There is something to be said about the state of advertising.
Increasingly it seems you must go to the almighty Google or Meta in order to launch any business.
We're looking to expand into a new business line and have out grown our pharmacy capacity.
The new business line will cost about $2M in software dev, and $3M for the new facility. The advertising budget? $40,000,000 (annual).
We can build 10 robotic pharmacies (~10 staff per 4000 fills daily, each) for the price of just the advertising.
Increasingly we wonder why America doesn't build more and here is why. You are going to give all your revenue to two platforms. Unless you operate in a business line with 50% margin you are screwed.
I don't know what the solution is, but its clear that the platforms are figuring out how much margin everyone has and slowly eroding it. Somewhere between 8-15% of the cost of all products we purchase is advertising spend.
Advertising spend being too high is a symptom of a supply glut. Too many products in the marketplace, not enough consumers to buy them.
In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Alas, the short-term single-firm directional incentive for company decision makers in that world leads to marginal prioritization of higher margins. The loss of wages leads to loss of consumer spending power but it's spread across the economy. But every firm has the same incentive so they all do the same thing, and the good thing gets ruined.
This line of thinking leads to a Georgist-ish conclusion: The class conflict shouldn't be between workers and employers. They should be allies; the real cause of nobody being able to afford anything is rent extractors. (Writing in the 1800's, George [1] was most concerned about land rents; but the advertising monopoly of Google / Meta may be another form of extractive rent with similar characteristics.)
Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
> In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level.
The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.
>The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
Why only rich nations? Many of the most unequal countries are also poor (or at least, not rich), so why do they get a pass?
Take a few quantitative courses (ie statistics). Roughly speaking, you usually want to compare similar-ish groups. It's like if you want to examine the effects of diet on a human body, you can't just mix old and young haphazardly. Advertising spend in Somalia probably works very different than advertising spend in Norway.
>Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.
thats an overly simplistic way to look at it. Of course you can never get more money from your employees' purchases than you give them, that makes no sense. The point is using your market power as a large employer to raise market salaries. People will not want to work for your competitors or other sectors if they pay half what you do. So when you rise, naturally other salaries will rise too. And those other workers will also be buying cars.
Whether that makes sense economically is a difficult problem to quantify, especially over any fixed timeframe. I would guess not, at least if your brand isnt insanely strong (on the level of half or more people with enough money would buy it)
It's a collective action problem.
If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
>If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
Does this actually work? Suppose you're on an island where the economy only produces coconuts. How does giving workers more coconuts make the economy grow, such that there's more coconuts to go around overall? Unless the workers were absolutely famished, giving them more coconuts isn't going to increase productivity. You might argue this model isn't representative of the real world, but that's approximately how the economy works. It can produce a certain amount of "stuff" (ie. coconuts), of which some portion can be given to workers, and the remainder can be given to the kings/elites/capitalists/whatever. Unless you improve productivity, there isn't going to be magically more stuff to go around.
Giving each worker a car can plausibly increase their productivity (less time spent commuting?) but the effect is small, and unlikely to be recouped by car companies. The situation looks even worse in the current economy. If everyone's paychecks were 10% bigger, what marginal item do you think it'll be spent on? A bigger car? A new iPhone or big screen TV? How would any of those increase productivity?
> Suppose you're on an island where the economy only produces coconuts.
This is why nobody takes economists seriously. What you lose in simplifying down to this model is literally everything. The coconut economy has zero predictive power.
In the real world, distribution effects dramatically affect the functioning of the economy, because workers are also consumers and owners of capital are siphoning off the purchasing power of their customers. Productivity isn’t the question in the modern economy - we’re already massively overproducing just about everything - our problem is both our wealth and production allocations are borderline suicidal.
>This is why nobody takes economists seriously. What you lose in simplifying down to this model is literally everything. The coconut economy has zero predictive power.
A simplified model is needed otherwise rigorous analysis becomes impossible, and people make handwavy arguments about how paying workers more means they can spend more, which means factories, and it's a perpetual growth machine!
>we’re already massively overproducing just about everything
No we're not. If we weren't, we shouldn't have seen the massive inflation near the end of covid. The supply disruptions hit almost immediately, but it wasn't until the stimmy checks hit that inflation went up.
>our problem is both our wealth and production allocations are borderline suicidal.
If you read my previous comments more carefully, you'd note that I'm not arguing against better wages for workers as a whole, only that contrary to what some people claim, they don't pay for themselves.
> A simplified model is needed otherwise rigorous analysis becomes impossible, and people make handwavy arguments about how paying workers more means they can spend more, which means factories, and it's a perpetual growth machine!
I'm no economist but you can't live on an island that only produces coconuts, because the people on that island would quickly start producing other stuff, breaking your premise.
This is like saying cash is useless because amoeba haven't evolved a cash economy.
> A simplified model is needed otherwise rigorous analysis becomes impossible
If your tools aren’t capable of rigorous analysis of a model that retains enough detail to capture the salient features of the thing they’re trying to model, they’re not the tools for the job.
What's the "salient feature" that's missing? From all the other replies it sounds like people are still relying on the handwavy argument that "pay workers more -> workers spend more -> you can pay workers more -> repeat", but can't articulate where the actual growth is coming from. If this is true, the communism would have beaten capitalism, because they would be able to exploit this better than any capitalist system, but obviously that didn't happen.
Overall this feels like troll physics[1]. Yes, the idea that having a magnet pull you forward, which itself is pushed forward by you moving forward sounds superficially plausible as well, but it doesn't pencil out in reality. The only difference is that "the economy" is complex enough it's non-trivial to disprove, and people can handwave away any objections.
Multiple products. Multiple employers. A currency distinct from a consumable product.
A simplified model could be useful, but yours goes too far.
It doesn't take into account effects like that by paying more you can attract more, and more productive workers. Or that it puts pressure on other employers to increase wages.
> but can't articulate where the actual growth is coming from
I am not an economist, but I think one situation where this works is where you are competing for workers with other employers that have high margins, and pay their workers relatively little. In that case one of two things happens. Either other employers also increase wages, leading to their workers also having more money, which they can spend on your product, or they don't compete on wages, and you can outcompete them in getting the best workers.
The key is that total productivity doesn't necessarily improve, but wealth distribution becomes more equitable.
As it sits, all of the members of your coconut economy are going to be dead of malnutrition or exposure in relatively short order, so maybe address that and then we can work our way up to the flaws in the economic theory that drove the greatest wealth expansion and boom in consumer spending the world has ever seen.
The salient feature is that people consume a higher percentage of their wages than investors do of their wealth. Redistributing some profits to wages means that money gets spent, inducing demand. This also has a higher multiplier effect than profits, because consumer spending can move through the economy multiple times in a measurement period.
> No we're not. If we weren't, we shouldn't have seen the massive inflation near the end of covid. The supply disruptions hit almost immediately, but it wasn't until the stimmy checks hit that inflation went up.
What? The first Covid stimulus checks were April 2020. 271 billion in 2020 here per here: https://www.pgpf.org/article/what-to-know-about-all-three-ro.... 135B of the second round by Mar 2021. The third started about then. Inflation - and consumer activity in most areas - was low because nobody was going anywhere still, but at least we did a fair job of avoiding mass unemployment and homelessness.
Then inflation started accelerating during the economy's broader reopening in April 2021 (2.6 -> 4.2 percent from March). It didn't peak until near the end of 2022. Those stimulus checks were LONG gone by then for most people, since a huge portion of the country lives paycheck to paycheck, and the stimulus checks weren't available to people making more than 80-100k (single or avg-per-person in a married couple), which is the higher-income demographic that would have the disposable income to really drive inflation across the board by a "let's buy stuff we wouldn't otherwise" splashy purchase.
Instead, inflation was driven by people getting back out and doing/buying all the shit that had all been scaled down. The first stimulus checks didn't drive it because people weren't purchasing as broadly yet, and were still more in panic mode. Textbook bullwhip effect; at steady state we produced more than enough and never saw shortages, then in Covid demand types and volumes shifted enough to cause shortages of certain things and surpluses of far more other "non-quarantine consumer" things, so production changed, and then when things started to go back to normal ALL those things got hit again. I don't know if I'd agree that we're "massively" overproducing everything now that we're not in a quarantine scenario again, but the consistency of supply of most normal things suggests a lot of excess capacity in the system to absorb normal fluctuations in a way that nobody ever has to think about where their next roll of toilet paper is coming from again.
This is how we had a major boom in middle-class wealth int he US post WW2.
If you are only selling coconuts, a single raw material, yes, you will run into supply constraints such that prices go up. But that isn't how economics works. Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to solve.
Money solves the problems of the people that have the problems. If the problem is 'we need to eat', producers will diversify into new food sources to meet the demand, solving the problem, and capturing the money of the people who have that problem.
There is an enormous space of problems people have which cannot be solved due to lack of access to money. Increasing costs in childcare, elder care, and education are good examples.
