web, CBS, The Conversation; image: Tara Winstead)

• A coalition of environmental groups has released a report warning that generative AI is more likely to increase energy use and spread climate misinformation than to solve the climate crisis. The authors dismiss as “hype” a previous report that argued that AI could help solve the climate crisis.
• Nvidia has released a new AI chip that it says is 30 times faster than the previous version. The company is now the third-highest-valued company in the US after Microsoft and Apple.
• An EU regulator has fined Google €250 million for scraping news articles to train AI models and not allowing publishers to opt out. This follows a previous €500 million fine for copyright infringement.
• A San Francisco startup is using AI and robotics to improve recycling efficiency and increase the proportion of material that gets recycled. The system is already being used in other parts of the US and by Amazon.
• Soccer teams in Europe are testing a new system called TacticAI to evaluate strategic options during match play. It’s currently limited to suggesting corner kick routines.

Are Chatbot Ads the New Advertising Game Changer?

3 Key Points

• The growing preference for chatbot interaction over traditional search engines could disrupt the digital advertising market and threaten the dominance of tech giants like Google.
• Chatbot ads offer businesses a new, potentially lucrative advertising avenue that could enable a better understanding of user interests, interactive advertisement experiences, and easier conversion of customers to buyers.
• While the chatbot advertising market has tremendous growth potential, concerns about user experience, addiction, manipulation, and unethical practices need to be addressed.

Sources: Adguard | Adweek | Axios | BNN | funnel | Quartz | Search Engine Land | The Washington Post | The Washington Post | Image: Sanket Mishra

Full Summary

In 2022, US spending on search advertising jumped 8% to $84.4 billion, solidifying its dominant 40% share of the digital advertising market. But AI chatbots' rapid development could shake up traditional search advertising methods and shift how customers engage on the internet.

How could a growing preference for chatbots over traditional search engines change the consumption of online content and digital advertising revenues? What impact would the expansion of the chatbot advertising market have on tech behemoths like Google? We’ll examine experts’ views on these questions.

Background

Advertisements are poised to become a common chatbot feature, potentially disrupting not just the distraction-free conversations users currently enjoy but also the online advertising industry as a whole, which is heavily reliant on search engine revenue. This is because chatbots allow users to access information without navigating to another webpage, thus bypassing typical search engine advertisements.

A growing number of companies are exploring the use of chatbot ads, which could become a lucrative alternative to subscription-based revenue and a counterbalance to the high costs of developing and operating AI models. The new strategy appeals to companies looking to gain insight into user interests at a time when traditional ad-tracking methods like cookies are fading. It may also allow brands to use interactive ads that not only respond to consumer queries but guide users through the purchasing process, turning browsers into buyers.

Key Chatbot Advertising Players

Pioneering the chatbot ad charge is Adzedek, a startup that uses a pay-per-click model and shares ad revenues with chatbot developers, much like traditional search-advertising businesses; 75% of the revenue goes to chatbot creators, while Adzedek retains 25% for operation costs.

Prominent tech companies using or exploring use of chatbot ads include:

• Microsoft, which sometimes displays ads within Copilot responses, also offers a Chat Ads API that enables publishers, apps, and online services to embed ads in their chat or messaging platforms.
• Snapchat, Baidu, and Axel Springer have partnered with Microsoft's API service to customize their chat experiences with ads.
• Alphabet, Google's parent company, is exploring ways to incorporate ads into its AI-powered services, including its Search Generative Experience (SGE), to enhance user interactions and improve business transactions.

A New Customer Experience

Adzedek's ad-integration replicates Google's search advertising approach: When a user interacts with a chatbot, sponsored results or ads appear in response to their query. The ads resemble standard text advertisements and are labeled as sponsored. These ads may grow more targeted as the chatbot better understands users’ interests over time.

Companies can determine how to target ads by having chatbots:

• Hone in on indicators that signal users’ intent to buy a product. For example, if users enter key words like “buy” or “recommend” in queries, the chatbot’s response could include an ad prompting the user to purchase a product that meets their needs.
• Analyze the context of a user’s query to identify what they might buy. For example, if a user asks what an ideal gift is for a knitter, the chatbot’s response might include an ad for an online wool store.

Chatbot Ad Downsides

Experts say that chatbot ads could negatively impact users’ experience. In addition to being irritating and misleading, ads could disrupt the flow of conversations. As a result, advertisers will need to balance advertising with user experience.

Additional concerns are that chatbot advertising could lead to:

• Addiction. Some worry that chatbot ads could incentivize companies to create more captivating, possibly addictive user experiences to broaden ad exposure and increase their advertising income.
• Manipulation. Since chatbots are designed to provide human-like responses, there’s an increased risk that users will perceive chatbot ads as credible information, which could negatively sway their thinking and behavior.
• Potentially unethical practices. Some fear that advertising companies will pay chatbot creators to steer users toward specific products, ideologies, or belief systems, potentially skewing user interactions. This move could extend tactics as far as influencing what information is included in chatbot training data, leading to biased interactions and potentially misleading users.

As a result, it’s critical to establish clear laws and ethical guidelines to curb potentially harmful practices.

Looking Ahead

While the chatbot ad market bears significant growth potential, experts say it’s difficult to predict the extent of its expansion since many complex factors shape its outlook. These include the specific types of goods or services advertised, marketing strategies, consumer experience, and chatbots’ varying pricing models.

Nevertheless, a rapidly growing preference for chatbots over traditional search engines could dramatically shift how people consume online content, impact revenues generated from digital advertising, and lead to chatbot advertising market growth that poses a serious threat to tech giants like Google.

What Do You Think?

Will ads in chatbot conversations improve or diminish the experience of using chatbots to get information? What safeguards, if any, might be needed to prevent manipulation of chatbot users?

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