Australian Digital Advertisers Lag on AI Integration Despite Privacy Pressures
Australian digital advertising executives are struggling to fully implement artificial intelligence technologies even as privacy regulations force widespread changes to data strategies, according to a new industry report released Wednesday.
The IAB Australia Data State of the Nation Report 2025 found that 91% of companies have yet to scale AI across their complete media campaign lifecycle, despite mounting pressure to find alternatives to traditional tracking methods. Only 32% have operationalized AI in limited use cases for media planning or activation.
The findings reveal a cautious approach to emerging technology even as the industry faces significant regulatory and technical challenges. Australia's Privacy Act reforms and the deprecation of third-party cookies are forcing advertisers to rethink fundamental data collection and targeting strategies.
"The findings reflect a pragmatic industry adapting to both opportunity and obligation," said Jonas Jaanimagi, technology lead at IAB Australia. "We're seeing strong momentum behind contextual targeting, increased emphasis on first-party data, and growing experimentation with AI—all in response to a rapidly evolving privacy landscape."
Privacy Preparedness Varies
The survey of 103 advertising decision-makers conducted in July 2025 shows mixed readiness for regulatory changes. While 67% say they are at least somewhat prepared for Australia's Privacy Act reforms, only 44% rate their understanding of the changes at six or above on a 10-point scale.
Privacy concerns are already reshaping advertising strategies. Three-quarters of respondents report that privacy changes are impacting personalization tactics, while 81% want industry-standard AI privacy and protection protocols.
The most widely adopted tools for managing privacy changes are contextual targeting and data clean rooms, with clean room adoption growing significantly year-over-year. Business confidence remains high in contextual targeting at 89% and identity solutions at 74%.
AI Adoption Remains Limited
Despite widespread availability of AI tools, adoption remains cautious and fragmented. Most companies are using accessible platforms rather than specialized advertising technology: 71% use general-purpose tools like ChatGPT while 56% leverage AI functionality within existing tech platforms.
The contrast with international markets is stark. By comparison, 30% of agencies, brands and publishers in the United States report having fully integrated and operational AI systems.
Top AI use cases include audience segmentation and cross-channel campaign optimization. However, significant concerns remain about data security risks, accuracy and transparency issues, and lack of clear industry standards.
Strategic Implications
The report highlights a critical tension in digital advertising: the need to maintain performance while adapting to privacy constraints and emerging technologies. Companies are investing in new measurement approaches and internal capabilities, but many are still in exploratory phases rather than full implementation.
"The results show that data maturity is accelerating across the industry," said Rachida Murray, chief data officer at Spark Foundry and co-chair of the IAB Australia Data Council. "We're seeing real investment in clean rooms, updated measurement strategies, and stronger internal capability to meet both privacy expectations and performance goals."
The findings suggest Australian advertisers are taking a measured approach to technological change, prioritizing compliance and risk management over rapid innovation. This cautious stance may protect companies from potential pitfalls but could also limit competitive advantages in an increasingly complex digital landscape.
Data Remains Critical
Despite mounting challenges, 92% of industry decision-makers still view data usage as critical or very important to driving commercial success. Companies are actively pursuing new tools, strategies and partnerships to navigate regulatory and technological changes while maintaining advertising effectiveness.
The emphasis on responsible data use reflects growing awareness that sustainable digital advertising requires balancing innovation with transparency and consumer trust. As Jaanimagi noted, "When used responsibly and with clear consent, data plays a critical role in funding the open internet by supporting free content and services."
The report represents the third wave of IAB Australia's ongoing study of industry data practices, with findings expected to inform education, training and industry initiatives for safe and effective use of emerging technologies.
This measured approach to AI adoption and privacy compliance may define how Australian digital advertising evolves compared to more aggressive international markets, where rapid implementation has sometimes outpaced regulatory frameworks and consumer expectations.
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