NEWS: Generative AI Set to Power 40 Percent of Video Ads by 2026, IAB Report

Same Day Edits
Jul 21
4 min read

A new report from the Interactive Advertising Bureau paints a clear picture: generative AI is no longer experimental and is on track to underpin nearly 40 percent of all video ads by 2026. The “2025 Digital Video Ad Spend & Strategy Full Report” released at the IAB’s Video Leadership Summit on July 15, shows that 86 percent of advertisers are already using or planning to use GenAI to build video creative. This shift is not just about novelty; brands of all sizes are turning to AI to keep pace with fast‑moving digital audiences.

Small and mid‑sized marketers lead the charge, drawn by the promise of high‑quality content at a fraction of the typical production budget. According to the report, 42 percent of advertisers are using GenAI to customise ads for specific demographics, 38 percent to adjust visual style, and 36 percent to optimise formats across devices and platforms. As one industry executive put it,

“The democratisation of advertising is entering an exciting new phase, and the outlines of a new future are coming into view fast”

Connected TV is emerging as an especially fertile ground for AI powered ads. Nearly half of CTV inventory is now biddable, up sharply from previous years, and 75 percent of buyers are building in‑house teams to manage automated CTV campaigns . Yet the report cautions that these tools must drive real business outcomes.

“Deliver, or you’ll get cut,”

reads one of the starkest findings: campaigns that fail to generate measurable results such as increased sales or store visits face rapid budget cuts.

Behind these figures lies a detailed survey of 368 advertisers conducted between February and March 2025. It found that 30 percent of video ads this year already include some AI generated elements, up from 22 percent in 2024, with that figure expected to climb to 39 percent next year. That pace of growth suggests that AI is moving from prototype to production fast, as brands seek to keep creative pipelines full while lowering turnaround times.

The Netflix of yesterday would have balked at using AI for final‑cut footage, but today even streamers are experimenting. Two days ago, Reuters reported that Netflix used GenAI to create the climactic visual effects sequence in its Argentine sci‑fi series El Eternauta. Co‑CEO Ted Sarandos explained that a collapsing building shot was generated with AI in a tenth of the usual time and at a fraction of the cost. He added that future applications might include voice‑based content search and more engaging ad experiences.

Other major platforms are racing to meet this moment. Adobe recently unveiled ten AI‑enhanced “agents” at its Australian summit, designed to automate everything from data analysis to content creation. According to Adobe’s Jeremy Wood, these agents will free marketers to focus on strategy by handling time‑consuming tasks such as multilingual asset production. Meanwhile, Google’s Flow and DeepMind’s Veo 3 are in development to streamline both editing and full AI‑driven narrative generation.

Despite the buzz, challenges remain. Data privacy and algorithmic bias are recurring concerns. Some advertisers worry that AI generated content may feel formulaic or miss the subtle emotional beats that human directors capture. Roughly 20 percent of brands say they lack the internal skills to properly guide AI tools, highlighting the need for training and clear best practices.

There is also a growing emphasis on measurement. According to Marketing Dive, total U.S. digital video ad spend grew 18 percent year‑on‑year to US $64 billion (AU $97 billion) in 2024 and is projected to maintain momentum in 2025. However, advertisers insist on tying AI efforts directly to ROI. As one CMO at a retail brand noted in an industry webinar,

“We’ll explore AI for creative, but every test must move the needle on conversion rates or we won’t press forward.”

Looking ahead, the IAB report predicts that AI will not only create ads but also optimise media buys in real time. By 2027, dynamic creative optimisation, where AI adjusts videos on the fly based on viewer response, could become standard practice. That convergence of generative and adaptive technologies points to a future where every ad break is personalised to the individual viewer’s preferences, viewing habits, and even current context.

For now, the industry is in a testing phase. Early adopters are experimenting with short‑form formats, interactive overlays, and context aware storytelling. The most successful campaigns blend AI’s speed with human creativity, ensuring that technology augments rather than replaces the narrative craft. As budgets shift and tools mature, marketers who stay data‑driven and outcome focused will stand out.

The real test will be whether generative AI can consistently deliver brand safety, legal compliance, and authentic engagement at scale. If it does, then the industry’s current infatuation with novelty may give way to a new baseline of smart, efficient, and effective video advertising. One thing is clear: generative AI is on track to become the engine powering a significant portion of video ads worldwide, and those who embrace it thoughtfully are likely to reap the rewards.

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NEWS: Generative AI Set to Power 40 Percent of Video Ads by 2026, IAB Report

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