As IBM Ramps Up Its AI-Powered Advertising, Can Watson Crack the Code of Digital Marketing?

Acquisition of The Weather Company fuels a new division

As much as we might want to try, nobody can change the weather. However, weather does have the ability to change us—our moods, our health, our daily routines—and those that know its effects might in turn be able to affect us.

In recent years, The Weather Company, which produces forecasts for 2.2 billion locations every 15 minutes, has been using its troves of data in ways that go far beyond what’s happening outside. Since its acquisition by IBM in January 2016, the company has also begun swirling deeper and deeper into the world of advertising with the help of Watson, IBM’s artificial intelligence service that’s working on everything from diagnosing diseases to crafting movie trailers. Now, IBM is finally bringing several major components of The Weather Company’s data capabilities under the Watson umbrella with the launch of Watson Advertising this week.

The new division—encompassing data, media and technology services—will offer a suite of AI products for everything from data analysis and media planning to content creation and audience targeting. By integrating The Weather Company’s signature WeatherFx and JourneyFx features along with all of the other data at IBM’s disposal, the company is hoping to transform what is in many ways still a legacy business into a cutting-edge advertising powerhouse.

“Weather impacts your mood and your emotions, and your moods and your emotions are a huge input into your decision-making modality,” says Cameron Clayton, the former CEO of The Weather Company who is now general manager of IBM Watson’s Content and IoT Platform.

Watson Advertising promises to kick start the era of cognitive advertising, a field that has both legacy tech companies and startups seeking to transform every aspect of marketing from image and voice recognition to big data analysis and custom content.

While there are countless ways to use Watson—through dozens of APIs or studio-like projects that can cost millions of dollars—its new advertising division is structured into four units. The flagship service, focused on audience targeting, will utilize Watson’s neural networks to analyze data and score users based on how likely they are to take an action (like purchasing a product, viewing a video or visiting a website). Another piece of the business will use AI for real-time optimization. A third, Watson Ads, will build on a service that launched last year with a number of high-profile brands, employing AI not just for data analysis or targeting but also for content creation. As part of a Toyota campaign, for example, Watson became a copywriter, crafting messaging for the carmaker’s Mirai model based on tech and science fans’ interests.

“The Watson Ad opportunity is an exciting first-to-market idea that advances our learning opportunities in the AI space,” says Eunice Kim, a media planner for Toyota Motor North America. “Not only are we able to create a one-to-one conversational engagement about Prius Prime with the user, but we’re able to garner insights about the consumer thought process that could potentially inform our communication strategies elsewhere.”

There have been plenty of other advertising opportunities for Watson. Earlier this year, it transformed into a doctor, promoting Theraflu while answering questions about various flu symptoms. For Campbell’s, Watson put on its chef’s hat, personalizing recipes within display ads using data about consumers’ locations and what ingredients they had on hand. For a major partnership with H&R Block, Watson turned into a tax expert, deploying an AI smart assistant to help clients find tax deductions.

“Brands are looking to AI as a feature that they might add and what that can do to distinguish them, modernize them and to give them a new look and a competitive edge,” notes Marty Wetherall, director of innovation at Fallon, which created H&R Block’s campaign.

As more marketers become interested in the potential of AI, the rebrand to Watson Advertising allows IBM to separate the advertising capabilities of The Weather Company from its other less-known operations—industries including aviation, insurance, energy, finance—explains Watson CMO Jordan Bitterman. Earlier this year, IBM created the Cognitive Media Council, a group of senior-level executives from agencies and brands that meet a few times a year to shape how marketers think about the future of AI.

“I was a mobile believer early,” Bitterman says, “and I can tell you that cognitive technology and AI will be 10 times bigger than mobile.”

The forecast for AI seems to be just heating up: According to Statista, revenue from AI services worldwide is expected to grow from $2.4 billion in 2017 to $4.1 billion in 2018 to $59.8 billion in 2025. Meanwhile, the market for Big Data is projected to grow from $33.5 billion in 2017 to $88.5 billion in 2025.

“We could certainly call AI the ‘new black,’” remarks Forrester analyst Joe Stanhope. “And marketers are getting pummeled on a daily basis with AI-type things.”

One of the first agencies to sign on for Watson Advertising is UM, which has been testing several of IBM’s new offerings for clients, including an unnamed auto brand. Since earlier this year, the agency has been piloting cognitive capabilities for localized ad campaigns at scale, meshing Watson data with client stats to analyze metrics across a large number of car dealerships in a way that optimizes ad spend while also checking local inventory to see whether or not it should personalize an ad to someone in that market.