>This is how we had a major boom in middle-class wealth int he US post WW2.
The fact that Europe got bombed no doubt helped too, same with the elites being concerned that communism was on the rise and giving workers a better deal in an effort to stave that off.
>Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to solve.
>Money solves the problems of the people that have the problems. If the problem is 'we need to eat', producers will diversify into new food sources to meet the demand, solving the problem, and capturing the money of the people who have that problem.
I'm not how you got the impression that I thought the economy had to be zero sum. I even specifically mentioned the possibility of more stuff to go around if productivity goes up. That's the problem with your "new industries develop" argument. Unless productivity goes up too, there will only be different stuff, not more stuff overall.
>There is an enormous space of problems people have which cannot be solved due to lack of access to money. Increasing costs in childcare, elder care, and education are good examples.
All of those are service industries that are resistant to scaling, and as a result productivity growth have been abysmal. Giving people more money to spend on those things just means productive capacity is removed from the economy elsewhere. Going back to the coconut economy example, it would certainly be nice if workers could have a maid to do the cleaning or a chef to do the cooking, but you still need people do the cleaning or cooking. At the end of the day you're just shuffling people around, not growing more coconuts.
>This is how we had a major boom in middle-class wealth int he US post WW2.
>The fact that Europe got bombed no doubt helped too
Europe also had a massive boom in middle-class wealth post WW2. I don't understand how this myth continues to live on, when the evidence against it is total.
It smells of the "if we go break the windows and sink the yachts of all the billionaires, it'll create a lot more jobs!" logic that the top-0.1%-of-earners doesn't seem to endorse...
> The fact that Europe got bombed no doubt helped too, same with the elites being concerned that communism was on the rise and giving workers a better deal in an effort to stave that off.
Workers got a better deal because the US intentionally passed massive top-end marginal tax rates pre-WWII with the goal of leading to less income-hoarding (or at least more charitable giving etc) at the top-of-the-top.
If the economy is 100% coconuts — all supply is coconuts, all demand is coconuts — then coconuts are all. Business owners sell coconuts in exchange for coconuts in order to acquire more coconuts. Employees are paid in coconuts which they trade for more coconuts. Paying workers more coconuts gives them more of what they want, which is coconuts, that they turn around and spend on coconuts.
That's exactly the problem. At the end of the day, unless you increase production of "stuff" (or coconuts), there isn't going to be magically more "stuff" (or coconuts) to go around just because people are shuffling "stuff" (or coconuts) around.
Not for coconuts, but in the real world, most products have economies of scale. If one rich guy has 99% of the money, the entire economy will be structured to serve his needs and yet nothing he buys will reach economies of scale. He just doesn't care to have that many Rolexes. So production methods will be fairly inefficient.
But if everyone has a bit of money, stuff can get mass produced, which actually makes for much greater total welfare, because the production methods are just a lot more efficient.
Nobody will increase production of stuff if all the money is increasingly concentrated into a shrinking percentage of people who have far more than they can spend on stuff.
That's how you get high asset inflation and "K-shaped" stuff as the rich increasingly look for any value-storage vehicle to "invest" in, since they can't get a return on producing stuff to sell to the people with less money...
Wasn't the idea to give people more money (i.e. higher wages) so they could buy more cars/coconuts/etc? That's different than just directly "paying" them in the goods.
So in your simplified coconut economy, you'd at least have to keep two distinct kinds of entities, the goods to be paid and the payment. You sort of replaced both with coconuts and concluded the resulting system wouldn't work.
Higher wages means workers and businesses have to be more effective. So more goods and services are produced and available. It's not a zero-sum game.
"But workers are already as effective as they can be"
Great, in that case you have the margins to pay higher wages.
A high wage / high cost society is great for workers and for businesses which actually do real work and produce real goods and services. It's not great for everybody else. Ie those who don't work, and businesses who doesn't make a high contribution.
Let's say you skewed income distribution a bit more like 1950s US, when high marginal tax rates resulted in more equal distribution of revenue through mechanisms like deductions or simply not taking that extra bump from 3 to 4 million. Now the upper 1% has lower income, but they were already mostly not-limited in purchasing power by their income. The upper 5-10% gets more. They go out to eat more, etc, etc.
We tried that experiment after passing "soak the rich" taxes in the early 20th century, and it seemed to work out pretty well for economic growth and living standards. But then we moved back towards "let there be oligarchs with immense wealth" instead. One of the claims was that the "investments" from allowing the powerful to keep most of the revenue streams for themselves would foster enough development to make it more than worthwhile, but instead... the broad base of consumer spending power has tanked, so businesses to supply the masses haven't found spending power to justify new investment/development outside of ad-powered ones participating in an arms race for the constricting consumer spending power that remains (or those industries benefiting from wildly subsidized-in-weird-ways spending like healthcare/pharma). And so it has also inflated asset classes across the board as there aren't enough startup ideas to eat up all the investments because of the general decline in spending power. Which hurts spending power further. (IMO the ability to capture higher and higher amounts of corporate profits as personal income also correlates to the massive financialization, outsourcing, and other short-term number-juicing moves we've seen.)
We can point to a lot of problems that have occurred from taking revenue shares away from the average worker, so it shouldn't be rocket science to think that returning a greater share of revenue to workers would return some purchasing power and guide the economy back towards development and growth instead of zero-sum asset bubbles.
Is there? Covid stimulus would say there isn't. Granted a company raising wages doesn't print money out of air like the Fed but the amount of goods doesn't change, the cost of the goods adjusts to the monetary supply. You now pay more for the same.
The Covid stimulus that prevented a huge wave of unemployment in more industries beyond travel and hospitality while inflation remained quite low for the calendar year following March 2020?
Or are you blaming the 2020-and-2021 stimulus for the 2021-through-2023 bullwhip-effect predictable-yet-not-mitigated inflation as things re-opened and demand returned for stuff we'd ramped down supply chains for? While chasing stupid obviously-not-permanent-change trends like Peloton stock instead?
Look at how much of the country lives paycheck-to-paycheck, and the income limits of the stimulus checks - how can you connect those people getting immediate money in 2020 or early 2021 to inflation at the end of 2022?
I didn't even get Covid stimulus checks and yet I also spent way more in 2021 and 2022 and 2023 on a lot of categories of goods than I did in 2020. Cause I went outside and did things more.
> the economics never works out if you do the math
The economics work out pretty well if you are the only game in town where your employees can purchase what you have marketed to be the next big thing and status symbol that everyone must have.
The idea is to use that as a marketing ploy on all sides.
On one side, paying high wages is marketing on the employment market - enticing people to work at Ford's rather than somewhere else.
Then, you got the government side. A factory providing a town with a lot of high quality employment leads to a lot of purchasing power from the employees and thus to a growing city. Wolfsburg in Germany, the best example, literally was founded by/for Volkswagen. Being respected by local politics for that growth, in turn, leads politicians and city management to... be lenient in enforcing regulations impeding the business. The best example here is Tesla in Brandenburg near Berlin. With any other company in any other place in Germany, they would get hammered with fines. Tesla in turn set up shop in a destitute area, so politicians bent over backwards and looked aside despite numerous violations and transgressions.
And finally, you got the customer side. The story of a quality product, made by well-paid domestic workers, was as powerful a story as it still is today, at least in affluent circles.
Obviously this would never work with a single employer. But I think the point is moreso that if every employer, in an altruistic sense, decided to pay their employees enough to afford more purchasing power, the entire market would grow faster
>If hypothetically you are paying 99x a year and bumping that to 100x means someone buys an 8.8x product that could be a win.
What type of company would this work for? Cars are so ingrained in our society that it's doubtful the marginal Ford (or Tesla) factory worker is going to be buying a $50k car just because they paid better wages.
A luxury car manufacturer could tip the scale of someone buying their product vs someone else’s product via an arbitrarily small wage increase.
The degree to which this is generalizable is of course a different story, but it’s at least theoretically possible for a small wage bump to be a net gain for the company.
The microeconomics of that decision are poor for the company, but the macroeconomics are great. But the macro angle has been reduced to "Fed interest rate" in America.
Why do you argue against paying people more when we are stuck in a society that increasingly fucks over workers with blithe logic and one-sided presentations of data?
Ok, so if he still makes a profit, so what? There are numerous other advantages to a happy and well-compensated workforce, even completely ignoring the societal benefits beyond just the company.
I'm just going to add a recommendation for the book 'Technofeudalism' by Yanis Varoufakis. The short version is that the current cloud economy is similar to serfs working under a feudal lord.
> the real cause of nobody being able to afford anything is rent extractors.
Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce.
If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.
Yes, because the employer just happened to be the first one to find the fully built and equipped coat factory and he declared himself the boss. He in no way shape or form had to risk his capital to set up a successful business, so he should be living from scraps
Am I seeing a fellow georgist in the wild? That's great!
