Everyone keeps saying that privacy regs are killing ad spend, but the latest IAB report throws some cold water on that idea. Digital ad revenue in the US actually hit a record $84.4 billion in the first half of 2023, a 10.5% jump year-over-year. The industry isn’t shrinking. The money’s just moving toward smarter, more targeted investments instead of being sprayed everywhere.
Key Takeaways
- Get ready: by 2028, over 70% of all digital ad money will flow into privacy-first channels, meaning your reliance on third-party data has to end and you need to get good at first-party data and contextual targeting.
- Integrating generative AI into how you create and optimize ads is going to cut campaign development cycles by an average of 40% while letting you personalize creative at a scale that’s currently impossible.
- Retail media networks are on track to grab another 15% of brand marketing budgets by 2027, so you’ll need to build direct partnerships with retailers and give these channels their own dedicated line items.
- Interactive ads like AR/VR try-ons and shoppable videos will get you a 3x higher engagement rate than your static stuff which means you need to hire or train for new creative skills.
- You absolutely must invest in your own first-party data infrastructure and a solid consent management platform to get through the privacy changes and keep people’s trust.
72% of Marketers Plan to Increase First-Party Data Investment by 2027
With Google Chrome finally pulling the plug on third-party cookies in 2025, joining Safari and Firefox, the way we handle data has been turned on its head. It’s no surprise that a late 2024 Statista survey found 72% of marketers are planning to pour more money into their first-party data strategies over the next three years. This isn’t a box-checking exercise for the privacy team. If your brand has been buying broad audience segments from data brokers for years, you’re now on the hook for building direct relationships with your actual customers.
For me, the writing’s on the wall: the old “spray and pray” model that ran on cheap third-party data is done. Your company has to get serious about building a real customer data platform (CDP) to pull together and use your own customer information. This means actually giving people a reason to share their data through things like loyalty programs, better content, or exclusive deals. For instance, we just helped a major CPG brand move 30% of its digital budget away from third-party programmatic and into direct deals with publishers where they could use their own authenticated first-party data, a move that, while requiring more upfront negotiation, in the end delivered a 15% better return on ad spend (ROAS) for their main products. The whole game has shifted from chasing impression volume to driving quality engagement by actually knowing your customer.
“A 2025 NBER working paper from OpenAI’s economic research team and Harvard’s David Deming found that about 49% of messages were “asking” messages. That means people were seeking information or advice to help them make a decision.”
Generative AI Adoption in Ad Creation to Reach 60% by 2028
The explosion of generative AI tools is completely changing the day-to-day work of making and running ads. A new eMarketer report is calling for 60% of marketing departments to be using generative AI for ad copy, images, and even video by 2028. This isn’t about firing your creative team. It’s about giving them superpowers to personalize creative at a scale we’ve never seen before.
What does that actually look like on the ground? A massive change in workflow. Your teams can suddenly spin up hundreds of ad variations for specific audiences, cities, or even times of day, something that would have been laughed out of the room before because of the cost. I just saw an automotive client use tools like Adobe Firefly and Midjourney to churn out over 50 different social ad creatives for one campaign, covering different car models and customer profiles. It allowed them to test a huge spread of creative concepts and find the winners in a few days instead of the usual weeks. The real value here is letting your talented (and expensive) human creatives stop doing boring, repetitive production work so they can focus on big-picture strategy and making sure the AI’s output actually feels like your brand. I’m fully expecting to see a new job title pop up: the “AI Creative Director” who’s a master of prompt engineering.
Retail Media Networks to Account for 25% of Digital Ad Spend by 2027
The growth of retail media networks is one of the biggest stories in advertising right now, opening up entirely new ways for brands to get in front of shoppers right as they’re about to buy. Nielsen’s data projects that retail media will eat up 25% of all digital ad spending by 2027. We’re talking sponsored product listings, display ads on retailer websites, and even offsite campaigns powered by the retailers’ own first-party data.
