A third of businesses will abandon gen AI projects before 2026: report

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Is the generative AI bubble about to burst?

Maybe not, but a Gartner report released on Monday suggests it’s certainly over-inflated. The report anticipates that businesses will abandon around 30% of their generative AI projects after reaching proof of concept by the end of 2025 due to poor data quality, suboptimal risk controls and, most importantly, hazy business value coupled with high costs.

Gartner estimates that deploying generative AI organisation-wide can cost between $5 million and $20 million. Building custom models from scratch can also cost up to $20 million, and further customising them and embedding APIs into apps can cost up to an additional $6.5 million and $1 million, respectively. Businesses can then spend more than $10,000 in recurring annual costs per user.

At those price points, it’s no wonder businesses want to see serious returns.

Late last year, a Gartner survey of 822 business leaders using generative AI found improvements in overall revenue generated, costs saved and productivity. 

Unfortunately, most businesses are using generative AI to enhance productivity, which can be difficult to directly translate into financial gain given the substantial investment that goes into building AI tools, the Gartner report states.

The trouble lies in AI benchmarking, which tends to focus on minute performance metrics, such as fractions of seconds saved, and the ability to produce hyper-specific information irrelevant to the average person. This can lead to a disconnect between how a business values its AI tools and how its clients do.

Marketers specifically are starting to see that value as AI tools become more sophisticated, particularly in AI’s creative capabilities. According to a study by Dentsu Creative, marketers are starting to believe that AI can compete with human creativity and imagination.

Fresh tech 

• OpenAI unveiled an AI-powered search engine, SearchGPT.
• NBCUniversal partnered with Huge to launch AI chatbot Oli, which will help viewers find programming throughout the network’s Olympics coverage.
• Vimeo announced AI video translations and dubbing to localise global ads. 
• Creator marketing platform Captiv8 launched an AI brand safety tool that can identify if creators have posted about politics in the past and estimate if they will do so again.
• Ad sales automation company Frequence introduced granular targeting and reporting features for advertisers on live and streaming sports programming.

Buddy up

• Video ad tech companies Connatix and JW Player have entered talks to merge, Digiday reported.
• iSpot integrated with TikTok to provide audience overlap verification and to measure the incremental reach TikTok delivers against linear TV and streaming.
• Taking a page out of OpenAI’s book, Perplexity plans to share ad revenue with publishers accusing it of plagiarism and content scraping. Perplexity told various tech outlets that it planned to cut deals back in January before publishers levied accusations its way.
• Outbrain agreed to acquire Teads for around $1 billion to create an open internet advertising platform that drives awareness, consideration and performance objectives across CTV, web and mobile apps. Both companies will bring together 20,000 direct advertisers with a base of 10,000+ premium media environments.

Trends

The 2024 Paris Olympics are on pace to generate the highest ad revenue in Olympics history, according to NBCUniversal. First-time sponsors have contributed more than $500 million and over 70% of Paris advertisers are new.

Media buyers and planners have attributed this record pace to a few things:

Hugh Scallon, SVP and head of video activation at VaynerMedia

• Sense of immediacy: The Paris time zone difference allows for a plethora of fresh content available every day from mid-afternoon to late evening in the U.S. across multiple screens.
• Escapism: Americans want lean-back, feel-good programming and the spirit of competition at this moment—especially considering Peacock has 33 million subscribers who can watch the Olympics in new ways. It’s the first truly streaming Olympics. 
• Underpriced attention: Now that the Olympics are available to programmatic advertisers there is a new limited window for arbitraging underpriced attention. The on-demand replay content is so deep, broad and compelling that the Peacock library makes for a less costly yet as impactful ad buy as a programmatic deal.

Michael Connors, senior director of investment, specialized services at Optimum Sports

• New ways of buying: Historically, the Olympics required massive investment with linear spend to access digital packages. This year, the bar for entry has been lowered, opening the floodgates for a lot of first-time Olympic advertisers and brands with lower marketing budgets. NBC went to market with streaming-only packages, Peacock is airing all events live as well as hosting hubs for every sport with event replays and highlights and the Olympics can be purchased programmatically for the first time—all allowing smaller budgets to make an impact.
• Athlete-focused ads: Advertisers have shifted to more athlete-focused creative. Brands sponsoring athletes, the International Olympic Committee or the U.S. Olympic and Paralympic Properties are choosing to highlight the athletes and their stories rather than traditional product-focused ads.
• New places to buy and engage: With a more advantageous time zone for domestic audiences, the daytime slot will air the majority of Gold Medal events live. Advertisers placed a larger share of their dollars in this daytime slot than ever before. They’re also leaning into social media platforms to reach younger fans. NBC will post highlights on its owned channels, giving advertisers the ability to reach fans in their feeds. NBC has also incorporated 27 creators to put a social spin on the Games offering another place to engage with fans.

Reading list

Individual creators have effectively become businesses in the eyes of brands and agencies, but that doesn’t mean lawmakers understand how to regulate these social media moguls. To get them up to speed, TechCrunch spoke to former YouTuber MatPat about his efforts to educate lawmakers on what creators need as small business owners.

(This article originally appeared in Campaign US as part of Tech Fix, a weekly technology newsletter curated by digital reporter Brandon Doerrer.)