In this interview, we have the privilege of conversing with Walter Pasquarelli, an internationally recognized advisor, speaker, and expert in AI strategy, generative AI, data governance, and synthetic realities. With a career anchored in leadership roles at The Economist Group, Pasquarelli has been at the forefront of technological innovation, influencing policy and business perceptions of emerging technologies. His impactful contributions have earned acclaim from prestigious publications like The Economist and Forbes, as well as recognition from influential bodies such as the European Parliament and NATO.
Explore Pasquarelli’s perspectives as he discusses the transformative impact of AI on the advertising industry, while debating both risks and regulatory compliance.
IAA Benelux: We’ll start by asking you the first question, which is how you’ve seen the recent evolution of AI change the advertising industry.
Pasquarelli: Well, that’s an excellent question. I think one way of thinking about it is to try to imagine yourself being back in the 1990s: the Internet is just on the cusp of widespread adoption, people are feeling that there’s something happening, some changes in the air, but nobody really knows what’s going on. Like people can see the initial trends.
Now ask yourself: How would you have positioned yourself back then? What kind of investments would you have made? How would you have tried to adapt to this changing environment?
Just like the web transformed the advertising industry back in the days, artificial intelligence will have a massive impact on how we actually produce ads and how we conduct business.
The president of Microsoft described it as “the steam engine of the 21st century,” and that I think offers us a pretty good picture of where the technology is actually heading and how it’s going to transform industries.
Generative AI in particular will be able to first of all create increased efficiency gains by allowing people to develop campaigns in a way that is much faster through a click of a button. It democratizes these technologies by providing openly available platforms and interfaces that anyone can access without an ability to code.
And overall, that means that instead of having campaigns for advertisements that would take maybe weeks to develop, now we’re actually looking at a matter of days, maybe even hours.
So for the advertising industry, there is almost a natural need in order to understand the technology, understand how it can benefit your business, identifying the use cases and jumping on a bandwagon.
IAA Benelux: What do you see as the main risks of using AI in the advertising industry?
Pasquarelli: Well, I think that’s probably one of the most important questions. And in fact, when we think about adopting new technologies, we can all get hyped up. We can all get excited about the benefits and the opportunities that this technology brings. But of course, there’s also some risks.
And that means that there is a need for having a careful and a considerate adoption of these technologies into your business so that you don’t just transform everything from one day to another, and then maybe things don’t work out the way you want to.
First of all, the thing that should be said is that there was really a major change in the business models that I believe AI will have on the advertising industry, as I just alluded earlier.
I think obviously with all these efficiency gains and things becoming much faster, there is perhaps a little bit of a risk that we will just try and become faster and faster and faster. But the quality of the ultimate outputs, because of the desire to become as efficient as possible, might actually go out of the window a little bit.
Roughly speaking, I think there was basically three layers of content that will be produced specifically with the advertising industry on the bottom layer. I think because of the efficiency gains and because of the low cost of producing content, there will be a majority of ads that will be produced almost entirely by artificial intelligence. That has advantages in the sense that this is a low cost option, but in terms of quality, it might not be the highest one.
There is then the highest layer, which is content that is almost entirely produced by humans. I think this will increasingly become, from a financial point of view, less viable.
But there is also a middle layer and that’s where artificial intelligence tools will be used in conjunction with humans, editing and producing outputs. Delivered at scale and produced fast, this will also secure the necessary quality.
When we look at generated content through AI, there is now increasingly an issue that with this type of content and these outputs are becoming realistic to the point that we cannot discern any more what is real and what is not. There will certainly be regulatory action coming in from different kinds of governments and from policy environments all over the world.
For the advertising industry, I think there is a real need to be able to first of all clarify exactly what is generated through AI, what is not generated through AI, while ensuring that these kinds of safety risks are flagged and are taken into account. So to avoid any kind of regulatory action, the advertising industry will undoubtedly change.
And being able to understand these changes, these trends and adaptive business models based on that will ensure that any company working within the ads industry will maintain their economic relevance.
