• by Joe Mandese  @mp_joemandese, May 28, 2024

Big agency holdcos continue to tout how the acceleration of AI into their organizations and operating systems will create a new Golden Age for the ad industry, but anecdotal evidence is mounting that it may be a little more tarnished than that.

I wrote previously citing Omnicom's decision to shutdown Sparks & Honey and merge its Q AI technology into Omnicom's OMNI as a potential canary in the coal mine for ad agencies.

This morning, financial services giant Klarna just released some more sobering news: that it slashed its Q1 marketing budget by 11% without sacrificing any performance thanks largely to its own use of AI.

In fact, Klarna, which itself is an AI-powered global payments network as well as a virtual shopping assistant, said it actually increased the number of ad campaigns and updated its marketing collateral more frequently while reducing its marketing spending.

"AI is responsible for 37% of the cost savings, or about $10 million on an annualized basis," the company says, citing the following "key drivers:"

• Cost reduction in external agency expenses: Klarna cut spending on external marketing suppliers by 25%, including translation, production, CRM, and social agencies, projecting a savings of $4 million in 2024.

• Savings on image production: Achieved a $6 million reduction in image production costs, despite running more campaigns and creating significantly more images. Using genAI tools like Midjourney, DALL-E, and Firefly for image generation -- and Topaz Gigapixel and Photoroom for final adjustments—Klarna saved $1.5 million in the first quarter of 2024 alone.

• Increased efficiency and creativity: Generated morethan 1,000 images in the first three months of 2024 using gen AI, reducing the image development cycle from six weeks to just seven days. This acceleration includes checks for brand consistency, image quality, and legal compliance.

"AI is helping us become leaner, faster and more responsive to what our customers care about, leading to a much, much better experience," states Klarna CMO David Sandström, adding, "And we’re actually driving more marketing activity while saving tens of millions of dollars a year."