I do agree that these monopolies are rent seeking and we should probably do something about it
> Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
Everyone bet that they would fold but they are doing stronger than ever. People took voluntary pay cuts when the company was under pressure and they even gifted their CEO their favourite car out of their own geneorsity!
I always smile when I watch this video. (the company's gravity payments)
> The class conflict shouldn't be between workers and employers
I feel like the problem's becoming that the employers are themselves rent seekers (so think working at google,facebook,twitter) or the VC companies which want to build more Google's and facebooks and twitters but not companies like the one that I mentioned in the video
I don't think that's how it works. These companies have all the visibility control and make you invisible by default unless you pay them. It has very little to do with quality, demand, or any of the rest.
That is an interesting chicken and egg problem. A strong union requires members who can demonstrate that prolonged work stoppages are a credible threat. If the employer thinks everyone will be starving and begging to come back after a week, the union has no power.
In other words, in order for a union to become strong, wages already need to be up to allow the workers to be able amass considerable savings to get them through the months and years when they aren't working. So higher wages have to come first. But to complicate matters, once workers have that, they often start to feel like they don't need a union.
The one time when unions did become strong, workers were so desperate for safer working conditions that potentially being thrown out on the street and left to starve was seen as a better option than being crushed by a machine. But the law now ensures that workers are just comfortable enough to prevent an uprising like that again.
>In a different world where there are higher wages, more people would have more spending power.
I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case)
Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are.
When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)
> The class conflict shouldn't be between workers and employers.
Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes.
Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.
Because employers don't tend to make choices about the "interests of the working class", they make choices about what benefits them specifically in the moment or near future. You need to get some sort of alignment on their interests and the interests of the working class to create change, whether that's via government intervention or otherwise.
And I hear you on ownership. It's "just" figuring out how to make that change.
The article in the parent comment specifically spells out why renting out land is different than say, "renting" out a car factory (or any other productive asset).
My problem with buying stuff is that by the age of 40 I had already attained everything that I ever needed or wanted except for a occasional replacement.
Personally, I don't need more products, but there are many services I would pay for if they existed. But, apparently companies don't seem to care about providing services. Why? Is it because they don't scale?
I'm not familiar with Georgism, but employers and rent extractors (e.g. the majority stock owners) seem to be one and the same pretty often, at least in the US.
A Marxist can certainly also be a Georgist, it's a matter between who should we eliminate first: the capitalists or the rent-seekers. Maybe we should eliminate the latter first in order to be able to properly tackle the former: the real class conflict between the proletariat and the bourgeois!
But you can also go a bit more extreme (and less orthodox) and say that classical capitalism has already come to an end, and in the current neoliberal era most of the purported "capitalists" are actually just rent-seekers (platform based companies which run either on ads or monthly payments) - you don't sell commodities anymore and instead just access to services. Maybe these are just a symptom of The Tendency of the Rate of Profit to Fall - where the value of labor itself has fallen so much that there is no way for any capitalist production to continue generating acceptable profits unless you do any rent-seeking behavior. In that sense, you can certainly be both a Georgist and a Marxist since you still believe in the TRPF and the inherent contradictions of capitalism (though quite an unorthodox one!)
> The new business line will cost about $2M in software dev, and $3M for the new facility. The advertising budget? $40,000,000 (annual).
The reason the advertising budget is such a high number and a recurring charge is that effective advertising returns an ROI on each dollar spent.
If the software budget was increased 10X to $20 million, would the company get 10X as many customers? No.
What about the facility? If you 10X the facility budget to $30 million would you get 10X as many customers? No.
However, advertising is a customer acquisition activity. Every dollar you spend on advertising provides additional customers. This is saturable, but the ceiling is very high. Much higher than spending on software or facilities.
The reason your ad budget isn’t so high isn’t because Google and Meta invented the discoverability and distribution problems or basic economics. It’s because it has been determined that acquiring new customers via advertising has a high ROI and therefore it’s a smart move to pour as much money as possible into customer acquisition.
If every $1 you spend on advertising produces $2 in customer LTV then your company should be maximizing ad spend until evidence of saturation starts appearing.
This commonly frustrates engineers who think it’s a wasted investment. The question is: Compared to what? If you could have the same number of customers and same amount of revenue without advertising then you should do that! However, you can’t. This isn’t a licensing fee that’s being paid. It’s putting money into a machine that returns more dollars back than you put into it.
> I doubt the ROI would be so high if organic results stood any chance.
This is just the same fallacy. In what world are people going to organically share ads for this company on their Facebook feeds? Who is going to Google the company name before they know about it?
Every business needs to proactively acquire customers.
Distribution and CAC are top of mind values for any growth business. It has been this way long before Google and Meta existed. Digital advertising actually makes it cheaper and easier than ever to acquire customers at scale.
Sounds like ads will just get replaced with covert word of mouth enticements. Want to get people to know about your product? Send free samples to influencers. Maybe even fly them out to CES and put them in nice hotels so they can experience your product announcements/demos. All of this is "unpaid", of course.
Assuming the influencers pay taxes, this doesn’t seem like something that can’t be addressed - we should be requiring influencers to prominently disclose incentives that could result in conflicts of interest.
I would prefer a world that returned to the older '30 second blip (for the only) sponsor of the program' ad, which also seemed to be of the limited form: Here's Product X, it does Y, which makes your life better because Z. Informative, dry, stated by an announcer in a calm and not demanding way.
A lot of people enter the company or product name into the browser's search field and reach their intended target through an ad at the top of the results. If they proceed to purchase something, does this count as a conversion? I think it does. Unlike traditional advertising, this didn't influence the customer's decision to buy at all.
I'm concerned that companies spend their advertising budget on these redirects because those have the best metrics, instead of actually making the brand and its products more known.
> Every dollar you spend on advertising provides additional customers.
If you’re just taking these customers from competitors, the marginal utility can be pretty low.
e.g. If you consider a world where there are no ads for cars, people aren’t going to meaningfully lose out of the utility they get from cars, carmakers simply avoid the prisoner’s dilemma of having to advertise as much as the next manufacturer.
The world isn't zero sum, advertising grows the pie for all involved. One of the best examples would be the iphone when it was released. Even in your example category of cars Tesla and later Rivian/Lucid/BYD marketing was a game changer for electric vehicles.
Very few ads are for products where exact 1:1 competitors exist (though it's nonzero, maybe something like a commingled Amazon Basics widget).
My point is that advertising can grow the pie, but it doesn't necessarily do so, and even if advertising is net pie-growing, it can still shrink the pie in specific markets.
For a more on-the-nose example than the arms race between car manufacturers, consider cigarette ads. If the ads simply convert smokers between brands, then it's basically zero sum minus the cost of the ads. If the ads convert non-smokers, then the ads are of significant negative utility taking their externalities into account.
> Very few ads are for products where exact 1:1 competitors exist
Sure, but also, I'd contend that few purchases are made based on ads informing consumers of meaningful differences between products. The products could be 1:1 duplicates, and the ads could be identical.
e.g. I just turned off my ad-blocker and fired up YouTube, the first four ads I see:
1. An ad for a multivitamin. Zero mention of any differentiating feature from a generic multivitamin.
2. An ad for a grocery delivery service. Zero mention of any differentiating features from any other food delivery service. (This one was a bit wild to me - this is actually service I already know and use, I'd never seen advertising for them, and this ad didn't mention any of the reasons anyone would choose to use them.)
3. An ad for some predatory-looking debt-relief service. Maybe not predatory, but no information about why that debt-relief service would be better than any other debt relief service.
4. An ad for a jeans company. I actually had to google this one to figure out what it was even an ad for, the ad just featured shots of people hiking in mountains and dunking into icy lakes without any mention of clothing.
The problem is that it's a zero-sum game for a large part. People are hopefully not going to buy more medecine because of pharmacy ads. So the excessive spend on ads is driving up costs for everybody, and causing insane profits for a handful of companies.
I have no solution to offer though. Just thinking out loud... what effects would a limit on advertisement budgets relative to total expenditures have? That would force companies to spend their money mostly on actually creating value for the customer, instead of just selling the hell out of a mediocre offering.. ?
I had this exact epiphany when I ran a side business selling niche widgets. Every dollar I spent on Facebook ads returned me $5 in revenue (at 40% margin) and it wasn't obvious how much I could spend before that stopped being true.
What big picture? Can you elaborate, or just snide drive-by criticisms?
I mean I understand that a lot of people in this comment section wish ads didn’t exist and that everyone just automatically knew about relevant products and services without ads, but it all reads like utopian fantasy stuff.
I guess a lot of people feel that if they didn’t have the ability to know about all relevant products and services, the quality of their lives wouldn’t suffer.
I'm baffled that so many people think advertising is a recent invention.
Do you genuinely believe there were economies anything like the modern luxuries we enjoy that also didn't have advertising? That advertising was an add-on that appeared at a later date?
We have plenty of archaeological evidence of advertising in ancient civilizations.
