The marketing industry has long relied on artificial intelligence to optimize ad campaigns with things like better analytics and targeting, but it has yet to fully reckon with how the recent explosion of generative AI is transforming the creative side of advertising.

Why it matters: Advertising agencies have a history of growing in response to technological shifts, not shrinking.

• 💡 As Brian Wieser, a top advertising analyst, recently noted, the head count at the major advertising holding groups grew by around 80% between 2012 and 2022 — per his estimates — despite the rise of automated marketing meant to make the process more efficient.

Driving the news: WPP, the largest advertising holding group in the world by revenue, announced a deal yesterday with leading AI company NVIDIA to give its creative teams AI tools to scale their designs.

• Code and Theory struck a similar type of AI creative partnership with Oracle earlier this month.
• Omnicom is teaming with Microsoft to test ways it can integrate generative AI into its creative and business solutions.

By the numbers: AI-enabled marketing today accounts for nearly half (45%) of all advertising globally, according to GroupM, an ad agency within WPP.

• By 2032, AI will influence 90% of all ad revenue — over $1.3 trillion.

Be smart: The world's largest advertising companies are helping to usher in these changes quickly by introducing new creative solutions for advertisers now.

• Google, Meta and Snap all debuted generative AI tools for advertising creatives in the last few weeks.

The big picture: The complexities that come with managing new technologies have the power to strengthen intermediaries — in this case, creative agencies — instead of crushing them, but only if they are quick to adapt.

• "In the long term, I think our creative — what I would call knowledge workers — will only find their jobs enhanced by the way that we will utilize this five years from now," said John Wren, chair and CEO at Omnicom Group, on an investor call last month.

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Analysts at New Street Research have slightly raised their 2023 forecasts for digital ad revenue growth in the U.S., thanks to resilience in performance marketing budgets that are mostly impacting search, retail and social media companies.

Yes, but: Demand for brand advertising "remains lackluster," per New Street, which is having an outsized impact on traditional advertising companies in television, print and radio.

Be smart: For traditional television firms, most ad optimism is stemming from growth in CTV, or streaming TV ads. But it's unlikely that CTV will be able to make up for the larger linear advertising declines this year.

• "Given the continued weaker backdrop entering the upfront negotiations, it is hard to see how most national TV networks will be able to return to growth this year, especially when considering the significant linear viewership declines," analysts at MoffettNathanson wrote in a note to clients on Friday.

Leaf Group, the digital roll-up company within Graham Holdings, is restructuring to become World of Good Brands, an homage to the most visited website in its portfolio, Well+Good.

Why it matters: The shake-up will separate Graham Holding's lifestyle publishing websites — Well+Good, Livestrong, Hunker and OnlyInYourState — from its marketplace businesses, Saatchi Art and Society6.

• Graham acquired Leaf Group in 2021 for $323 million in cash.

Details: As the World of Good Brands, the four lifestyle websites will operate independently under the leadership of newly appointed chief executive Lindsey Abramo.

• Right now, World of Good Brands' four main sites and its collection of dozens of smaller lifestyle sites mostly monetize through programmatic ads, but the restructuring will allow it to push more aggressively into direct sales and e-commerce.

By the numbers: A company spokesperson said World of Good Brands brings in eight figures of revenue annually but said they "cannot comment on profitability."

• In its last public earnings report, Graham said that revenue for the Leaf Group's media businesses "declined substantially in the first quarter of 2023" due to "reduced traffic and the soft digital advertising market for both direct and programmatic categories."

The big picture: Graham owns several media entities such as Slate, Foreign Policy's parent The FP Group, local podcast network City Cast, kids audio network Pinna, and Graham Media Group, which houses seven local media networks.

• Graham Holdings was formerly called the Washington Post Company. It was renamed in 2013 after its chair, former Washington Post publisher Don Graham, sold the paper to Jeff Bezos.

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News companies are exploring ways to structure deals with artificial intelligence firms that could help them reap the benefits of AI's explosive consumer adoption, rather than be overcome by it.

Why it matters: A regulatory approach to managing deals between AI companies and news firms seems unlikely in the near term, if at all, leaving the industry to negotiate on behalf of itself.

• “I don’t think there’s going to be any real regulation of AI anytime soon,” News Corp. CEO Robert Thomson told a group of news executives at a global conference for the International News Media Association last week.

In a Q&A session during the conference last week, Thomson noted that he met with OpenAI CEO Sam Altman a few months ago to discuss how AI training models work.

• “Unless at the front end you define what the principles are, you are on the digital defensive,” he said.
• A generative AI deal "can't just be about us," he said. "It needs to create a benchmark. ... It can't be a sweetheart deal."

Yes, but: News companies have a mixed track record of negotiating with Big Tech firms for payments.

State of play: The most pressing problem the media industry is facing in the wake of AI's explosion is the impact it will have on its traffic, particularly from search engines. Other challenges, such as copyright protections, are also being discussed.

• For publishers already beginning to use AI, coming up with a uniform way to disclose AI's contribution to their work is a hotly debated issue.

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Disney's live-action remake of "The Little Mermaid" brought in $117.5 million domestically over the four-day weekend, representing the fifth-highest Memorial Day weekend opening of all time, according to Comscore.

Why it matters: While the film didn't have the same blockbuster opening that "Top Gun: Maverick" saw during the same time frame last year, it did signal healthy momentum at the box office ahead of a jam-packed summer.

Details: The movie's debut fell in line with ticket sales expectations. For the three-day weekend, it earned $95.5 million domestically, which is roughly the same amount Disney's live-action remake of "Aladdin" earned when it debuted over Memorial Day weekend in 2019.

Be smart: Disney has a mixed track record when it comes to live-action remakes of its animated classics.

• Remakes for "The Lion King" (2019), "Beauty and the Beast" (2017) and "Aladdin" (2019) went on to gross over $1.6 billion, $1.2 billion and $1 billion, respectively. While live-action sequels of "Christopher Robin" (2018) and "Dumbo" (2019), were far less commercially successful.

The big picture: The box office continues to lag pre-pandemic sales by nearly 25%.

• But Comscore senior media analyst Paul Dergarabedian says a stronger slew of late-summer hits could help the theater industry make up for some of that lag.

By the numbers: As of now, there are 42 wide-release films set to be released this summer compared to 22 last summer, per Dergarabedian. To hit the $4 billion mark, the box office needs to generate $560 million more this summer than it did last year, he estimates.

Yes, but: It's unlikely that the box office fully reverts to pre-pandemic levels of $11 billion+ in domestic grosses this year, even if the box office hits $4 billion by the end of the summer.

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By the end of 2023, CNN's Atlanta staff is preparing a long-planned move out of the palatial CNN Center, its downtown home since 1987, back to its original Techwood campus in Midtown, Axios Atlanta co-author Emma Hurt writes.

Why it matters: CNN today remains headquartered in Atlanta, but its presence has shrunk from 6,000 in 2013 to just a few hundred staffers today.

The big picture: The network, which was founded in Atlanta in 1980, has been shifting its center of gravity to Washington, D.C., and New York for decades.

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