Artificial Intelligence (AI) and automation are revolutionizing digital marketing by offering unparalleled personalization, efficiency, and decision-making capabilities. This research investigates the transformative role of AI in shaping marketing strategy, with a focus on consumer perception, ethical dilemmas, and operational outcomes. Through mixed-method research, including a survey of 109 respondents and literature from global academic and industry sources, this study evaluates AI’s practical and psychological impact on digital marketing. Findings reveal that AI improves customer engagement, reduces campaign costs, and enhances targeting, yet raises concerns over job displacement, privacy, and over-automation. The study proposes a conceptual framework that integrates AI technologies with consumer trust, personalization, and marketing performance. Recommendations include ethical AI governance, hybrid human-AI collaboration, and industry-specific adoption pathways. This paper contributes to understanding how AI can be applied strategically while maintaining authenticity and long-term brand equity.