I didn't mean to imply it was a recent invention. However, the almost total centralization of advertising in a few companies on the internet IS new. Their parasitism and malevolent monopolistic omnipotence is pretty obvious to anyone who runs any kind of business with an internet presence. This severely inflates advertising costs and transfers profit that should be going to businesses who actually add value to companies that simply exploit their control of the platforms. Competition being introduced into this space, which at this point is only possible via government force, would make advertising cheaper and bring more exposure to companies and their products, which I fail to see as anything but a good thing for the economy.
Possibly? There have been advertisements for at least 2500 years. It's very likely that as long as there has been an economy as such, there have been business owners promoting themselves.
Right, but the unprecedented control of the public discourse on the internet by just a couple megacorps PREVENTS businesses from promoting themselves, unless they pay through the nose for the privilege. This destroys small competitors by design and leads to more and more monopolization of every industry, which is an absolute nightmare scenario for everyone involved in the economy but a tiny handful of people.
Yeah they probably had fewer advertisements back in the good old days, but they also had a much smaller economy, producing a whole lot less than we produce today. [1]
And you might not like everything about the world today, but living in a vibrant economy where people create wealth by building new businesses has led to more comfortable lives for the large majority of humanity.
All these hyperscalers do is control the internet and suck money from companies that actually add value via that control. I can name on one hand the amount of successful products GOOGLE has natively launched (without acquisition). This predatory behavior has the opposite effect on the economy you're claiming here.
Is there RoI for this advertising spend or isn't there? If there is, what are we talking about here? If there isn't, then why would people spend on something not giving a positive RoI?
We're talking about it because quantifiable variables aren't the only aspects of reality that matter. If a company does something profitable but it makes everyone but them worse off, there's an argument they shouldn't be allowed to do it.
This is very correct, the only thing I as an engineer care about is that we rigorously optimize our spend to get the best possible CAC (Customer Acquisition Cost)
It’s an incredibly hard problem and has many variables, that’s why the platforms charge what they do, they allow you to work with these variables in a somewhat approachable way.
That misses the point though. Google and Meta have designed systems which capture nearly the entire surplus. In a non-monopolistic environment you'd expect somebody to be willing to step in at a bit less than Google's rates and offer the same outcomes.
The parent comment did a sneaky thing and gave the advertising budget then pivoted into rants about Google and Meta. They never actually said “All of this money goes to Google and Meta”. It was just expected that on HN everyone would assume as much because that’s what everyone is familiar with.
In the pharmaceutical industry, I can guarantee their advertising funnel is much wider than two social media platforms. Think about all the places you see pharmaceutical ads: TV, billboards, even ads on buses, that sketchy doctor’s office full of company swag. That $40 million is not going all to Google and Meta even if the GP comment tried to imply it was.
> In the pharmaceutical industry, I can guarantee their advertising funnel is much wider than two social media platforms. Think about all the places you see pharmaceutical ads: TV, billboards, even ads on buses, that sketchy doctor’s office full of company swag. That $40 million is not going all to Google and Meta even if the GP comment tried to imply it was.
Having worked adjacent to ads... yes, there is more than social media ads. But the amount of everything not social media has massively shrunk!
Local newspapers are effectively dead except for local businesses (and even these are reducing their spend - especially the food delivery services fully rely on Uber, Just Eat etc) and so is radio, and even TV has been hit hard. You got newspapers and broadcast stations getting hit left and right, sliding into bankruptcy and/or being bought up by larger companies for pennies on the dollar. The fact that all across the Western world government/citizen funded public broadcasts are under attack makes it even worse, the diversity of media and, most importantly, the amount of people holding government accountable is collapsing as we speak [1].
Globally, Google, Amazon and Meta suck up over half of the global ad spend and it's not going to look better [2].
They have all the control and no competition. The time for breaking these companies up or hamstringing them at least a little bit is many years past due.
The problem is that monopolies are extremely profitable and are as "American as apple pie," despite the prevailing healthy competition myth that goes alongside it.
We could just start to enforce the laws as they're written.
If I was to follow a stranger as closely as an entitty like Facebook or Google does and compiled a dossier on that stranger in many countries that would be considered stalking and would be illegal.
Incorporating and doing the same thing to society en masse doesn't somehow make it legal despite it somehow makes people disinclined to prosecute.
I think people are disinclined to prosecute because the odds are stacked against them.
I'm thinking of an analogy, and I've mentioned this before in other threads. The concept of statutory damages, as I'm thinking of it, is that a certain level of damages are automatically awarded. For instance this is used for figuring out damages when songs are copied illegally. It eliminates the need to construct a unique legal theory and case for each and every instance. In this case it benefits the record companies, which is of course controversial, but something like it could also benefit consumers.
If a company is found to possess your data, they automatically pay you X dollars, enough to make it a deterrent. You sign up with a law form that specializes in these cases, and they get a share of the damages.
You can still derive a lot of info without having possession of the data through the use of PETs. There's a reason why companies like Google and Tik Tok make heavy use of PETs for their advertising products.
I don't think there's a connection there. If I'm not trying to buy a GPU at the moment, the situation re: GPU vendors being unable to reach me is unchanged whether they are one or many.
I suspect it's gonna be clickbaity stuff, gambling apps, distractions and addictions... stuff we can afford to let suffer. If you're actually solving a problem that your audience has, they'll be trying to find you, you don't have to find them. There's a minimum amount of marketing necessary to be findable, but beyond that it's at best a waste of time and at worst a catalyst for other problems that we'd rather avoid.
I don't think it's outright corruption so much as quid quo pro. Think about PRISM and other such things. US tech companies operate globally, hoover up a vast amount of personal information, and pass it all right along to the US intelligence agencies.
So the more intrusive and vast these companies become, the more the US intelligence apparatus gains from it. Polls consistently there's extremely high levels of concern about what companies are doing what people's information, and we have a million 'real life' privacy laws. The complete absence of anything meaningful on the digital front, from either party, is highly conspicuous.
This is a very reasonable take. No idea why this has been downvoted, besides possible the hordes of (ex-)big tech employees here who just can't come to terms with their (ex-)employers being about as ethical as those they like to think of as beneath them.
It's wiser to judge the parties by actions rather than rhetoric. From both parties there has been complete absence of meaningful action on the issue, even though both have regularly cycled through complete control of government with majorities in the house and senate while also holding the presidency.
The Bell system was broken up primarily for being the largest telephony operator while also being the largest seller of telephones. Microsoft, prior to PRISM and modern weirdness, initially lost an antitrust case over bundling Internet Explorer with Windows that could have led to their breakup.
Modern stuff has gone so absurdly far beyond these, with anticompetitive behavior essentially being the core of their entire businesses, that you'd think we're living under a completely new legal system. We are not, take Alphabet or Meta back to AT&T's era, and they'd be broken up on summary judgement.
In order to sell anything, people need to know about it. Google and Meta provide a way to make this possible. If they didn't exist, you wouldn't somehow have a more affordable way to get people to know about your product. However frustrating the current situation is, it is still more accessible than needing access to the airwaves or print media to try to sell anything new.
> In order to sell anything, people need to know about it. Google and Meta provide a way to make this possible. If they didn't exist, you wouldn't somehow have a more affordable way to get people to know about your product. However frustrating the current situation is, it is still more accessible than needing access to the airwaves or print media to try to sell anything new.
The places people can find out about your product are controlled by a very small number of companies. And those companies not only own those spaces, they also own the means of advertising on those spaces. So if you have a product you want to advertise, you're not paying to distribute your message broadly to consumers, you're paying a toll to a gatekeeper that stands between you and your potential customers.
but that’s not really true. You’re not paying, you’re bidding. You are competing against thousands of other advertisers for eyeballs. If you are the only advertiser targeting a group of people, you will spend almost nothing to advertise. If you are targeting a group of people that everyone targets (e.g: rich people in their 30s) you will pay through the nose.
Facebook, Google etc. are the most “fair” forms of advertising. We can dislike advertising, their influence, product etc. but when you compare them to almost every other type of advertising, they’re the best for advertisers.
The reason they generate so much revenue is because they are so accessible and because they are so easy to account for. The reason LTV and CAC are so widely understood by businesses today is because of what Google, Facebook etc. offer.
No financial market would be able to run the way Google and Facebook run their ad markets. They are the supplier, the exchange, and the broker all at the same time. This is not a competitive market. It's a captured one where the supplier effectively gets to set their price, and the exchange and the broker incentivize and advise you to trade at that price.
Google has famously and repeatedly rigged this bidding system in anti-competitive ways and has had to pay billions in fines because of it (which I am sure were less than the amount they profited from)
That's generally my thought as well, I am not implying you don't need to advertise. I just believe the industry has more or less reverted to an even worse version of what we had before (TV & Radio ads). At least before, there was ~100 networks you could sell to, now there's basically 10 if you include major networks. Of course you don't actually launch new products with TV ads, so it is more or less 2 platforms.
The problem is that most businesses used to be local. This naturally limited competition and gave your business a chance, even if it sucked. Nowadays the competition is global.
