The Implications of AI on Performance Marketing

Performance media, also known as performance marketing, is a digital marketing strategy where advertisers pay only for specific, measurable actions or results, such as clicks, leads or sales, rather than for impressions or time-based placements.

Given consumers’ use of ad blocking technology and paying for premium subscriptions to avoid seeing ads, brands must work even harder to drive awareness and conversion in those circumstances when impressions occur. To this end, AI is reshaping how brands approach advertising, optimize campaigns and engage with audiences by automating routine tasks to delivering hyper-personalized experiences to increase conversion. In this blog post, we’ll explore the key implications of AI on performance media and what it means for marketers, advertisers and consumers alike.

Enhanced Targeting and Personalization

One of the most significant impacts of AI on performance media is its ability to analyze vast amounts of data to identify patterns and insights. AI-powered algorithms can segment audiences with incredible precision, enabling marketers to deliver highly personalized ads at scale, which are tailored to individual preferences, behaviours and demographics.

Implications:

• Hyper-Personalization: Ads can be customized based on factors like location, browsing behavior and even the time of day, making them more engaging and effective.
• Improved ROI: By targeting the right audience with the right message at the right time, brands can maximize conversion to a desired action.
• Consumer Experience: Personalized ads lead to a more relevant and engaging experience for consumers, reducing ad fatigue and increasing brand loyalty.
• Privacy Considerations: The use of personal data for targeting raises questions about privacy and consent, requiring brands to navigate ethical and regulatory challenges, especially where they work in multiple jurisdictions, often with varying rules and requirements.

AI-Generated Content: Creativity Meets Automation

AI is increasingly being used to generate creative content, i.e., text, audio, image and video, which empower marketers to produce high-quality creative assets quickly and cost-effectively.

Implications:

• Creative Challenges: While dynamic creative optimization—tailoring ads in real time—offers incredible flexibility, it also requires marketers to think strategically about how to design modular creative assets that can be dynamically assembled and work within a given campaign across multiple channels.
• Efficiency: Brands can produce high-quality content without the need for extensive resources or large creative teams. AI can generate creative assets in minutes, significantly reducing the time it takes to launch campaigns but brands must be alive to not drowning out messages with an overabundance of content.
• Copyright: AI-generated content may not attract copyright protection. This will depend in part on the degree to which there is sufficient “originality” in the work. According to the US Copyright Office, copyrightable works are required to have human authorship and when AI receives solely a prompt from a human and produces work in response, there is not enough human authorship and it cannot be copyrighted. However, if the user transforms the AI-generated material in a substantively creative way, then it becomes eligible for copyright protection. Earlier this year, Innovation, Science and Economic Development Canada released its Consultation on Copyright in the Age of Generative Artificial Intelligence, which found a lack of consensus among stakeholders regarding many issues, however stakeholders were generally opposed to protecting AI-generated content without sufficient human contributions.
• Human-AI Collaboration: While AI can handle repetitive or formulaic creative tasks, human oversight is essential to ensure the content aligns with brand values and resonates emotionally with audiences, avoids hallucinations and ensures that known issues with AI image creation are avoided, e.g., atypical number of digits on a hand.

Trust in Communications: Human-in-the-Loop

There has long been a need for sufficient oversight to ensure that content is accurate, not misleading and compliant with Canadian law. The use of AI in generating creative content reinforces the requirement for careful review of all materials before they are launched. Non-compliance can result in fines and penalties, recalls, criminal and civil litigation and reputational harm.

Brands ought to be cognizant of the following types of content that may attract specific compliance requirements:

• Health Claims: If the content relates to a food, drug, natural health product, or cosmetic, it must comply with the Food and Drugs Act and associated regulations. Broad or vague claims like “boosts immunity” or “improves overall health” may be scrutinized unless they are supported by specific evidence.
• Comparative Advertising: Comparative advertising is generally permitted in Canada but false or misleading statements may lead to liability under the Trademarks Act and Competition Act. Recent Federal Court guidance found that advertising does not necessarily represent a full and balanced view but there must be a reasonable basis for the comparisons made (Energizer Brands, LLC v Gillette Company, 2023 FC 804).
• Vulnerable Populations: Advertising to children in Canada is a highly sensitive and regulated area due to the vulnerabilities of young audiences. Brands must be cognizant of relevant consumer protection laws and regulations, including: (i) the Quebec Consumer Protection Act, which prohibits advertising to children; (ii) sections 12-13 of the Canadian Code of Advertising Standards; and (iii) the Broadcast Code for Advertising to Children.
• Lotteries: Brands running sweepstakes must ensure compliance with relevant criminal and civil laws, including the Criminal Code and Competition Act. Generally speaking, to avoid being classified as an illegal lottery, contests must incorporate an element of skill and not require payment, with limited exceptions.

Conclusion

AI optimizes performance media and can be a catalyst for creative innovation. By enabling hyper-personalization, automating content creation and providing data-driven insights, AI is empowering marketers, while at the same time presenting potential risks that must be addressed thoughtfully and responsibly.

Brands should remain vigilant and mitigate the risk of relying on generative AI by: (i) ensuring all output is reviewed for accuracy and compliance with relevant advertising laws and frameworks; and (ii) implementing robust governance and risk management relating to the use of AI.

If you have any questions about how your brand may use and implement AI, we invite you to contact one of the authors of this article.

Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.