At Cannes, the ad industry contemplates its AI future with a mix of hope and fear

I'm writing today’s newsletter from the Cannes Lions Festival of Creativity, the annual confab where advertising and marketing honchos meet on the Riviera to sip rosé, hand out awards, and talk about the future. This year, AI was top of mind for many attendees, as it has been for executives in almost every industry since ChatGPT debuted in November 2022.

As with those in other industries, creative agencies want AI­—but they want it on their own terms. At Cannes, many of the world’s biggest agencies—WPP, Publicis, Havas, and Dentsu—announced plans to use AI. Some of these agencies say AI is already helping them to mock up campaigns and storyboard spots. Some are using AI models to test ads—predicting their likely impact on different audience segments. And some are using the technology to create full campaigns.

But agencies’ race towards AI is driven as much by fear as it is by opportunity. AI may let brands bypass them entirely and use AI to design their own campaigns. At the very least, they worry AI will challenge a business model in which the agencies traditionally charged based on people hours. In a world where generative AI supercharges productivity, agency pricing models that were based on the human labor required for a campaign will be increasingly untenable, accelerating a trend towards performance-based pricing that is already well underway.

And, of course, everyone working at agencies is worried about what AI will mean for their own jobs. At Cannes, that anxiety was evident just beneath the surface. At a breakfast event Fortune cohosted with Meta, a number of marketing executives asked me privately what I thought AI’s impact on jobs would be—both in the ad industry and more broadly. Ahead of the festival, advertising agency Publicis released a video meant to be—according to Publicis CEO Arthur Sadoun—a “not so serious” take on creative agencies’ AI obsession. The video poked fun at “old Mad Men pitching AI,” offering assurances that “our people will be fine,” but that soon switched to “here a cut, there a cut, everyone gets cut.” The video ended with the tagline “Imagine if we all took the BS out of AI?” I thought the video was mildly amusing—and landed some valid points with its snark. But, according to an article in trade publication Campaign, the ad cut a little too close to the bone for some industry executives.

With AI, agencies are finding themselves, not for the first time, in the “frenemies” zone with tech companies—both partnering with them and heavily dependent on them as a marketing channel and yet potentially competing with them too. All along the beach at Cannes, Big Tech—companies such as Google, Meta, Snap, and TikTok—used their big tents to showcase their latest ad tech, touting new AI-powered tools for ad development and placement.

At the Fortune-Meta breakfast event, Erik Hawkins, Meta’s vice president for global partners, pointed out that brands that use Meta’s AI tools on average see a 22% increase in return on every marketing dollar they spend. Many of Meta’s AI tools are simply back-end processes and allow for more precision targeting of ads. But some of them can also be used to generate a wider, more diverse range of marketing content too. Hawkins said that as these tools gain wider use, making sure they are used responsibly is becoming more important, and that Meta had joined dozens of other big companies, academic institutions, and nonprofits in forming the AI Alliance that is supporting open research and open science using AI.

At Cannes, many brands were divided on the use of generative AI to produce campaign content. They’ve watched as some companies such as Levi’s and Victoria’s Secret have faced consumer backlash after using AI to create marketing imagery. In both cases, the campaigns were meant to portray the brands as diverse and body-positive. But they faced objections that the use of generative AI belied that message because it deprived real human body-positive and minority models of work. Some brands, including H&M, L’Oreal, and Lego, have barred the use of generative AI in marketing materials. But others such as candymaker Mars and cosmetics giant Estée Lauder are jumping in with both feet—using generative AI technology to help hone marketing content or brainstorm marketing concepts.

My own prediction is that brand hesitancy over generative AI will crumble over the next few years, as those experimenting with the technology demonstrate its ROI and figure out how to sidestep the ethical pitfalls.

But I couldn’t help thinking at Cannes this year that the ad industry has still not fully internalized the magnitude of the platform shift that is about to hit them. If AI chatbots and assistants become our primary means of accessing the internet, and of conducting e-commerce (which is likely to happen as AI models improve), how brands reach consumers is going to change profoundly. It won’t be about reaching consumers online anymore, because they won’t be there—their AI assistants will be there in their stead. Already publishers are talking about licensing deals with companies such as OpenAI and Google, that will see their content used more prominently in chatbot responses. Both tech companies have broached the idea of displaying ads against chatbot responses. But if people just send their AI agents out to do their shopping, booking, and buying for them, brands may find their direct access to the consumer diminished and attenuated.

At Cannes, the tide was turning. But it wasn’t clear those partying in the beach tents and on the yachts had noticed.

With that, here’s more AI news.

Jeremy Kahn
jeremy.kahn@fortune.com
@jeremyakahn

Today's news, research, calendar, Fortune on AI, and Brain Food sections were curated by Fortune's Sharon Goldman.

**Before we get to the news, a quick reminder to preorder my forthcoming book Mastering AI: A Survival Guide to Our Superpowered Future. It is being published by Simon & Schuster in the U.S. on July 9 and in the U.K. by Bedford Square Publishers on Aug. 1. You can preorder the U.S. edition here and the U.K. edition here.

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