Dj Tv Industry Bets Ai Can Peel Ad Dollars Away From Big Tech

By Patrick Coffee and Katie Deighton

Television commercials might soon look a lot like the ads in your Instagram and TikTok feeds: scrappy, niche and often obscure.

Media conglomerates like Comcast and hardware makers including Roku are developing artificial-intelligence tools and self-service platforms to make streaming-TV ads affordable for small and midsize businesses.

Their inspirations are tech giants like Meta and Google, whose riches largely flow from millions of small businesses on their ad platforms. If the TV industry can compete with those companies' massive reach and ability to demonstrate results, they envision enabling a flood of TV commercials from companies that hadn't considered themselves ready for prime time.

"I don't think people understand how many more TV ads are about to be created," said James Borow, vice president of product and engineering for Universal Ads, Comcast's digital sales platform.

The ad sellers are looking to bring down costs by offering their AI-powered services free of charge. Universal Ads next week will release its AI Video Generator assistant, developed with startup Creatify, that mirrors Meta's plans to fully automate ad production. And Britain's Channel 4 this summer introduced a generative AI service that can cut the cost of producing a 30-second commercial by around 90%, according to the organization.

One of Channel 4's first AI ads promoted a podcast called "The Good, The Bad & The Healthy."

"This is very much about how we can democratize TV," said Samantha Hicks, Channel 4's head of advertiser strategy.

The consumer-targeting capabilities of connected TV are another big part of the small-business pitch.

Victory Snacks, a startup whose campus division collaborates with colleges and universities on themed food items, wanted to branch out beyond its usual social-media and search marketing to promote QB1 Jerky, a new product developed with former University of Texas at Austin Longhorns quarterback Quinn Ewers, according to Chief Growth Officer Grant Cohen.

Broadcast buys were prohibitively expensive, however, and even ads during Longhorns' games wouldn't be efficient since many viewers would be rooting for the opposing team, Cohen said. Victory Snacks ultimately targeted a narrower, connected-TV audience using Universal Ads.

"I want to run an ad that's only for people in Austin who like the University of Texas," Cohen said.

Programmers like Channel 4 and Comcast, which owns networks such as NBC and Bravo as well as the Peacock streaming service, hope these tools can counter the steady decline in traditional TV ad sales, while equipment makers like Roku see them as sources of new revenue beyond their core businesses of selling hardware.

Broadcast and cable ad spending in the U.S. will fall 15.5% this year to $49.94 billion, according to research firm eMarketer. U.S. connected-TV ad spending, by comparison, will grow 13.2% to $31.91 billion, and will surpass traditional TV ad spending by 2028, eMarketer said.

Many TV companies are collaborating to better compete with the consumer penetration of Meta, Google and Amazon while simultaneously building their own self-serve platforms. Roku's ad inventory is available in Comcast's Universal Ads alongside the likes of Peacock, Paramount+ and HBO Max, for example, but the company also introduced Roku Ads Manager, a proprietary platform for buying ads on its devices and services, late last year.

The goal is to lure habitual social-media advertisers, such as direct-to-consumer brands and makers of apps and mobile games, by touting Roku's ability to help them target ads using subscriber data, according to Peter Hamilton, the company's head of ad innovation.

Roku doesn't have an all-in-one production tool, but its AI upscaler can help lower-quality videos look better on streaming-TV screens by automatically creating more frames, Hamilton said. It also uses the AI startup Spaceback to help buyers turn existing social posts like TikTok videos into commercials that can send texts to viewers who click with their Roku remotes.

Small businesses using Ads Manager contributed to some of the 18% first-quarter growth at Roku's platforms division, according to executives on its August earnings call.

"It really does bring in hundreds of net new advertisers to TV that we wouldn't have seen," said Charlie Collier, president of Roku Media, on the call.

Playing the numbers game

Proving that streaming-TV ads can deliver results may be more important than any new generative tool, however.

The performance marketers in Roku's sights have been trained to closely measure the cost of every view, click and download, said Hamilton. Banking too much on advances in creative automation may be a mistake, he said.

"Focusing on that versus campaign performance is more of a shiny object than real performance for advertisers, because they can get generative video anywhere and everywhere right now," said Hamilton.

Streaming TV stands at a disadvantage on this score because the very word "performance" has been co-opted by social-media companies to indicate how many viewers actually clicked on an ad, said James Rooke, president of Comcast Advertising.

"There is so much value that TV drives that is not click-based," he said, referring to outcomes like sales growth more broadly.

Comcast works with companies that use AI agents to measure campaign results as they happen and connect ads to sales by tracking the behavior of consumers who saw them, according to Rooke.

Ad quality is another challenge, as not everyone believes viewers are ready for small-business ads running on big-budget TV shows and movies alongside blue-chip brands.

LG Ad Solutions, a platform introduced by connected-TV manufacturer LG in 2021, has collaborated with creative AI companies like Spaceback but hasn't directly courted small-business advertisers, according to Tony Marlow, chief marketing officer for LG Ad Solutions.

Technology can't yet ensure that low-budget commercials will be good enough, he said.

"You can create an ad. You can put it in front of folks," said Marlow. "But it's like having all of the ingredients to a souffle. I'm not a world-class chef. I'm not going to be able to create that souffle."

Write to Patrick Coffee at patrick.coffee@wsj.com and Katie Deighton at katie.deighton@wsj.com

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