AI Washing

What is AI Washing?

AI washing is a deceptive promotional practice that exaggerates or outright lies about a product or service’s use of artificial intelligence (AI).

The objective of AI washing is to capitalize on people’s interest in AI and make an offering seem to be more cutting-edge than it really is. For example, a company may claim their chatbot is “Powered by the latest AI technology” when in reality, it simply matches keywords with pre-written responses.

Techopedia Explains the AI Washing Meaning

Although every AI washing definition explains that the marketing tactic is deceptive, it’s important to note that sometimes the deception is unintentional. Marketers may overstate the role of artificial intelligence in their offerings simply because they don’t fully understand the technology.

AI Washing Origins

In marketing, “washing” is a strategy for aligning a product or service with current trends to make it more desirable. The strategy has its roots in one of the meanings of whitewashing: the practice of presenting a sanitized or misleading version of something to create a favorable impression.

Other types of washing include:

How AI Washing Works

AI-washed marketing deliverables will often use vague language and AI-related jargon to capitalize on a general lack of understanding about what AI really is and how it works.

For example, a company may claim its product is “AI-powered” because it can be used to automate workflow. Or they may claim the cloud service they offer uses machine learning (ML) because it can analyze data.

The problem is that automation and data analysis functions can often be achieved with programmed instructions that never change. To be truly “Powered by AI,” artificial intelligence has to be an integral part of how the product or service works.

Why Do Companies Engage in AI Washing?

Companies that want to associate artificial intelligence with their brand may engage in AI washing in order to:

•  Increase consumer and investor interest.
•  Increase brand value.
•  Inflate the perceived value of a product/service.
• Justify a higher price point.
• Distract attention from a product or service’s shortcomings or limitations.
• Stay competitive in a fast-moving market.
• Create the perception they are more advanced than a specific competitor.

How To Avoid Vendors Engaging in AI Washing

It’s important for vendors to use the term “AI” accurately in both their internal communications and their customer facing sales and marketing materials. Look for vendors whose websites and white papers include a glossary of AI-related terminology if you want to avoid companies that are AI washing.

If the company claims to develop AI in-house instead of purchasing AI as a service (AIaaS), look at the “Who We Are” section of their website to see if the management team has the necessary skills to create AI models and tune foundation models for specific types of tasks.

While you are visiting the corporate website, check to see if they’ve published case studies or customer testimonials that explain how the vendor’s artificial intelligence has helped them solve a very specific problem.

If you are speaking with a vendor representative and are concerned their company may be AI washing intentionally or unintentionally, consider asking these three questions:

Why is AI Washing Bad?

Like any deceitful marketing tactic, AI washing can end up backfiring.

When consumers purchase or subscribe to products/services that fail to deliver the AI capabilities that were advertised, they are likely to “vote with their feet.” This means they will stop using the product/service and seek out alternatives that truly deliver on their promises.

It’s likely they will also use social media or customer review platforms to express their disappointment. Negative posts can result in a loss of trust and more negative posts, which in turn, can ultimately turn AI into just another tech buzzword.

Unfortunately, all the negative publicity created by companies that AI wash can harm the perception of AI as a whole, and make it harder for legitimate AI projects to gain trust and funding.

AI Washing Impact on the Technology

The noise created by AI hype cycles – even when they are positive – can make it challenging for truly innovative companies to differentiate themselves and attract the attention of investors and customers.

AI washing complicates things even more, because funds that could support genuine innovation may be diverted to companies that are better at marketing AI than actual technology development.

Should this happen, the impact of AI washing can create a vicious circle:

People become skeptical about the value of AI > It becomes more difficult to attract investors and customers > AI advancements slow down > People become skeptical about the value of AI > It becomes more difficult to attract investors and customers > AI advancements slow down…

AI Washing Real-Life Examples

In the United States, the Securities and Exchange Commission (SEC) levied AI washing charges against two companies that provide investment advice: Delphia Inc. and Global Predictions Inc.

According to an SEC press release, Delphia claimed that it “put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.”

Global Predictions claimed to be the “first regulated AI financial advisor” and its platform provided “[e]xpert AI-driven forecasts.”

Investigations found that both companies misrepresented their AI capabilities, and the two firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.

“As more and more investors consider using AI tools in making their investment decisions or deciding to invest in companies claiming to harness its transformational power, we are committed to protecting them against those engaged in AI washing.” – Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

AI Washing Regulatory Landscape

If a company claims to offer AI-powered solutions but fails to adequately explain how AI is used – or it exaggerates the role AI plays in its product/service – this could simply be regarded as misleading, which is bad enough.

However, if the misrepresentations are made with the intention of purposely deceiving consumers or investors to gain financial or other benefits, they may be regarded as fraud, and this can have legal consequences.

The threshold for what constitutes misleading practices or fraud, particularly in the context of AI, often depends on the degree to which the company exaggerated or misrepresented the capabilities of its product, as well as its intent.

Currently, there’s no single comprehensive law that specifically addresses AI washing. However, several existing and emerging regulations and guidelines around the world address the broader issues of AI transparency, AI ethics, and AI accountability, which indirectly impact AI washing.

For example, the European Union Artificial Intelligence Act (EU AI Act) is expected to legally define AI and mandate transparency requirements. This could end up deterring AI washing by obligating companies to substantiate their claims about using AI.

The Bottom Line

It can be tempting for marketers to take advantage of people’s fuzzy understanding of artificial intelligence and slap the label AI on anything that was developed with the help of artificial technology tools.

However, to legitimately wear the label “Powered by AI,” artificial intelligence needs to be a core component of the product/service and significantly contribute to its value proposition.

This means that AI should be integral to how the product or service operates. It has to enhance the product/service performance, efficiency, or user experience in ways that would not be possible with traditional computing methods alone.

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