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Wave of AI-based marketing startups arrives as Microsoft, Google rush AI-based products to market

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As more artificial intelligence tools are being built for generating content — and getting an influx of investment and attention from tech giants like Microsoft and Google — startups in the marketing space are hoping to take advantage of this new AI wave.

While much of the hype has been focused on AI-generated text, images and videos, one new startup, called Rembrand (after the Dutch painter Rembrandt) is looking to expand on that hype by going after the $23 billion product placement market.

On Tuesday, Rembrand — founded by adtech veteran Omar Tawakol — announced an $8 million seed funding round for its platform that uses AI to place realistic-looking products in digital videos. Rather than manually placing products on real-life TV and movie sets, Rembrand uses a process called neural inverse rendering to digitally insert sponsored items into movies, shows and social media content made by millions of influencers across various platforms.

Even before the current boom began, marketing-related generative AI startups have raised funding. In 2021, Copysmith — a startup based in Birmingham, Alabama with a platform for generating AI-written content — raised $10 million. Late last year, San Francisco-based Sellscale — which helps clients write AI-generated emails — raised $3 million. And in October, the Austin-based generative content platform Jasper AI raised $125 million.

In the case of Rembrand, the plan is to start with talk shows before expanding to other categories such as sports, wellness and gaming. Tawakol — who co-founded the data management platform BlueKai and also the enterprise voice AI platform Voicea — wouldn’t disclose any specific brands or content creators that have agreed to test his company’s latest tech. However, he hopes Rembrand’s automated tools — and the advertising revenue that comes with them — will win people over.

“It takes four to six weeks of negotiation to get your product in a video,” Tawakol said. “If you’re shipping product, you can only afford to talk to the top tier, which is really expensive… If you scroll a little bit deeper in the curve, it opens up hundreds of thousands of other influencers, if not millions, who have very passionate followers.”

Rembrand is just one of a growing number of marketing tech startups hoping to profit from the emerging category of generative content. With giants like Microsoft and Google rapidly rolling out new AI-powered products and services more marketing-related startups focused on AI-generated content are also taking advantage of the increased attention on the topic and increased financial investments.

“What you see sometimes with a virtual product company is they try to go with big shock and awe,” said Sam Wick, the head of UTA Ventures, which invested in Rembrand. “But that’s probably a considerable amount more work for them to insert it there. And it’s not repeatable for another video.”

The broader market of generative AI startups continues to grow. According to a recent report by market intelligence firm CB Insights, total funding for the category grew from $271 million in 2020 to $1.5 billion in 2021 to $2.7 billion in 2022. Meanwhile, total funding deals have nearly tripled in four years, from 42 in 2019 — the same year OpenAI raised $1 billion from Microsoft — to 110 in 2022. Last year, around $317 million in funding went to startups focused on social media and marketing content while just $10 million went to startups making visual ads and marketing materials.

Other startups are taking a more bootstrapped approach. For example, the co-founders of Daydrm.AI developed an AI model trained on learning from award-winning campaigns from Cannes Lions, D&AD and The One Show. By using the platform, a marketer can enter a brief from which the AI will generate ideas specifically for creating a viral YouTube video, a user-generated campaign for Instagram, a live event, in-store activation, and/or various digital campaigns.

“Brand strategists have felt a little bit left out of this AI revolution,” said Daydrm co-founder James Fox, adding that strategists have to develop ideas with limited knowledge and short timelines. “Our model has an encyclopedic model of effective case studies and what creative briefs actually look like from the inside.”

Using AI as a ‘creative calculator’

Fox and his co-founder Aaron Adler are plenty familiar with the world of advertising. Fox was previously global head of brand strategy at Goldman Sachs, following two decades at various ad agencies. Adler is a front-end software developer whose past project partners include LinkedIn, IBM, Facebook, Eileen Fisher and Patagonia. But rather than replace strategists, Fox and Adler think they can help automate the idea iteration process with what Adler describes as a “creative calculator” that doesn’t have to be based in reality.

“We don’t think that AI is creative,” Adler said. “What it’s doing is finding the patterns and feels creative to us, but it’s really just doing correlation problem-solving in the background.”

Companies that launched before the boom are also seeing the benefit. For example, two-year-old Jasper AI now has 100,000 paying customers, according to Jasper CMO Meghan Keaney Anderson. Although she wouldn’t disclose the company’s most recent revenue, Jasper previously reported 2021 annual recurring revenue of $35 million and Anderson said the last two quarters have been the “strongest yet.”

Anderson, who joined Hubspot in 2011, said the generative AI space is now going through the education phase in a similar way that social media marketing underwent more than a decade ago. Rather than promote itself with flashy big campaigns, she said the company is focusing on its community of users who share tips and tricks and attend boot camps.

“It’s definitely a rising tide moment when suddenly we don’t have to explain to businesses what this means,” she said.

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