IAA Benelux: With current and upcoming laws within the EU (i.e., GDPR, Copyright Laws, DSA, AI Act), do you think these risks are adequately reflected and potentially mitigated, compared to the regulatory regime in other countries, especially the US?
Pasquarelli: Yeah, that’s a very interesting question. You know, every time when it comes to the question of policy and regulation, the real question that I always ask myself is for whom, and that means for whom are these regulations being developed? Who is the target group? Who are the main stakeholders that regulators have in mind when developing these kinds of policies?
And this is, I think, where the approach of the United States and the European Union is probably a little bit different.
The European Union, when it comes to AI, has put front and center the protection of the consumer and of citizens, and that means that they have developed different kinds of risk buckets that basically try and limit the risk that some of these AI tools bring.
Now critics have said that this is something that may be a little bit limiting for companies seeking to develop these AI tools, as basically this would mean that they have to adhere to more stringent regulations as to how these tools can be developed. But to reiterate again, the European Union says the consumer is front and center for us.
The United States by contrast has a slightly different approach in the sense that they are not saying we are going to develop stringent top down regulations. But in fact as we saw in the US White House executive order, they’re looking more at looser guidelines, principles that allow for greater flexibility in developing AI systems and how they are deployed across the markets.
The target group here is, I think on the one hand surely protecting the consumer, but on the other hand ensuring that companies that develop these kinds of systems have sufficient space in order to be able to still do research, still produce new innovations, but simultaneously having some kind of northern light to which they can actually orient their work toward.
All these risks accurately reflected, the differences between the US and the EU regulatory approach is in that sense not too not too different. Both regulations and both policies take to account the risks of safety, such as deepfakes, concerns of AI-generated synthetic content, of ensuring that any kind of outputs does not contain any bias, which is particularly relevant as well in the advertising industry.
The way they try to achieve that is perhaps a little bit different.
IAA Benelux: What do you see as the main opportunities for using AI in the advertising industry?
Pasquarelli: I think when it comes to using AI in the advertising industry, the main keywords here that I see is, of course, creating efficiency and widening the creative opportunities that any advertising business has. And for this, I think one of the first things that should be said is that data is really at the heart of any discussion on AI.
I really want to reiterate this quite strongly because when I hear businesses and when I speak to some of my clients and they say we want to have AI, there’s actually really little discussion about data.
Data is the foundation. It’s the building blocks that actually make artificial intelligence intelligent.
There are a few things of how this can be used in order to make the advertising industry more profitable, more efficient.
When we think about artificial intelligence systems, the typical opportunities that we found in the past years were of course taking this data and then personalized campaigns through having insights of potential customers or potential leads and target them more efficiently.
That means as well that we can then optimize our ad performance in real time using AI-driven algorithms.
And something that’s probably the most interesting point of that is that we can actually make future forecasts of what we think some of our customers might actually want.
We have these big blocks of historical data that can tell us anything about what people wanted in the past and based on this we can make more or less predictable reliable decisions on what the future might hold for some of our customers.
But this is now where things get quite interesting because we have of course these typical, more traditional AI tools that we can now combine with the power of generative AI. And generative AI here is I think really the game changer because in addition to having these kinds of data sets that provide us insights about our customers, we can now generate content that target those customers specifically.
Think, for example, you have a wide selection of customers that are divided by demographics, by geography, and we can now target the copy of our ads specifically to those people and generate it automatically.
So we don’t need any more a huge team of people that sit behind the desk and think about, OK, how can we adapt those copies, but we can actually generate them autonomously.
We will always still need a human in the loop that checks these ads to ensure that they’re actually accurate and then they don’t contain bias and they don’t produce anything crazy.
But it’s still a game changer in the sense that the efficiency gains are to me quite clear.
And the second point that is brought about by generative AI and particularly for the advertising industry, is the fact that we now have a creative sparring partner. So we can create some concepts from copy, and potentially designs. We can even feed our own human-generated ones into these systems and ask: “What do you think about this? Is there any room for improvement? Could I change this part or is there maybe something that I can tweak here to make it more relevant to the people I try to serve?”