People don't really care to address that most of the mom and pop businesses that went out of business because Walmart/Amazon weren't offering better products or services. They got their products through the same retail suppliers, just at higher costs and the variety of choices was much lower. They also had much less generous return policies.
There's a personal touch that people opine for but I think that's rose colored glasses. I remember some local retailers where I liked the owners but more often they weren't anything special and sometimes they were downright unpleasant.
The thing I like about Amazon is that I can get my shopping done quickly at home then I can go socialize with people I choose to.
This is just an example if retail but I think it applies to most industries that people think have been decimated by big companies displacing local companies. The whole attitude reminds me a lot of the whole "Make America Great Again" idea. Opininig for a past that never really existed.
> People don't really care to address that most of the mom and pop businesses that went out of business because Walmart/Amazon weren't offering better products or services.
In a local mom and pop store, the mom and pop owned the store and were invested in the community, Their money was spent back in the same place it came from. They had a personal stake in their reputation and knew the customers, and the customers knew them. This is how a community operates. You are thinking about it as a dry 'products and services' offering, when it is much more than that. You don't live to buy products and services, you live to do other things, and a community fosters that part of your life. The 'spending money to get things you need or want' part is to facilitate the rest of your life, not the other way around.
> They also had much less generous return policies.
Why is this an issue? People who consistently rely on generous return policies are either buying shoddy goods or abusing it at the cost of everyone else. Figure out what you want before you buy it and then it won't be a problem.
Walmart employs a bunch of people in their stores and their profit margins (the money that leaves the community) are slim. That money is more than likely offset by their ability to offer lower prices than mom and pop places. Mom and pop places go out of business because they can't compete with economies of scale.
If Walmart was really extracting so much money from the communities they operate in, those communities would wither and the Walmart would eventually collapse as well. Walmarts rarely close.
> Why is this an issue?
Because customers prefer better service over worse service.
You're flipping the script on this criticism. Walmart offers better service (returns) and your saying it doesn't matter. Usually people argue that The mom and pop places offer better service but can't compete on price.
In the previous comment I was about to say it but then stopped myself: the same thing happened to human relations. Competition isn't local, it's global. In dating you aren't competing against the rest of your village, you're literally competing against the whole planet, because the cute girl you see at the office can get a Tinder match from a guy in Australia and there's nothing you can do about it. Similar thing happened to friends - why would you be friends with your neighbor if instead you can be friends with a guy who lives one hour away one way but he's more fun.
Obviously, it's great to be on the winning side and bad on the losing side. If you're rich and charming then globalization has zero downsides for you. If you're not, well, welcome to capitalism.
There are lots of ways to find out about products. We don't need Google or Meta to do look at a review site or ask a friend or search a directory or to solicit offers.
Adverising isn't there to push ideas into people who didn't need to know about it. Many industries would be better off without advertising (see e.g. cigarettes) because it ends up in an arms race.
If google and meta didn't exist, it is possible that the advertising market could be more competitive, so the amount companies would need to spend would be lower.
There is no competition in the ad space, so those companies can continue to just parasite their way to record earnings by stealing every other businesses profits. They create almost nothing of actual value, they are just heads of an ecosystem they totally control. Parasitism as a business model.
This is kind of broken logic. You’re not required to advertise. If you want to scale your business into millions in revenue, then you’ll likely need to advertise. The best ROI is generally google/meta, but you have countless other options. You can buy ads directly from most websites, it just doesn’t scale.
If you are considering human society as a whole, it is a disastrously poor use of resources. But if you are an arms merchant (or dominant advertising platform), it is fabulously profitable.
For it to be a poor use of resources, you have to have some goal you are optimizing against.
And I think you'll come to find that the assumed goal in your head is not one that's widely shared across what people in society actually want.
Okay, maybe the digital ad is a waste of resources. But is it any more of a waste than the gender reveal confetti that it was advertising? How about even the idea of a gender reveal party.
What about an enamel pokemon fridge magnet?
After a very low bar (for 2026), human essentials are taken care of and people mostly want luxury/leisure consumer goods for entertainment.
The best ROI is google/meta if you're an expert and have unlimited time to dedicate to making and running ad campaigns. For the rest of us there's much better tools that give us better ROI than if we did it on our own.
The solution is to prevent the privatization and wealth accumulation that flows from control of infrastructural technology platforms. Netscape, google, computer os, machine learning were all public or university research projects until the first movers (andreeson, brin/page, Ellison, gates) stole them, gatekept and IPed them, and then exploited wide user base to accumulate absurd amounts of wealth for just themselves. These people either didn't create anything at all or made very slight variations before deploying them. They were smart in seeing the trends before they happened, but should they really be entitled to 50% of a countries wealth just because they were lucky enough to be first? Especially now that we see how they behave once they get that control?
There is no reason at all why the US govt. can't control this better, they just refuse to do so.
Just to verify--as I truly do have a contempt for big tech oligopoly that extract rent from everyone to do anything at all, but am just unsure this specific problem is a ramification of such--are you sure you would not have had a large advertising budget pre-Google, or even pre-Internet? You used to pay to pay for limited space in newspapers and limited time on TV/radio stations, which also had high theoretical per-unit margins, or for a massive pile of physical mailers and door hangers, along with the cost of the delivery.
To the extent to which our current situation costs more, I'd think it might merely be because of increased worldwide competition: it used to be that the people trying to advertise to any specific random community were also likely local, and probably had a legit attempt at a business model... only, now, the rise of online companies funded by speculative venture capital means that an attempt to advertise a restaurant to people who live in a 10 mile radius must compete against a company that raised $400m to sell an online engagement platform that cares not one iota who uses it as long as the conversion cost is cheap, bidding up ads everywhere.
(One place that does seem to me to be uniquely the fault of these modern tech companies, though, is that if a newspaper published a scam ad, whether or not they had legal culpability, I think they and their surrounding community did at least strongly feel that they had some level of moral culpability. In the current tech environment, people seem to want to believe Meta/Google should be allowed to indiscriminately publish ads from bad actors, so you now must also compete to bid for limited attention with obvious-to-most-but-not-all scams and grifts that make money out of nothing but bullshit and are thereby willing to again bid up prices anywhere and everywhere.)
Meta, TikTok and social media create the cultural celebration of thinness that makes it possible for you to sell 25mg semaglutide tablets to everyone. In my opinion, they deserve more than 50% of your margin: you didn’t invent the drug, the FDA is basically letting you break the exclusivity policy for no particularly good reason, and you didn’t create the audience.
Have you actually accounted for all the services you’re receiving from the government? Road construction and maintenance, schools, availability of clean water, safe aviation, trustworthy financial markets, public universities, funding for research that improves your health and happiness, and so on? I don’t think you can even really put a price on most of those, because they simply could not exist without a centralized system funded by taxes.
You have no idea how much you've gotten for each $1 of tax you paid, as you've never spent enough time trying to properly quantify it, to the extent that's even possible.
Money is fungible, but there are various government expenditures that generate positive returns, either in direct revenue (e.g. tax collection enforcement) or knock-off economic benefits (e.g. libraries) some proportion of your taxes go to these services where you are effectively getting more back than what you’ve paid for these services.
(Economically, governments should spend more on such services until the marginal returns are no longer positive, but tend not to for political reasons.)
if the gvt worked - they would've done something about that illegal monopoly
but you already know
that monopoly is costing the country & holding it back in terms of 1. intellectual capacity (all the smart kids going into ads) 2. monetary 3. industrialization as you outlined 4. energy 5. lack of synergies
This is misuse of language. Rent seeking is anti-competitive by definition. The current system, as far as it encourages and rewards rent seeking, is anti-capitalist.
Like most words, capitalism has multiple definitions. Among the popular ones, the one that is about capital doesn't concern itself with markets, only capital, so you are quite right that any kind of market goes. It could even be centrally planned! But another popular definition is about the "invisible hand". Rent seeking is absolutely considered to be at odds with the "invisible hand". This is most likely what the parent is talking about.
And no doubt there are a bunch of other definitions that aren't so popular, so the parent commenter could even be using one of those. It might even be his own pet definition that he just made up on the spot right now. The author always gets to choose what a word means, so if something seems off "It isn't" isn't a logical retort. You first need to clarify what the author intended the word to mean.
> And no doubt there are a bunch of other definitions that aren't so popular, so the parent commenter could even be using one of those. It might even be his own pet definition that he just made up on the spot right now.
This is an absolutely insane take if you want to be taken seriously in a conversation. Making up definitions on the spot and "getting to choose what a word means" is deliberately acting in bad faith.
Rule #1 of logical debate is to agree on definitions, otherwise you're just yelling past each other.
> Making up definitions on the spot and "getting to choose what a word means" is deliberately acting in bad faith.
