Unmasking AI in Advertising: Why Transparency Is Key to Consumer Trust
Exploring the debate over AI disclosure in advertising and marketing and why it's necessary... or not.
First, let me say “Happy Thanksgiving” to those celebrating the day. Here’s a link to its historical perspectives from the National Archives.
In March 2015, Lord & Taylor promoted its new Design Lab collection with what had become a standard style marketing campaign.
In addition to magazines, the retailer gave 50 fashion influencers a free paisley asymmetrical dress and paid them $1,000 to $4,000 each to post styled photos on Instagram. The influencers’ combined posts reached 11.4 million users in just two days, leading to 328,000 engagements and a sold-out dress.
The problem: none of the influencers disclosed they were paid to promote the dress. Someone somewhere lodged a complaint with the Federal Trade Commission, which was following the rise of undisclosed paid social media posts. Back in 2013, the FTC had organized hearings to set standards. Regulators wanted to set an example and the Lord & Taylor campaign fit. ~ Technical.ly, What is the creator economy?
In early 2016, Lord & Taylor settled with the FTC, and the commission introduced new “native advertising” guidelines requiring more transparent disclosures on paid posts using “#ad” or similar markers.
Only 2.2% of Americans say they trust influencers for purchase advice.
Technical.ly says only 2.2% of Americans trust influencers for purchase advice.
That’s the issue: A lack of transparency (certainly an ethical issue) damages trust, such as the failure to disclose Tweets and IG, Facebook, and blog posts resulting from payment in goods or stipends.
The question is, do AI-generated advertising and marketing campaigns require the same level of disclosure?
The Case for Disclosure in AI Ads and Marketing
Consumer trust in AI-generated advertising is relatively low. Only a small percentage of consumers express comfort or trust in such practices.
According to a Yahoo and Publicis Media survey, only 38% of consumers view AI in advertising favorably.
A Statista report indicates that 64% of consumers found advertising that disclosed the use of AI appealing, suggesting that transparency can significantly enhance trust.
Furthermore, a YouGov survey reveals that around half of international consumers are uncomfortable with AI-generated advertising, and only about a third are comfortable with AI-created brand ambassadors or AI-generated product images.
These findings highlight consumers' skepticism about AI's role in advertising and emphasize the importance of transparency and disclosure in building trust.
Transparency significantly impacts consumer trust in AI-generated advertising, with research showing that disclosure of AI use can substantially boost brand perception and ad effectiveness. Here are the key findings on how transparency affects consumer trust in AI ads:
Increased Trust and Appeal
When brands disclose their use of AI in advertising, it leads to notable improvements in consumer trust and ad appeal:
47% increase in ad appeal.
73% rise in ad trustworthiness.
96% jump in overall brand trust.
These significant gains demonstrate that transparency about AI use can enhance rather than diminish consumer reception of ads.
Consumer Desire for Disclosure
Consumers strongly prefer to know when AI is used in advertising:
Nearly 83% say it should be legally required to label AI-generated content.
72% of consumers report that AI makes it difficult to determine what content is authentic.
Only about 25% of consumers could correctly identify an AI-generated image when shown alongside authentic marketing images.
Impact on Brand Perception
Being open about AI use can positively influence how consumers view a brand:
AI-generated ads with noticed disclosures significantly boosted brand perceptions.
Transparency can generate positive brand equity.
64% of consumers found advertising that disclosed AI use appealing.
Industry Divide
There's a notable gap between advertiser and consumer perceptions of AI:
77% of advertising professionals view AI positively.
Only 38% of consumers share this positive outlook.
This divide underscores the importance of transparency in bridging the trust gap between brands and consumers regarding AI use.
Concerns and Preferences
Consumers have specific concerns about AI in advertising that transparency can address:
Nearly 40% worry about being misled or misinformed by brands using AI.
Almost half state they don't want to see AI-generated models in ads.
70.4% are concerned that AI-generated models will take jobs from real people.
Coca-Cola Christmas Ad at Center of Controversy
Coca-Cola is at the center of the controversy over AI-generated ads and marketing campaigns (or the use of AI for advertising in general). Its Christmas ad, a remake of the company's iconic 1995 "Holidays Are Coming" commercial, sparked significant consumer backlash, with some calling it "soulless” and "absent of genuine creativity."
Slate states, “Amid this growing divide, Coca-Cola entered the conversation with a bold move: the release of a new Christmas commercial created using generative AI, thrusting the global brand into the heart of this contentious debate.”
In this case, the issue is less about disclosure — the ad includes a disclaimer stating, "Created by Real Magic AI," referencing the company's software — and more about the campaign as “emblematic of a worrying trend of replacing human artistry with machine-generated substitutes.”
That said, it represents the larger debate over whether advertisers should a) opt for using AI as part of the creative process and b), when they do, should they disclose that fact.
The Case Against Disclosure in AI Ads and Marketing
If the content is good, meets consumer needs, addresses concerns, and solves problems, who cares if ChatGPT generated it?
The case for disclosure is strong, but here’s my take: Why does it matter?
If the content is good, meets consumer needs, addresses concerns, and solves problems, who cares if ChatGPT generated it?
Do we disclose when we create images using Photoshop or videos using Presenter Pro? How about when filmmakers use VFX software to create visual effects?
You may recall Tom Cruises’ disclaimer at the beginning of Top Gun: Maverick that the film used no CGI for special effects. Why did he feel that was necessary? Because it’s standard practice.
I contend the same ethic should apply to AI-generated content. But that’s just me.
Takeaway
Consumers prefer transparency about AI use in advertising, suggesting it can significantly enhance trust, appeal, and overall brand perception. As AI becomes more prevalent in marketing, brands prioritizing openness and clarity about their AI practices will likely gain a competitive advantage in consumer trust and engagement.
Ultimately, the FTC or another government agency will likely have to weigh in, but it remains to be seen when or if that will happen.
What do you think? Should brands disclose the use of AI in advertising and marketing campaigns? Leave a comment and let us know your thoughts.
In general people fear change and historically people were skeptical of the invention of electricity, cars, the ability to land on the moon. I grew up without email, the Internet, and cable wasn't a thing. Now people can't imagine what that even looks like. If history has taught us anything, it's that we will adapt. As for whether advertisers should disclose using AI, I think we just need to start assuming at some point everyone will be using it. Great article! I remember that 1995 holidays are coming campaign. After 30 years, one would hope there would be significant advancements in the world. 🌎
New technology often generates fear, skepticism, and distrust until it becomes normalized. The rise of generative AI is no different.
Google's stance on AI-generated content is the same as for human-generated content: It should be high quality, original, and helpful to the reader.
The fiction authors I know who are using AI in their creative process also report that their readers don't seem to care if AI is used or not; as long as the story is good and well-told, they're happy.
I believe that surveys of consumers today reveal both ignorance but also manipulated bias against the use of AI, but that in real-use situations, it doesn't matter as much.
And the surveys will likely change over time as AI content becomes more widely adopted and society in general starts to appreciate its utility as a co-creative partner.