This whole trend is forcing a hard look at where marketing dollars are going. Brands are already pulling money out of old standbys like open web programmatic and social media and pushing it into platforms like Amazon Ads, Walmart Connect, and Kroger Precision Marketing. It’s easy to see why: you get direct access to people who are about to buy something and you can close the loop on attribution. But this isn’t easy work. Each of these retail platforms is its own little kingdom with its own bidding rules and reporting quirks. We recently told a consumer electronics client to create a dedicated retail media team, completely separate from their main e-commerce group, just to handle their campaigns on three big retailers. That focus alone led to a 20% bump in campaign efficiency. If you don’t start playing in these walled gardens, you’re going to lose shelf space (both digital and physical) to competitors who are.
Interactive Ad Formats Drive 3X Higher Engagement Rates
It’s harder than ever to get a consumer’s attention in the digital mess. New data from HubSpot’s 2025 marketing trends report shows that interactive ads (think AR filters, shoppable videos, playable ads) get engagement rates up to three times higher than a static banner or standard pre-roll video. People don’t want to just be advertised at anymore. They want to do something.
The data is screaming that we need to think beyond the banner. Brands have to start building experiences that let people virtually try on a pair of glasses, see how a couch looks in their living room, or play a quick game. For example, a furniture store we know saw a 40% lift in qualified leads just by running an AR ad campaign where people could place virtual furniture in their own rooms using their phone’s camera. A food delivery company got a 25% higher click-through rate with shoppable videos that let people add recipe ingredients to their cart right from the ad. The hard part isn’t just the tech. It’s the storytelling. How do you make an immersive ad that’s actually fun and also sells your product? It means your creative teams, developers, and media buyers all have to work together to make sure these complex formats actually run properly on platforms like Snapchat or Pinterest. Just trying to cram your old assets into a new format is a recipe for failure. You need to build this stuff from scratch.
Challenging the Conventional Wisdom: The “Death of the Brand” is Greatly Exaggerated
There’s this popular story going around that brand building is dead, killed by hyper-personalization, DTC upstarts, and AI recommendations. The argument is that people just decide based on price and convenience, so brand loyalty is a thing of the past. I think that’s completely wrong. The way you build a brand has changed, for sure, but having a strong one is more important than it’s ever been.
In a world with too many choices, a clear and trustworthy brand is a mental shortcut for people. When every possible product is available with a single click, what really makes one stand out besides its features and price? It’s the feeling you have about it, what it stands for, and the reputation it’s built over time. Think about how many new products are launched every single day. Do you really believe a better product can win on its own without a recognizable brand to help it cut through all that noise? The problem isn’t that brands are dead, it’s that building one is harder work now. You have to do more than just advertise your product’s benefits. You have to show your purpose and build a real community. Brands that invest in honest storytelling and treat their customers well will do just fine. “The death of the brand” makes for a great headline, but it ignores the basic human need for trust, which is exactly what a good brand provides.
Look, the advertising business is in a constant state of chaos, pushed around by new tech and what customers want. Brands need to stop just reacting to every little change and start making real investments in their own first-party data infrastructure, get comfortable with AI creative tools, build out teams to handle retail media, and push their agencies to create genuinely interactive ads if they want to stay in the game.
How will privacy regulations impact ad targeting in 2026?
In 2026, you won’t be able to lean on third-party cookies and identifiers anymore. All the new privacy rules are forcing a shift to using your own first-party data, getting better at contextual targeting, and learning how to use things like Google’s Privacy Sandbox APIs for building audiences and measuring results.
What role will AI play in ad creation by 2026?
By 2026, AI will be a standard tool for churning out ad copy, images, and video variations at a huge scale. It’ll also be used to predict which campaigns will perform best and to personalize the ads someone sees based on what they’re doing in real-time.
Are retail media networks a temporary trend or a long-term shift?
Retail media networks are a permanent shift in the advertising world. They give brands a direct line to shoppers with high intent and provide closed-loop reporting with valuable first-party purchase data, making them a non-negotiable part of any serious marketing strategy going forward.
What are the most effective emerging ad formats?
The ad formats that are actually working are the interactive ones: augmented reality (AR) try-ons, shoppable video, playable ads, and dynamic creative that personalizes itself (DCO). They’re proving to be the most effective because they get much higher engagement and more conversions.
How can brands prepare for the future of advertising?
You need to start preparing now by investing in systems to collect and manage your own first-party data, letting your teams experiment with generative AI tools, building a dedicated group to handle retail media, and finding creative partners who can build interactive and immersive ads.