According to Kasha Cacy, U.S. CEO of UM, the company’s 100 data scientists aren’t always enough to manage the level of complexity that Watson offers on its own. She says that bringing Watson Advertising onboard allows the agency to “take the shackles off” and be more creative with how they use data, citing one client that is already using a combination of weather data, Google searches and pollen counts to trigger when media should be bought in various markets.

“There are things that we would love to be able to do that we just can’t right now because we don’t have the human or technology processing to be able to do it,” Cacy says. “That was kind of the impetus for us talking to the Watson folks, because I think as I looked across the business I saw all these places where the thinking was there, the strategy was there, the ideas were there, but the implementation was just too onerous and I hate the idea that we’re limited by implementation.”

Indeed, it seems like AI is on most marketers’ to-do lists, whether that means researching ideas, meeting with AI companies or spending actual money. However, Stanhope cautions, the space is so new that there is also a lot of room for over-hyping it.

Building brand Watson

For years, IBM and longtime agency Ogilvy & Mather have sought to explain the capabilities of AI while also humanizing it for a world not yet ready to integrate man with machine (or vice versa). First came Watson’s now famous 2011 appearance on Jeopardy, where it managed to win both the competition and the hearts of nerds around the world. A few years later, it delved into music, with a memorable 2015 TV spot featuring Bob Dylan that showed Watson bragging to the songwriter about being able to read 800 million pages per second—devouring Dylan’s entire career catalog and identifying themes in his work.

Last year, it made the first AI-created movie trailer for the sci-fi flick Morgan. This past February, Watson analyzed the work of Spanish architect Antoni Gaudi to inspire an art installation at Mobile World Congress in Barcelona.

According to Ogilvy U.S. CEO Lou Aversano, the goal has been to give Watson a “humble, friendly, ‘I’m here to help’ personality” that takes the fear out of using AI. He says Watson has become a frame of reference in the category for ways to use data across a variety of industries.

“Technology has always been and will always be there to help businesses do more to increase productivity,” he says. “You can go back to the mainframe, you can go back to the card punch, when accounting systems were computerized. And this is just the next manifestation of it. This happens to be the first time where that technology has an ability to learn. It’s not just a data input machine.”

While some marketers that have worked with Watson are pleased with the results, it’s clear that even cognitive celebrities have critics. Some experts in the AI community think the Watson brand is already overhyped, resting too much on its early Jeopardy victory without offering enough tangible proof for what it can win for clients today. Financial analysts have also been a little wary. In a report released in July, Jefferies financial analyst James Kisner said that IBM is being “outgunned” in the race to hire AI talent, with Amazon posting 10 times more AI job listings on sites like Monster.com while Apple had twice as many.

Kisner—who talked to a number of buyers, users, competitors and evaluators for the report—also found that Watson tends to be more expensive than many other AI platforms in the market. That could be a risk as other companies create their own massive data sets and offer services at a much lower price point. (In October 2016, IBM cut its API query prices by 70 percent, according to Jefferies.)

“Watson is what we call a picky eater,” Kisner says. “So they have to prepare all this data before they analyze it and people are finding that the price tag to do that is very high.”

Some industry observers say that early hype in a marketplace full of risk and confusion could damage the likelihood of companies investing in the right places. Forrester’s Stanhope doesn’t fault IBM, in particular, explaining that the company seems to have relative parity with competitors in terms of competency. On the other hand, he says IBM does seem to be all-in with Watson.

And Watson’s brand certainly comes up a lot more in IBM’s earnings as its capabilities expand. According to the Jefferies report, references to Watson in IBM press releases and prepared remarks have skyrocketed from just a few each quarter in 2013 to more than 200 in third-quarter 2016 before falling to around 100 earlier this year. Meanwhile, the company’s overall quarterly results have been less than flattering with 20 straight quarters of losses, while revenue from Watson’s unit has remained fairly flat. (Asked about earnings, Watson chief revenue officer Carrie Seifer declined to comment, mentioning only that the company is still in the “early stages” of bringing Watson to market.)

Training data

While Watson might promise a lot, it’s not a turnkey solution, to use a favorite phrase from the world of ad tech. That’s because getting the right answers requires having the right information, but it also requires asking the right questions—and that requires having the right data in the first place. Jacob Colker, an entrepreneur in residence at The Allen Institute—an AI think tank founded by Microsoft co-founder Paul Allen—believes that AI-based success is rooted in having the proper data to train algorithms with.

“Let’s say you and I are going to drive to grandma’s house,” he explains. “There are 100 ways we can get there, but over time through simulations we understand the easiest way to get there. Then you can add in reinforcement learning, where you reward the computer for making the best amount of turns.”

This story first appeared in the Sept. 25, 2017, issue of Adweek magazine. Click here to subscribe.

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