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Disney harnesses AI to drive streaming ad technology

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Walt Disney (DIS.N) is harnessing artificial intelligence to power a new advertising tool that will help brands tailor their commercials to fit the mood of specific scenes within a movie or television series.

Dubbed “Disney’s Magic Words,” this tool introduces a new form of contextual advertising for the Disney+ and Hulu streaming services. It uses a combination of AI and machine learning to analyze and tag scenes across its library, identifying the contents, brands, images and mood.

Brands can use these descriptive tags, known as metadata, to identify a specific scene or mood and then personalize messaging to match.

“What that means is leaving broad demos (demographics) behind and buying specific audiences,” said Geoffrey Calabrese, Omnicom Media Group’s chief investment officer. “These magic words are literally going to be able to connect me to the emotions of the consumer, at an audience level. And for us, that’s really a game changer.”

Omnicom is one of six global advertising companies taking part in an early beta test of this advertising product, Disney told Reuters. The other beta partners are Dentsu (4324.T), GroupM, Horizon Media, IPG Mediabrands and Publicis Media (PUBP.PA). The company announced the new ad features last month, at a showcase at the Consumer Electronics Show in Las Vegas.

Rita Ferro, Disney’s global head of ad sales, said the feature allows advertisers to maximize the impact of their messages “because it resonates with concepts that the viewers experience.”

Disney’s investment in streaming ad technology comes as advertisers are moving away from broadcast and cable TV, along with viewers. The company’s advertising revenue fell nearly 3 per cent in its fiscal 2024 first quarter to $3.35 billion, according to LSEG, reflecting declines in traditional TV viewership. Researcher eMarketer estimated Disney+ accounted for about $790 million in revenue last year.

Disney does not report its advertising revenue.

CEO Bob Iger told investors during the company’s quarterly investor call on Wednesday that the ad-supported version of the Disney+ service has attracted more than 1,000 advertisers in the first quarter, a tenfold increase from launch.

“Our revolutionary approach to technology ensures that our entire streaming portfolio will be the ultimate destination for brands in the years ahead,” Iger said in a statement to Reuters.

Half of consumers who sign up for Disney+ opt for the less-expensive version of the service, which includes advertising, said Joe Earley, president of Disney’s direct-to-consumer business. He said the company has spent years refining ad technology that has been designed specifically for streaming. Its Hulu service launched as a free, advertising-supported service in 2008.

“Disney+ didn’t have to ramp up,” Earley said. “It hit the ground running.”

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