That I think is really where the magic happens when we think about using AI in the advertising industry. The efficiency gain and as well as having an additional partner to test the boundaries of our creativity.
IAA Benelux: Do you think that self regulation on AI could be an effective tool for the advertising industry?
Pasquarelli: Yeah, I think that’s an excellent question and one that I think has been preoccupying people across different kinds of industries, and across government on what actually is the right kind of approach. I think to really understand this debate, we probably want to lay out the key points on either side.
First of all, when we think about self regulation, the main point is the fact that industry professionals in advertising, they have the expertise. They know exactly how their industry works. They understand the nuances and the complexities of their industry.
And this is something that for regulators, who might perhaps be more generalists in the background, not all of them but some might find it more difficult to actually implement effectively.
The other point is of course in any discussion about flexibility and agility. If we have regulation that is too strong, that is too top down, that is something that can limit the scope of innovation, which ultimately impacts the economic growth that a particular region or country may have when using these kinds of tools. So innovation is I would say is at the core of any discussion of self regulation versus actual policy enforcement.
There are of course a couple of ways this can be done in terms of self regulation.
One is for example is establishing industry standards where you have different kinds of advertising businesses coming together, working together with policymakers to establish these standards to which they can all work towards to and hold themselves accountable to.
Other opportunities are, for example, doing something like ethics committees that are composed of policymakers, people from the advertising community as well as civil society, and then of course educating consumers about what is at stake, what issues they have to be aware of and so on.
The other side of the debate, however, says that there is basically a conflict of interest between corporate interests and interests of consumers. And that’s something that I think is prevalent not only in the advertising industry, but one could extend the argument across the entire economy. But that brings as well a lack of enforcement of these kinds of like guidelines and industry standards. So I think if we talk about self regulation and we talk about establishing these standards and guidelines, that there needs to be real credible mechanisms for accountability and for redress.
The point however is that again I think self regulation is something that might work in some industries, and might not work in others. I think there is probably a sweet spot there. I don’t think that any government or any sort of policy maker can just come in and propose any kind of regulation without having extensively consulted with industry on what the right approach is.
Ultimately for any country or any region or any organization, if we talk about the European Union versus the United States, it all is a matter of setting the priorities. Do we want to create an environment which fosters more strongly innovation? Do we want to create an environment where citizens are protected at all costs? Or can we perhaps find a middle ground? Will we reconcile innovation and ensuring consumer trust?
These are the questions that any policy maker, when talking about regulation or self regulations, should ask themselves.
IAA Benelux: And the last question, how do you see these technologies evolving in the future and what will be the implications for the advertising industry?
Pasquarelli: You know, years ago I would have probably made a forecast that would range within the time frame of maybe 5 to 10 years.
Now with all these investments coming into the AI field, this time has effectively shifted from between two or three years actually. There is a lot of momentum that is currently happening and the curve of progress has effectively bended from being incremental to exponential.
Now, what does this mean in terms of the areas of application for artificial intelligence? For every conversation that I’m having with my clients, it seems to be that there is effectively two main trends taking place.
The first one is that there is going to be an increased maturity of these systems. They will become increasingly accurate. They will become increasingly faster and they will become increasingly sophisticated in the terms of outputs they produce. So the quality of these outputs will become better and better.
But one thing that I always say is that we can not only boil down progress in AI in terms of its intelligence, but increasingly because of the relevance of the of humans in this relationship. Progress in AI will be as well the relationship or let’s call it the interaction, the seamlessness of interaction that we’re going to have with these kinds of systems.
And the future, from what we can see right now slowly emerging, is having systems that are autonomous and that can increasingly act as agents based on our instructions.
Rather than having a simple interface through which you will be interacting and say design a template or design a copy or design a briefing for an ad campaign, we will be increasingly able to interact with tools that maybe go out and scan the Internet and produce research for us. We can now have agents that will be going out and collecting data from across web pages and then providing us in an aggregate and condensed format.
So these tools will become better. They will become more intelligent. They will become more accurate. But simultaneously, the seamlessness and the quality of interactions that we were going to have with those tools will increase as well.