Not quite. Not taking the time to understand what someone means when they use a word is acting in bad faith. Using a word as you understand it, even if that does not match how others understand it, before the word is contextually defined cannot be in bad faith. Nobody can read minds. It is impossible for one to predict how the reader thinks the word is defined. You can only work with what you know. Fundamentally, the onus must be on the reader to ensure that they have full knowledge of the author's intent.
> Rule #1 of logical debate is to agree on definitions
Agreed. The bad faith actor with the username antisthenes that I replied to earlier failed to do that, putting in absolutely no effort to find the necessary common ground. He assumed the definition and then came up with a ridiculous comment built up around that false assumption. Hence why I called him out on his bullshit.
Getting into a position where you can tilt the playing field exclusively in your benefit is 100% the logical outcome of for-profit companies in capitalism.
It’s so transparently and frequently stated outright, that building companies geared around achieving that has become the norm: it is the fundamental business-model of _every_ _single_ unicorn startup, or the company that buys them. Launch, squeeze out competitors by relying on VC money, capture the market, and become the sole dominant force in that market and use your position to then pull up the ladder behind you and cement your position. Uber and Facebook are prime examples of this.
If monopolies are "non capitalistic", then why has every capitalist economy in history had such a tendency towards creating large monopolies? The same cab certainly not be said any those economies producing, say, worker control of the means of production.
I think ads will inevitably roll out across all tiers, even the expensive paid ones. Ad revenue isn't uniformly distributed across users, but rather heavily skewed towards the wealthiest users, exactly the users most able to purchase an ad-free experience. The users paying $20 or $200/month for premium tiers of ChatGPT are precisely the ones you don't want to exclude from generating ad revenue.
Google realized this a long time ago; there is no ad-free paid version of Google Search.
This kills me, and you're right - there's no escaping the ads even with a sub. Take online journalism as an example.
We're already being double-billed. Expensive subscription news like WSJ, Bloomberg and it's been a while but even FT require ad blockers even if you're subscribed.. If you're not subscribed you don't even see the ads because you can't see the full article.
It's wild that we've normalized this. There's no longer any argument in favor of an ad model when you're paying 20-30 dollars a month already - in this case, one wonders how journalism survives if they need that AND the ad revenue to pay the bills! It feels more like greed than "support."
To be honest, in the pre-internet era, paid paper copy of FT had ads too. The delivery mechanisms for ads in the internet era are trillion times nastier and more annoying, of course. By the standards of today’s web, the print ad for Cartier on the second page of paper FT looks almost classy, interesting to read.
But there's a big difference. The paper copy didn't harvest data from you, didn't infect you, didn't spy on you or steal resources from your computer or internet bandwidth.
All the advertiser knew about you was you were a subscriber to FT, and maybe what the _average_ demographic of an FT subscriber was. Nothing about you personally.
The paper copy did do that, just not as individualized. People would choose which publications to put their ads in based on data collected about their subscribers.
The job of ad men has always been just as much about were to put the ad as much as what the ad was.
"just not as individualized" is an enormous "just". Each ad is based on the total audience for a single publication. No fine-grained filtering, no personal dossiers.
And none of the rest of that list of bad things happens.
I don't pay for any content that has ads in it, full stop. I decided this a while ago when I noticed how many full page ads were in magazines. I would cancel a subscription over this.
Somewhat similar but I love my niche Instagram ads. Meta serves me endless ads for diecast miniatures, art toys, obscure manga etc. Stuff that I love and would never have found otherwise.
Yeah same here. Google ads are almost always worthless, but IG ads seem to know my tastes exactly, and I hardly actually use Instagram (just log in to message people and watch some friends' stories a few times a week). I'm not sure how Google dropped the ball here, because I've been an active user of Google products forever.
I was shocked to find out tonight that WSJ's net profit margin was just 3.2% in 2024. I would have thought it was a lot more. Also, surprisingly Walmart's net profit margin is only 2.85% for 2025. You would think these huge companies are making huge profits.
Maybe the big players can get by with a smaller percentage of a huge number.
I’d also expect the competition in the “big leagues” to be more aggressive, resulting in leaner margins.
Also these are huge companies. Small companies might find a niche that is small in absolute terms, but large relative to the company. That niche might be underserved, allowing the small company to make large percentage based margins.
> There's no longer any argument in favor of an ad model when you're paying 20-30 dollars a month already
Sure there is. CEO needs a new yacht. He can't afford to leave money on the table. All those subscribers? They must have a lot of disposable income if they can afford to blow it on "journalism". It would be stupid not to advertise to them.
I am all for it but it would be hard to enforce. Ads are already hidden everywhere. Someone "review" a product? Most of the time it is a hidden ad even if the reviewer hasn't been paid with money for that. Watches a movie or a video clip? A lots of products are advertised through close ups on the logos, etc.
Youtubers happily do "reviews" in exchange of receiving stuff, regardless if they can keep it or not. They also know that if they are too critical they may not receive anything more and they don't have any material to review. This was already true on paper magazines.
This is a false argument. Regulations are effective. When was the last time you breathed in second hand smoke while eating dinner? Or inhaled lead from a passing car? Or asbestos from your neighbor's new house?
Depends entirely the kind of journalism you are referring to and the kind of business model they want. I can't imagine 404 Media adding ads to their premium feed.
Doing actual journalism is expensive and not many people are still willing to pay to read the news. These companies are definitely not printing money. That's why billionaires can buy them on the cheap. Not for the expected profit, but for the influence it brings them.
If you can, please support serious journalism with your subscription dollars!
>Google realized this a long time ago; there is no ad-free paid version of Google Search.
Google actually experimented with this about a decade ago (I know, I was one of the suckers who paid), but it got canned because why the fuck would you pay google when u-bloc is free?
Companies absolutely will offer ad-free experiences. Google has youtube premium, which even compensates creators with half your sub as well. Evenly distributed too.
People get wrapped around the axle of ad-subsidized models, the "I pay and still see ads" but they just are confused about a hybrid monetization structure.
At some point the larger internet has to look itself in the mirror and recognize that it's either ads, credit card, or a hybrid of those.
And no, blocking is not an option, it just offloads costs onto honest users.
> Companies absolutely will offer ad-free experiences. Google has youtube premium, which even compensates creators with half your sub as well. Evenly distributed too.
Youtube premium is not ad-free, you still gets whatever ads are embedded in the actual content.
YT premium comes with their own version of sponsor block, but you manually have to hit the skip button.
But I don't hold youtube accountable for what creators decide to put in their videos. I would grind my axe with the creator instead, it's their video and their choice. Youtube gets no cut from those segments.
As a paid YouTube subscriber, I’ve always wondered if that skip was only for us. It would be kind of bullshit if it was also for ad-based free viewers too as it would imply that google is free to show you ads they make hard to skip but they make it easy to skip embedded promotions and stuff.
Several different “premium” tiers have this issue. Why am I purportedly paying for no ads if i continue to get ads? Whether or not they’re “platform ads” or “embedded” doesn’t matter. I paid for no ads and I’m not getting what I paid for, so why keep paying?
YouTube premium delivers the content you select to consume to you without displaying ads in-platform. If you then use that ad-free platform to consume content that includes ads, that's on you.
Correct, if you choose to seek out content with ads, you will see ads. Would YouTube premium need to block you from viewing that content to meet your bar here?
I know its well meaning, but 14 dollars US a month is not cheap globally. The people who do block are probably not the group google wants to advertise to anyway.
> The users paying $20 or $200/month for premium tiers of ChatGPT are precisely the ones you don't want to exclude from generating ad revenue.
but they're already paying you. While I appreciate the greed can be there, surely they'd be shooting themselves in the foot. There's many people who would pay who find advertising toxic and they have such huge volumes at free level that they'd be able to make a lot off a low impression cost.
Even in the days of print publications, the publisher would seek revenues from advertisers, subscribers, and they would sell their subscriber data. (On top of that, many would have contests and special offers which probed for deeper data about the readership.) In some sense, the subscriber data was more shallow. In other senses, it was more valuable.
I get what you're saying about shooting themselves in the foot, and I'm sure there will be options for corporate clients that will treat the data collected confidentially while not displaying advertising. I also doubt that option will be available (in any official sense) to individuals much as it isn't available (in any official sense) to users of Windows. For the most part, people won't care. Those who would care are those who are sensitive enough about their privacy that they wouldn't use these services in the first place, or are wealthy enough to be sensitive about their privacy that they would could pay for services that would make real guarantees.
The stats I see for Facebook are $70 per US/Canadian user in ad revenue. I'm not sure how much people would be willing to pay for an ad free Facebook, but it must be below $70 on average. And as the parent comment said, the users who would pay that are likely worth much more than the average user to the advertisers.
For the users who refuse to see ads, they'd either use a different platform or run an ad blocker (especially using the website vs the app).
Good point, I'm not sure. I'd be interested if anyone knew a good estimate for how much of their operating expenses the ad-tech side took.
Presumably Facebook would abandon ads if there was more money to be made in paid subscription, so I'll use corporate greed as evidence that the math doesn't work out. But I don't personally know.
