Cannabis ad dollars: From the sidelines to center stage

On November 3, 2020, four states voted to legalize cannabis for recreational use. Now, in fifteen states and the District of Columbia, cannabis has been given the green light. That’s good news for publishers looking for their next growth opportunity.

Already, cannabis advertising is an approximately $1B industry in the U.S., and it’s projected to triple to more than $3B by 2025. Over the coming five years, net sales of legal cannabis are also expected to swell to over $50B, eclipsing the $49.2B consumers spend at retail on cosmetics and beauty. This is a sector that publishers can’t afford to miss out on.

But before publishers can take advantage of that opportunity, they need to recognize that cannabis presents a unique set of challenges they must plan for.

15 states, thousands of laws

As with alcohol, the laws that govern cannabis advertising vary by state and locality, but unlike alcohol, legal cannabis is new. The result is a mind-boggling, ever-changing patchwork of federal, state and local regulations. So how can publishers ensure efficiency and brand safety when just keeping up with the regulations is so complicated?

To solve the problem, publishers are turning to AI-powered compliance automation, ensuring that ads are served to appropriate audiences only and that ad-creative is compliant across every unique jurisdiction.

Compliance is just the first hurdle

As with other highly regulated industries like pharma and alcohol, creative, copy and fine print for cannabis must meet rigorous standards. It’s not just about where the ad runs. It’s about what the advertiser can say.

Manual checking is far too slow for a programmatic world, so publishers might think they have no choice but to sit on the sidelines. But here, too, some publishers are exploring new AI solutions to automate this process, enabling them to screen inbound ad creative from highly regulated verticals in milliseconds rather than hours.

Geotargeting needs surgical precision

With laws that affect cannabis advertising varying from state to state and sometimes even at the local level, geotargeting has never been more important. This is especially true for national publishers who accept cannabis ad creative that requires nuanced regional geotargeting. To give cannabis advertisers the reach mainstream brands enjoy without worry, publishers need to ensure they can deliver ads with targeted precision across the nationwide patchwork of legalized regions.

What’s more, they need to ensure that each creative meets the right regulatory requirements of the local regulations. AI is becoming the go-to technology for publishers to manage the complexity and deliver results.

Brands are adopting AI, too

Publishers aren’t the only ones leveraging AI. Some brands are using AI to build customer profiles. For example, companies may seek to find athlete-consumers for a new CBD topical cream and then use those insights to serve ads via various platforms. Other brands are bolstering their ad campaigns using real-time weather and social media data to feed into programmatic campaigns.

Cannabis brands are deploying AI to create better online retail experiences through smart recommendations. The website CannaMart is deploying AI and machine learning to recommend products to site visitors. In another use case, the app Uppy allows medical cannabis consumers to journal their experiences with cannabis products and uses aggregate data to make recommendations.

On a macro level, solving the problem advertisers face in running cannabis creative at scale has the ability to unlock serious revenue opportunities for media companies. The publishers that overcome some of the challenges that held them back from entering this vertical previously will be rewarded from the myriad of ambitious cannabis producers and retailers that are trying to differentiate their products, build their brands and compete for consumer attention.

Cannabis is maturing, and it’s time for publishers to dive in.