Dark sides of artificial intelligence: The dangers of automated decision‐making in search engine advertising

With the growing use of artificial intelligence, search engine providers are increasingly pushing advertisers to use automated bidding strategies based on machine learning. Such automated decision‐making systems leave advertisers in the dark about the data being used and how they can influence the outcome of the decision‐making process. Previous literature on artificial intelligence lacks an understanding of the dangers related to artificially intelligent systems and their lack of transparency. In response, our paper addresses the inherent risks of the automated optimization of advertisers' bidding strategies in search engine advertising. The selected empirical case of a service company therefore demonstrates how data availability can trigger a long‐term decline in advertising performance and how search engine advertising performance metrics develop before and after an event of data scarcity. Based on data collected for 525 days, difference‐in‐differences analysis shows that the algorithmic approach has a considerable and lasting negative impact on advertising performance. Furthermore, the empirical case indicates that self‐regulated learning can initialize a downward spiral that gradually impairs advertising performance. Thus, the aim of this study is to increase awareness regarding automated decision‐making dangers in search engine advertising and help advertisers take preventive measures to reduce the risks of algorithm missteps.