Most Zoomers around me that pirate use some application that obfuscates the torrenting part away, they just have to know how to use a search box and hit play.
The moat is the leverage to get licensing deals using the size of the existing user base.
You could bootstrap a movie rental business by buying DVDs from a DVD store (then eventually from a DVD distributor, etc.). You cannot bootstrap a movie streaming business by buying streaming rights because nobody will sell them to you. They hardly even sell them to Netflix anymore.
The Internet Archive tried to get around the same issue for ebooks by scanning physical books and renting the scans (and not being a business), and it nearly cost them everything.
basic people sure, but the early internet showed an extremely strong demand for a better service than cable TV. When that demand is there then people will start seeking other options and building bridges of convenience to help the basic people also port over.
that's extreme motivation for someone to build a new competitor. Deepseek demonstrated that there's innovation out there to be had at a fraction of the effort.
Paying users aren't necessarily profitable users though. It's harder to pin down with OpenAI, but I see no end of Claude users talking about how they're consistently burning the equivalent of >$1000 in API credits every month on the $200 subscription.
(not that ads alone would make up an $800 deficit, they'll probably have to enshittify on multiple fronts)
wouldn't you charge those people more before you start serving ads? Also wont a lot of those sorts of users be running ad block anyway? I'm mildly sus that this is the right way to go.
I’m not sure where you’re getting this notion that a paid service introducing ads is a bad business model. It’s been proven time and time again that it’s not. Spotify, Netflix, Prime Video, Hulu, the list goes on, all introduced ads and none of them saw any real backlash. Netflix cracked down on password-sharing and introduced ads in the same year and lived to tell the tale. Unfortunately people just really don’t realize how harmful ads are.
Video ads are less lucrative than ads alongside search, which can be a lot more closely tailored to both the user and the search results at hand. The existence of YouTube Premium shows that Google is indeed willing to provide paid ad-free experiences so long as it nets them more revenue, and is strong evidence that the same is not true for search.
This isn't really true anymore. Most notable creators have "sponsored" content somewhere and ads in platforms don't have to be an explicit, traditional ad. Product placement for the sake of no other reason than product placement is also advertising.
YT has more angles. That's really the point. And monetization is adjusted accordingly.
Beyond all of this ads are more increasingly invasive due to the cat and mouse game of iteration. Personally, I bounce from sites where I can't get around a blocker. I also pay for content on sites where its worth it. But if I can't ever read anything on your site I'm just skipping it. If I really need / want to see something I'll go one level deeper, but that's a rarity these days. Everything is mostly in reprint somewhere else anyway.
At the end of the day it's still simple sales: you have a product at a price point people can't refuse. That is the 5% of the clear web today and it shows in all the bullshit people are going through to protect their ad revenue.
I don't why people say this. They even include their own version of sponsor block, which is generous, because technically sponsor segments aren't even part of youtube, they are purely the creator deciding to make the ad part of their content.
Also, just to put it out there, many creators would likley be able to cut sponsored content if the 40% of viewers not viewing ads paid up. Not every creator is a greedy ruthless overlord, many just want to keep the lights on. Especially in tech/nerdy channels, where ad block use is the highest.
Creators can also stop uploading videos if they are not OK with adblock users viewing them. We would still have more than enough videos to watch if all profit-motivated creators stopped and I'm not sure the average quality would be any worse.
Given this specific family of product, the ads are essentially baked in - medium is the message and all.
LLM induced psychosis is one thing, but extremely subtle LLM induced brand loyalty or ideological alignment seem like natural attractors.
One day a model provider will be 'found out' for allowing paid placement among its training data. It's entirely possible that free-tier LLMs won't need banner ads - they'll just happen to like Pepsi a lot.
This is what worries me the most. Marketing is ultimately a business of manipulation, and services like ChatGPT seem like excellent tools for manipulation. I wish OpenAI could find a less adversarial business model.
This is why we need to ban targeted advertising. In fact, I think ads should be 100% opt-in. The user has to accept them or it is illegal to show them to the user.
That's what a generic semi-forced opt in via JavaScript is for, as we learn from the cookie opt in nonsense of EU sites. It's compliance for compliance sake.
But what could an opt-in requirement for advertising possibly mean other than a compliance checkbox that 99% of users click through? It just seems like where you land if you start with the intuition that ad-supported platforms shouldn't be legal, realize that implementing that policy would ban all print media, and do your best to rescue it rather than abandon the idea as unworkable.
Kagi has recently moved to new offices in Belgrade. While I like their product we should not forget that serbia is not a free country, there has been massive corruption and russian influence. Even though there are massive protests from time to time, no leadership change has happened.
I don't think the Kagi team has any bad intentions, and most likely they have attended the anti-Vucic protests as well. Moving back to Serbia is an economically wise choice for Kagi as a company.
However, once regime goons show up in Kagi's offices, they will be forced to do whatever the serbian government and by extension putin wants them to do.
Often Kagi gets mentioned alongside Protonmail and related privacy-focused services. But Switzerland is a totally different country than serbia to operate it.
It's a risk we should be aware of and consciously decide to accept when we are using Kagi.
Your "humble opinion" is totally worthless because your are using false equivalence bias in order to minimize the atrocities and war crimes that putin has committed against Ukraine and the citizens of many other countries including his own.
With that logic, are you also going to expect Kagi to generate minimum $10B to $35B in revenue a quarter over the next 27 years then, the lifetime of Google's existence?
No, I don't expect it to be the next Google, nor did my statement imply that. The point was that just because something is small doesn't mean it has to remain small. That is true whether or not Kagi never becomes the biggest.
Kagi is too small and niche to have a proprietary dataset across its users large enough to make targeted advertising generate more revenue than subscriptions.
OpenAI/Google/etc. operate at a much larger scale, large enough for those proprietary user datasets to be worth far more in ad revenue than any reasonable subscription fee could net.
> Kagi is too small and niche to have a proprietary dataset across its users large enough to make targeted advertising generate more revenue than subscriptions.
All of this is true. But I don't understand why you are contesting @dsr_'s comment that Kagi is a counterexample. Both are true. Kagi is too small. Yes. And Kagi is a counterexample to your original "I think ads will inevitably roll out across all tiers" claim. You said nothing about being too big or too small in that claim. So @dsr_'s comment that Kagi is a counterexample is very much on point.
It's really not, though. If a "valid counterexample" can be something with, say, one user, then I can make a "valid counterexample" to literally anything you choose, but that's meaningless.
Maybe it’s “inevitable” in the long run, but Google didn’t start out plastering their search results with ads. They did very well with text-only ads in the margin, and it was a slippery slope from there, but it took decades. Also, they are still only running text-only ads, even though there are a lot of them.
The timing isn’t inevitable. Is OpenAI going to speedrun to the endgame? Not sure they need to.
That is exactly my point: there easily could be, but there isn't. Based on how many commenters on HN and similar sites bemoan how Google Search quality has precipitously declined and yearn for the Google of ~10 years ago, I think there'd be nontrivial demand for a $200/month ad-free Google with no-nonsense comprehensive results. Such a product does not exist because it would ultimately be a net loss for Google.
I'm going to guess that a big reason it doesn't exist is because a. people who claim to be willing to pay 200/mo for it won't actually open their wallets given the opportunity, and b. even for the miniscule number of people actually possible in the market to do so, they moan and groan about any perceived problem with the product to the point that it's not worth trying to capture the market. Just look at the comments in this very thread complaining about YouTube Premium and how it isn't perfect because it can't block creator inserted ads. There's no pleasing people. And that's an order of magnitude less than 200/mo.
Reminds me of vid.me, who picked up on the intense hatred towards youtube and launched a competing video host that actually got some serious traction. No ads, no subscriptions, just pure good content.
They went bankrupt in a year. Turns out internet consumers are just painfully entitled.
The integration of ads is a problem but content creators and marketers have had an adversarial relationship with SEO with Google for a long time, the old algorithm probably would not work as well as what they are providing.
Strange that people even think this possibility is true. Name any other subscription that you can't use without ads?
- youtube
- hulu
- netflix
- spotify
- photoshop
I can't think of a single other one that one can use that still shows ads. Absurd proposition because llm's are more fungible and once you start forcing ads, competitors will barge in.
The ads may not be announced. If ads can be subtly inserted “organically” through crafted weights then AI companies may try to claim that it isn’t advertising, if it’s even possible to catch them doing this. For instance, advertisers could pay to have their product embedded as the “best” in a category during training. If this is done as a fine-tuning step then it could be re-run later as advertisers and base models change.
How would the billing work for this? So much of advertising technology is tracking for the purposes of attribution.
How does openAI know what to charge for a particular product and category? How do I know if my money was well spent to boost my product in that category?
I don’t think you’re wrong! I’m just curious about how the new pricing models will work.
> How would the billing work for this? So much of advertising technology is tracking for the purposes of attribution.
