Paul Caiozzo closed his small agency in late 2021 and teamed with former lead execs of Heat—John Elder and Mike Barrett—to launch the world’s first “human-machine hybrid creative agency.”

Two years later, Supernatural continues to build its case in an advertising industry that has become obsessed with AI.

While generative AI has been this year’s hot topic, Barrett, who is Supernatural's co-founder and chief strategy officer, said the agency uses all kinds of tech, including machine learning and robotic process automation, to simplify parts of the agency process.

“When you look at all the other parts of advertising that have been transformed by technology [like] media, CRM and performance, the creative side hadn't really changed much from the ‘Mad Men’ days,” said Elder, another co-founder and CEO. “Certainly, there were elements of technology, but it was not consistent.”

On a Zoom call, Barrett demonstrated the features of Supernatural's AI-enabled operating system, called Merlyn, which he has been building since the agency's inception. “If 2022 was all about making our Merlyn smart, 2023 has been about making it conversational, making it so you can talk to it,” he said.

Merlyn's operating system was initially used simply for strategy purposes; now the agency is creating audience profiles for brands that give feedback when asked questions or when presented with a brief or piece of content. Barrett showed an example of an audience profile created for Ikea (which is not a client).

The profile can then be asked to provide thoughts about a potential initiative being run by the brand and can even be asked to generate product name ideas. In practice, the agency could then use generative writing AI, trained with Ikea’s data, to write its own product names. With an agency employee always at the helm, this becomes a collaborative process with AI. 

“We update it every 48 to 72 hours,” Barrett said. “So we're always fiddling around under the hood, with the algorithms, always trying to make it better.”

Unlike its OS which was built from scratch, the agency also uses a sandbox of AI tools such as ChatGPT, Dall-E2, Bard and others on the creative front.

It's been a winning formula. Supernatural, which has fewer than 20 employees, grew its revenue from $850,000 in 2021 to $3.7 million in 2022. The agency has been using AI to make modest engagements profitable, while still delivering quick results and campaigns that are creative.

For Kayak, Supernatural identified a consumer target that was keen on traveling despite the recession but wanted to save money where possible. The agency then created two campaigns and deployed them using generative AI and traditional production methods. Generative AI was used to create assets for digital and social channels.

The campaigns recorded a combined brand lift of 21.9% in consideration and 19.8% in favorability, according to the agency. The cost per lifted user was also reduced by an average of 10%, with the 15-second promotional videos surpassing conversion rates by almost six times the client's historical average, Supernatural said.

Supernatural helped B2B cold brew coffee company Wandering Bear pivot its business to a B2C model following the onset of the pandemic by identifying an audience that was being targeted the same way by every other coffee company. Merlyn suggested a sound branding strategy instead.

Website traffic increased 16-fold compared to the previous year, the agency said, exceeding all expectations and delivering more than 1 million new visitors to Wandering Bear’s site.

Enabled by its tech, the agency is also growing its business beyond advertising. Currently, 50% of Supernatural’s revenue comes from consulting.

Supernatural helped Zipcar relaunch marketing last year after being hit by COVID, after identifying that Zipcar’s target audience is urban, politically liberal and not dependent on personal cars.

The agency then collaborated with Zipcar’s in-house creative team to develop a campaign that led to a tripling of ad awareness and site traffic with no budget increase from the prior year.

Barrett said the agency recently did a workshop demonstration for Visa in which it went from audience identification to strategy in 45 minutes.

The agency said it is being asked by clients to implement its tools internally. Supernatural helped The Christ Hospital Network with internal communications and recruiting, a campaign that garnered two Effie wins for the agency, which is now being tasked to build software for the hospital.

“We are an agency, we do make ads. But we are also following where the market is leading us right now, which is these consulting engagements,” Barrett said.

“It’s about what is the agency of the future going to be,” Elder added. “If you go back to the old days, an agency really used to be a consultant. David Ogilvy used to help clients figure out what the future of their business is and where their growth is.”

Later this year, Supernatural is looking into using AI to build a media offering. Ultimately, Barrett predicts that there is an 18- to 24-month window of disruption in the AI space before it becomes as common as Photoshop for each agency. 

“Everyone's going to have it,” Barrett said. “And then it comes back to talent and data … data strategy and talent strategy are always going to be the two things that drive this business.”