30 Gen AI Campaigns Later, Klarna Cuts Annual Marketing Spend by 12%

Swedish buy-now-pay-later company Klarna has launched nearly 30 topical marketing campaigns this year entirely created by generative AI, using the technology to generate ideas, write copy, and create images. While much has been said about AI tools boosting efficiency, the firm is also finding these campaigns are more effective. These campaigns, often tied to events like Mother’s Day, Black Friday, and Back to School, focus on high-volume, time-consuming tasks, such as producing ads for multiple markets and languages. “We've removed a lot of the cumbersome, expensive, and mundane tasks of marketing,” marketing chief David Sandstorm said. "Historically, we had to pay an agency or an artist to bring these ideas to life. We've saved millions on that ideation process alone.” In the past, Klarna relied on production and translation agencies to execute a similar number of high-quality campaigns, often flying to far-flung locations like South Africa to capture the right visuals. Now, the fintech company relies on AI to develop ideas—which it asserts are still rooted in human insight—and turn them into campaign visuals and content that guides production. In doing so, Klarna has reduced its sales and marketing spending by 12% annually, the company told ADWEEK. This approach has meant that Klarna has been about to expand its reach across markets like Austria with less staff and at a lower cost, according to Sandstorm. An early tester Klarna began testing gen AI shortly after ChatGPT launched in November 2022. In May, it announced a $6 million decrease in image production costs while running more campaigns and updating marketing materials more frequently. The company cut its sales and marketing spend by 11% in Q1 2024, with AI accounting for 37% of the cost savings, translating to $10 million annually. Klarna's marketing chief, David Sandstrom, hints at potential further cuts to the marketing team as AI capabilities continue to expand. In May, Klarna also reported a 25% decrease in external agency expenses, including translation, production, CRM, and social agencies, resulting in $4 million in savings. Tools like Midjourney and DALL-E contributed to a $1.5 million reduction in Q1 of 2024 alone. Speaking to the Financial Times in August, Klarna said that it has plans to cut its workforce by 50% in the next few years, reducing the headcount from 3,800 to 2,000 employees. Although layoffs are not yet implemented, CEO Sebastian Siemiatkowski faced criticism in an archived post on X for boasting about how AI image generation with a smaller marketing team has played a key role in cost-cutting. Sandstrom told ADWEEK the reduction in Klarna's marketing team size is partly due to AI’s growing capabilities and further cuts could follow as AI continues to advance. Klarna's strategy is yielding results, at least for now. The company reported a 27% increase in revenues for the first half of 2024 compared to the same period in 2023, according to its H1 earnings in August. Boosting conversions Gen AI's value extends beyond cost savings, it’s driving better results for the fintech firm while creating more relevant ads. Klarna used gen AI on campaigns that educate customers about its payment options. Klarna used AI models like Midjourney and Leonardo to generate an ad for its back to school campaign. These ads saw a 300%-400% increase in click-through rates, according to Sandstrom, with email click-through rates improving from 0.5% to 2%, compared to previous campaigns without any AI input. “You don't need to win a Cannes Lion for the Mother's Day campaign,” he said. Next big bet: AI voice-over While OpenAI is Klarna's foundational partner for text generation, the firm uses a mix of platforms like DALL·E, Leonardo, and Adobe Firefly for image creation, and Topaz Gigapixel and Photoroom for final adjustments. Klarna has also partnered with voice AI platform Eleven Labs to streamline voiceovers for its global campaigns. "What we’ve done now with Eleven Labs and the ability to replace voice actors is the next significant development for us," Sandstrom said. The technology lets Klarna maintain a consistent brand voice across different markets, eliminating the need for costly, labor-intensive translations. Only humans can create fresh ideas Despite these advances, Klarna has found that AI still struggles with certain creative tasks. High-concept, brand-defining campaigns remain a challenge for AI, particularly in out-of-home advertising. "For months, we've tried to have AI crack a fantastic out-of-home campaign, but it cannot do that. Everything becomes bland or boring or not really on-brand,” said Sandstorm who highlighted that human creativity remains crucial for generating fresh, distinctive ideas. Klarna's big creative campaigns, such as its holiday campaign with Shaquille O'Neal, still rely heavily on human ingenuity. "When it comes to our big creative campaigns, we haven't cracked how AI can help us create an idea,” said Sandstorm.

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30 Gen AI Campaigns Later, Klarna Cuts Annual Marketing Spend by 12%

After running 30 marketing campaigns this year, Klarna found using gen AI improved their performance compared to campaigns without it

Trishla Ostwal

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Trishla Ostwal