By Chris Wlach, Senior Director, Legal, Acxiom
It’s been three years since ChatGPT, NVIDIA, and a few others put their golden touch to the economy. Artificial intelligence, and the hardware and data centers that power it, has become a Midas machine, leading to trillion-dollar market caps, billion-dollar investments, and hundred-million dollar salaries.
Advertiser and agencies have crowded around AI’s golden glow. They’re reorienting their business models, developing AI SaaS tools, and launching partnerships with AI providers. With trillions flying around, a bet on AI is bound to pay off.
Or will it? In recent months investors and others have grown nervous about over-investments and over-valuations. The AI wave, they worry, is cresting — and may soon crash. Marketing teams, surfing atop the tech, could fall hard.
If the continued volume of AI buzz means anything, most in marketing think a crash unlikely. Yet unlikely risks can’t be dismissed. Most car trips don’t end in accidents; but some do. And so we take precautions. We equip cars with safety features, buy insurance, and so on.
In short, we hedge.
Whether you’re an AI bull or bear, CMOs and others managing AI investments need to hedge against the risk that the AI bubble pops. Here are four strategies.
First: Keep Your Options Open
Advertisers and agencies didn’t make our modern AI models, but they’ve tied themselves to the technology through “partnerships.” WPP, for instance, announced in October a five-year AI partnership with Google.
“Partnership” can mean everything from a contractual relationship to mere handshakes and good vibes. But in their more formal forms, AI partnerships pose problems. Imagine an AI company sinks into bankruptcy or trips into regulatory hot water; the handcuffs of an exclusive partnership can drag their “partners” down with them.
To hedge that risk marketers and brands should avoid hard commitments to particular AI vendors. Steer clear of both contractual exclusivity clauses and internal mandates to use just one tool. Businesses should also push for termination rights and resist auto-renewals in AI vendor agreements. Be ready to swap one vendor for another — or for good old-fashioned humans.
These practices are prudent even if you don’t fear a widespread AI bubble. Individual start-ups, especially in the frothy, lucrative AI space, can tank on a dime.
Second: Mind Your Purse
Developing and delivering AI — from building data centers to creating LLMs to hiring talent — requires massive long-term investments. Investments so massive and long-term that new financing structures have sprung up to fund them.
Let the AI companies invest away. Brands and agencies can enjoy the technology’s benefits without needing complex debt instruments. And in an AI downturn, that’s a good thing.
For budget managers, one key risk strategy is to shift AI investments from multi-year, fixed costs to short-term, variable expenses. Make internal investments in stages rather than upfront; seek AI expertise among contractors instead of full-time employees; move AI vendor deals to usage-based pricing.
If things turn sour, marketers will be glad they’ve kept cash on hand.
Third: Quit Slapping “AI” on Everything
For three years running “AI” remains the buzziest of buzzwords. Marketing teams can’t get a sentence out without saying the trendy two letters.
But when trends suddenly change, it’s those same buzzwords that ring out of touch. (If you doubt that, ask your company’s Chief Metaverse Officer what NFTs are hot these days.)
“AI” won’t go the way of “NFT.” The underlying tech has powerful, real-world applications. Still, if the current AI fervor cools, the acronym may no longer sit front and center in every company’s press releases.
Organizations concerned about a bubble should consider whether their slogan and vision need to mention “AI.” Think over whether every product must have “AI” in the name. Offer your Chief AI Officer another title. Love AI all you want; just don’t get a tattoo.
Even now the “AI” label no longer signals something special. A recent analysis by FactSet found that 98% of technology companies in the S&P 500 mentioned the term in their earnings calls. Toilet companies sell AI. When everyone says the same thing, how does any one voice get heard?
Fourth: Talk About Risk — and Plan
The most critical step in prepping for an AI bubble is recognizing what the bubble is: neither a certainty nor a fantasy, but a nontrivial risk.
CMOs and other managers in the marketing space should frankly and realistically discuss that risk. Decide how their business can prepare for an AI-centered crash and make plans in case the risk becomes reality.
The AI rocket may continue to rise. But still keep your seatbelts fastened.
