Welcome to the Machine. The Rise of Algo Media Buying.

Four big questions re: algo media buying:
1) What is algo media buying, and why should I care?
2) Why is algo media buying good for advertisers?
3) Why is algo media buying bad for advertisers?
4) Is the advertising industry ready for algo media buying?

Setting the table: Last week was about algo TV. This week: algo media buying — where machines, not people, decide which ads run.

Flashback: The Four(ish) Horsemen of Algo TV

The future is arriving fast. Two signals:
1) Meta says it’ll automate all ad tasks, even creative, by 2026.

2) Microsoft is shutting down its ad-buying platform (Xandr DSP).

Why it matters: Big tech is betting on AI to run the whole show — ad planning, buying, targeting, and even making the ads.

What is algo media buying, and why should I care?

Quick answer: It's when AI makes most of the ad decisions, not humans.

What AI can now do:
1) Plan campaigns
2) Pick who sees your ad
3) Build and run the campaign
4) Adjust while it runs
5) Measure performance
6) Even make the ad

More: The AI Agent Revolution Reshaping Advertising's Ecosystem

Top AI use cases in ad agencies according to the IAB:
1) Target audiences - 51%
2) Cross-platform optimization - 38%
3) Analyze performance - 37%
4) Collect data - 37%

Bottom line: This is just the start. Bigger changes are coming fast.

The challengers: The huge platforms (Amazon, Google, Meta, etc.) are widely known.  This landscape of AI marketing startups from Liveramp Ventures is extremely helpful!

Why is algo media buying good for advertisers?

Positive #1: Outcomes-based advertising - Advertisers simply set a goal (such as cost per customer). AI figures out the rest.

Why this matters: Ads shift from being a cost to being part of how products are sold, which could boost total ad spending. Ad spend could increase beyond its 2% share of GDP over the past 100 years.

Quote from Mark Zuckerberg - CEO @ Meta:
“I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today.”

Positive #2: Small teams with A-level players become killers - AI removes busywork, helping top talent think big instead of managing tiny ad tasks.

Why is algo media buying bad for advertisers?

Negative #1: No transparency - AI does what it wants to hit your goal, but you won’t know how it did it. It might favor its own sites (like YouTube) to hit your targets.

Quote from Shiv Gupta - Founder @ U of Digital:
“The economics make this pivot inevitable. Transparent DSPs operate on razor-thin margins with high operational costs and fierce competition. Meanwhile, black-box solutions like Google's Performance Max and Meta's Advantage+ (and the soon-to-be-launched Microsoft PerformanceAdvantageMax+++Turbo) already deliver fantastic performance with minimal human intervention. Because their promise is performance and ease-of-use, they are able to justify obscuring cost and taking high margins. Microsoft is simply the first major player with the courage to admit that continuing to invest in traditional DSP infrastructure makes little business sense when the entire industry is racing toward AI-powered automation. (To be fair, it's convenient courage, as Xandr has been losing market share and clout in the DSP sector for a while.)”

Negative #2: Brand → Agency → Platform - AI now makes creative ads too. Brands could skip agencies and go straight to platforms.

Quote from Ben Thompson - Author/Founder @ Stratechery:
“Well, wouldn’t it be better or easier if they could generate infinite creative and target that? And, oh, by the way, I don’t need to give them anything. I say, “Here’s my site, I’m willing to pay $9 per user, go find me users”. And they go out, they search your site, they look at it, they pull images, they pull the text, they create ads on your behalf, they create an infinite number of ads or whatever makes economic sense, they A/B test them. Within a matter of minutes, they have figured out which one’s performed with which things, they go out, find your customers, they deliver them to you for $9. And by the way, because they’re doing this at scale and they have these massive engines, their margin is actually expanding as they do it. I’ve yet to hear any argument for why that wouldn’t be — the more variables you can put in, the better, and they just got a massively expanded set of variables and the ability to generate the ads themselves.”

More: Mark Zuckerberg just declared war on the entire advertising industry

PSA: The following TV ad currently running on Fox News was 100% generated by AI.

Is the advertising industry ready for algo media buying?

Quick answer: Not even close!  The technology is developing far faster than marketing organizations can keep up with.

Impact on jobs: Ad agencies are near a record level of employment in the U.S. (247K in 2022).

Ad agency jobs, according to the U.S. Bureau of Labor Statistics:
1) 1995 - 177K
2) 2005 - 188K (↑ 6%)
3) 2015 - 218K (↑ 16%)
4) 2025 - 220K (↑ 1%)

Wow: Even before AI hits, 60% of HoldCO employees report low morale!

Bull case for ad industry adoption of AI: OMD’s Ben Hovaness thinks AI will handle 80% of digital ad buying by 2030.

Bear case for ad industry adoption of AI: 80% of advertising agencies currently use spreadsheets to manage media planning.  

Bottom line: AI is taking over how ads are made, bought, and delivered. It’s faster, cheaper, and maybe better — but not without risks. Buckle up.