Transparency or Trap? The Paradox of AI Disclosure in Shaping Gen Z’s Advertising Responses

Abstract

The integration of artificial intelligence (AI), particularly generative AI, has significantly transformed marketing practices by enhancing the efficiency and cost-effectiveness of content creation. However, growing consumer demand for transparency about AI involvement in marketing content creates a paradox: while disclosure reflects ethical accountability, it may simultaneously undermine consumer trust and perceived authenticity. This study examines the impact of AI disclosure versus non-disclosure on Generation Z consumers' trust, perceived brand authenticity, and attitude toward advertisements. Using an experimental between-subjects design, 264 Indonesian Gen Z respondents were exposed to one of two versions of a fictional beauty clinic advertisement, either labeled as AI-generated or unlabeled. Results show that AI disclosure significantly reduced consumer trust (β = -0.541, p < .001) and perceived brand authenticity (β = -0.624, p < .001) compared to non-disclosure. While AI disclosure showed no significant direct effect on attitude toward advertisement (β = 0.092, p = .173), trust fully mediated this relationship (indirect effect = -0.337, 95% CI [-0.535, -0.155]), indicating that disclosure shapes advertising attitudes indirectly by eroding trust. These findings reveal that Gen Z consumers do not reject AI-generated advertising per se, but respond negatively when disclosure diminishes their sense of authenticity and credibility toward the brand. The study contributes to the AI marketing literature by isolating the effect of transparency disclosure itself, rather than merely comparing AI-generated to human-made content, and offers practical guidance for brands seeking to balance ethical transparency with consumer trust in AI-assisted advertising strategies.