AI ads can look weird. Brands like Coca-Cola are making them anyway.

Three animated holiday ads from Coca-Cola had the advertising community up in arms last week. Their offense? They were generated by artificial intelligence—and look like it.

Marketing professionals and consumers alike mocked logos that they describe as badly rendered, shiny faces and distorted proportions released by the same advertiser behind humanity-affirming campaigns like “Hilltop,” in which young people sang, “I’d like to buy the world a Coke.”

“‘Always the real thing’ OH the IRONY,” a YouTube commenter remarked on one of Coke’s videos.

The fracas shines a light on a new creative tension running through Madison Avenue, parallel to concerns over how AI will change the way ad agencies get paid.

Many creatives who dream up and make advertising remain loyal to the idea that commercials should be shaped by human artistry and, at the high end, look as good as Hollywood movies. The clients they work for are growing more interested in using ads to show investors they are on top of new technologies, however, no matter how uncanny they might look to consumers, advertising executives say.

“They want to signal to the Street that they are trying to get cheaper and faster with their creative services,” said Mark Himmelsbach, founding partner of marketing services firm RYA. Very few signals are as bright as holiday ads that run relentlessly during the final weeks of the year, he said.

Coke said it is using AI not as a blunt cost-cutting instrument but as a tool to personalize ads without having to animate multiple features, among other uses. One of the new ads features a truck on a highway where a sign welcomes visitors. With the use of AI, Coke is targeting consumers in 12 U.S. cities with versions of the ad that show the name of their city, according to Pratik Thakar, a vice president and global head of generative AI at the company.

Serious new toy

Few brands so far have made ads using primarily AI-generated imagery, due in part to the risk-averse nature of most marketing leaders, advertising executives say. Those that have released all-AI advertising have felt the wrath of professionals and consumers disquieted by the technology.

Toys “R” Us in June released a 60-second ad charting its history that it said was made using Sora, an OpenAI tool that converts text to video, and found itself both praised and attacked.

“The train left the station, and we just decided to be the first ones on it,” the retailer’s chief marketing officer, Kim Miller Olko, said at the time.

Retailer Mango earlier this year began testing the use of AI fashion models in some clothing ads and on its website in a move that the company said demonstrated a commitment to innovation. Detractors called it false advertising and raised concerns over the slim bodies the technology generated. Mango said the AI images were clearly labeled as such.

Coke, for its part, has shifted some of its billions of dollars in annual ad spending as it seeks younger consumers. The company in the last five years moved from spending 30% of its media-buying budget on digital advertising to spending 60%, for example, to more precisely target distinct groups of consumers.

The company has also highlighted a business unit it created last year that can help create marketing assets more quickly.

“In our previous model, it took several months to create a TV ad,” Coca-Cola Chairman and Chief Executive James Quincey said on an earnings call in February. “Now, we’re producing thousands of pieces of digital content that are contextually relevant and measuring these results in real time.”

The same month it said it was working with OpenAI via consulting firm Bain & Co., exploring what Quincey called opportunities to enhance its marketing, along with other ways to improve its operations.

Human factors

To make the new holiday ads, Coke asked three AI-focused agencies to deliver a spin on its 1995 commercial titled “Holidays Are Coming.” It is running three versions from two of those agencies in different ways across markets around the world.

Some of the negative commentary might reflect personal anxieties, Coke’s Thakar suggested.

“I think the chatter is happening with the particular industry sector who is more nervous about the technology and what is going to impact their future,” he said, noting that the ads still took an ample amount of time, skill and human judgment to create.

Rob Wrubel, founder and managing partner at Silverside AI, which worked with Coke on the new campaign, said there is a misperception around how AI-generated imagery is made.

“People believe that AI means you automate everything—someone just puts one prompt in and a video pops out. It is the farthest from the truth,” Wrubel said. But, he added, “The intensity of the creative process that used to happen over weeks and months can now happen every two hours.”

The most important audience

Defenders of AI-generated ads say the debate about creative execution is beside the point, because consumers don’t have a problem with the look of AI imagery.

System1, a U.K.-based company that tests the effectiveness of ads, found that Coke’s holiday ads scored very highly among consumers, hardly any of whom noted the AI-generated flaws and glossy faces highlighted by critics.

These ads might be outliers because Coke’s polar bears and festive delivery trucks have been shown on TV for nearly three decades and are likely to spark nostalgia in any form, said Andrew Tindall, System1’s senior vice president of global partnerships.

When it comes to Coke’s use of AI, System1’s research suggests “people either don’t know or they don’t care,” Tindall said.

Ipsos North America, which researches and predicts ad effectiveness, among other services, also scored Coke’s ad as likely being effective with consumers, according to its head of creative excellence, Pedr Howard. The company considers an ad effective if people can remember it and who it is for, and if they have any changed feelings or perceptions of the company after watching.

Although Coke’s 1995 “Holidays Are Coming” ad was mostly live-action, the new AI renditions might also benefit from the fact that the brand has used computer-generated polar bears and penguins in ads over the years, Howard said.

“That lends itself to AI producing it, because you don’t worry about, ‘Does it look like a real human or not?’” he said. “It’s not meant to—it’s always been CGI.”

Write to Katie Deighton at katie.deighton@wsj.com and Megan Graham at megan.graham@wsj.com