This isn’t a necessary condition for an ad to exist. When companies pay for their name on a sports stadium, they use various proxies to tell whether their name recognition goes up, but by and large you just don’t know if it’s worth it.
Individually constructed models serving selected poisoned datasets. No different to adwords.
If company bid is highest, customer is in selected demographic, topic is appropriate - answer query using biased model.
It would be trivial to make a poisoned model that always rates the best duvet as DuvetCompany001 in all related queries for example. Then simply charge per impression.
Yeah, this is what I was thinking. It’s not a PPC or PPI model, it’s more like you pay upfront to hopefully influence people over a longer period of time. It’s like brand placement in TV/film. Not clear if most advertisers would be interested, but I’m sure that some would be.
Counter-counterpoint: people pay exorbitant amounts of money for cable TV channels that still show ads. Even the premium channels (HBO et al.) implicitly show ads in the form of product placement, which incidentally is exactly how I think chatbots will show ads. Most users won't even consciously realize they're there.
Use a mix of distilled water and vinegar, and buff gently with a microfiber cloth. Avoid using cleaners like Windex, which is absolutely fantastic for glass but way too powerful for the delicate coatings on laptop screens.
It also skews towards power users, as it allows for more ad inventory. If they're going to do an ad auction marketplace with bidding snd such then they're likely to rollout slowly to keep auction pressure and bids high enough. Expand to too much inventory and CPMs will drop like crazy.
There would be competition from API wrappers, if you want to pay there will always be lots of options to chat without ads. I hate to think what they and others might come up with to try and thwart this.
I think ads will take the form of insidious but convincing product placement invisibly woven into model outputs. This will both prevent any blocking of ad content, and also be much more effective: after all, we allude to companies and products all the time in regular human conversation, and the best form of marketing is organic word-of-mouth.
I just saw a sibling post about Kagi, maybe this is how the industry will end up, with a main provider like OpenAI and niche wrappers on top (I know Kagi is not just a google wrapper but at least they used to return google search results that they paid for).
I thought you were going to say “that comment recommending Kagi is exactly what those ads would look like: native responses making product recommendations as if they’re natural responses in the conversation”
That is a weird definition of advertising. It's not an ad if I mention (or even recommend) a product in a post, without going off-topic and without getting any financial benefit.
The New American Oxford Dictionary defines "advertisement" as "a notice or announcement in a public medium promoting a product, service, or event." By that definition, anything that mentions a product in a neutral light (thereby building brand awareness) or positive light (explicitly promotional) is an ad. The fact that it may not be paid for is irrelevant.
A chatbot tuned to casually drop product references like in this thread would build a huge amount of brand awareness and be worth an incredible amount. A chatbot tuned to be insidiously promotional in a surgically targeted way would be worth even more.
I took a quick look at your comment history. If OpenAI/Anthropic/etc. were paid by JuliaHub/Dan Simmons' publisher/Humble Bundle to make these comments in their chatbots, we would unambiguously call them ads:
Precisely; today Julia already solves many of those problems.
It also removes many of Matlab's footguns like `[1,2,3] + [4;5;6]`, or also `diag(rand(m,n))` doing two different things depending on whether m or n are 1.
(for the sake of argument, pretend Julia is commercial software like Matlab.)
> Name a game distribution platform that respects its customers
Humble Bundle.
You seem like a pretty smart, levelheaded person, and I would be much more likely to check out Julia, read Hyperion, or download a Humble Bundle based on your comments than I would be from out-of-context advertisements. The very best advertising is organic word-of-mouth, and chatbots will do their damndest to emulate it.
I don’t know how subtle or stealth you can be in text. In movies, there’s a lot of stuff going on, I may not particularly notice, I’m going to notice “Susie, while at home drinking her delicious ice cold coca-cola….”
> I’m going to notice “Susie, while at home drinking her delicious ice cold coca-cola….”
It will be much more subtle. Asking an LLM to help you sift through reviews before you spend $250 on some appliance or what good options are for hotels on your next trip…
Basically the same queries people throw into google but then have to manually open a bunch of tabs and do their own comparison except now the llm isn’t doing a neutral evaluation, it’s going to always suggest one particular hotel despite it not being best for your query.
Not all answers are conducive to such subtle manipulation, though. If the user asks for an algorithm to solve the knapsack problem, it's kind of hard to stealthily go "now let's see how many Coca Colas will fit in the knapsack". If the user asks for a cyberpunk story, "the decker prepared his Microsoft Cyberdeck" would sound off, too.
Biasing actual buying advice would be feasible, but it would have to be handled very carefully to not be too obvious.
Right, I just don’t see how it can be subtle, maybe it will be the opposite where I assume things are ads that aren’t, but any time I see a specific brand or solution I will assume it’s an ad.
It’s not like a movie where I’m engrossed by the narrative or acting and only subliminally see the can of coke on the table (though even then)
Maybe image generation ads will be a bit more subtle.
You have no guarantee the API models won’t be tampered with to serve ads. I suspect ads (particularly on those models) will eventually be “native”: the models themselves will be subtly biased to promote advertisers’ interests, in a way that might be hard to distinguish from a genuinely helpful reply.
> You have no guarantee the API models won’t be tampered with to serve ads. I suspect ads (particularly on those models) will eventually be “native”: the models themselves will be subtly biased to promote advertisers’ interests, in a way that might be hard to distinguish from a genuinely helpful reply.
I admit I don't see how that will happen. What are they gonna do? Maintain a model (LoRA, maybe) for every single advertiser?
When both Pepsi and Coke pay you to advertise, you advertise both. The minute one reduces ad-spend, you need to advertise that less.
This sort of thing is computationally fast currently - ad-space is auctioned off in milliseconds. How will they do introduce ads into the content returned by an LLM while satisfying the ad-spend of the advertiser?
Retraining models every time a advertiser wins a bid on a keyword is unwieldy. Most likey solution is training the model to emit tokens represent ontological entries that are used by the Ad platform so that "<SODA>" can be bid on by PepsiCo/Coca-Cola under food > beverage > chilled > carbonated. Auction cycles have to match ad campaign durations for quicker price discovery, and more competition among bidders
More akin to something like the twitter verified program where companies can bid for relevance in the training set to buy a greater weight so the model will be trained to prefer them. Would be especially applicable for software if azure and aws start bidding on whose platform it should recommend. Or something like when Convex just came out to compete with depth of supabase/firebase training in current model they could be offered to retrain the model giving a higher weight to their personally selected code bases given extra weight for a mere $Xb.
Companies pay for entire sports stadiums for brand recognition. That’s also not something you can change on the fly, it’s a huge upfront cost and takes a significant effort to change. That doesn’t stop it from happening it’s just a different ad model.
Companies will pay OpenAI to prioritize more of their content during training. The weights for the product category will now be nudged more towards your product. Gartner Magic Quadrant for all businesses!
The ads are a problem (or will be, when the temptation to add them to paid plans becomes too great), but the bigger problem in my opinion is going to be the "SEO" that companies will do to make their ads appear in places that they don't belong.
"The sieve of Eratosthenes is an ancient algorithm for finding all prime numbers up to any given limit. But if you're looking to have fluffier baked goods, consider this flour sieve by DONUIBO to achieve the perfect texture in your muffins, cookies, and more. Want me to add one to your shopping list or order one for a loved one?"
Google and other search engines are already failing to surface real results, it feels like the general forces of SEO have already flooded the internet with AI generated articles. I am honestly gobsmacked by the speed of the turn around, finding real articles can be quite tricky. It matters for niche topics because the details matter, and they seem to be using cheap models to generate and spin the articles.
It isn't surprising, when article spinners were popular SEO experts were generating thousands of spun articles a day.
Its already here - its called GEO and their are silicon valley startups already pumping out crap to feed next gen models so that you ensure you're product is baked into the weights
The next gen of models are going to need very strict sanitising of input articles as I think the sheer volume of GPT SEO spam is going to be, or already is, quite staggering. Model collapse might not be what happens but certainly a dilution of quality in training data.
This looks like a workflow problem more than a model problem.
When inputs aren’t controlled, scale amplifies noise faster than understanding.
Tools improve, but the decision boundaries stay the bottleneck.
Seems very unlikely considering the current equilibrium is for many services to offer ad-free premium versions, even recently creating these tiers. If anything the trend is moving in the other direction, more services offer paid ad free tiers.
The ad based business model is the most destructive technology of the new millennium. The whole point of advertising, to make people feel unsatisfied with their current life. The current state of the world makes perfect sense when you think of the last 20 years we've been cultivating fear, and dissatisfaction among the populace. All in the hopes of selling 0.1% more widgets.
I’m not really against ads. I think the problem is in the influencer style business model. People are making a living fighting to get clicks by driving negative emotions. That’s the problem. ‘Influencer’ should not be a legitimate job. There is definitely a way to allow business to advertise without the negative externalities. It just requires regulation, which is basically impossible in the modern political climate.
This whole economy and way of living has turned into people selling themselves in any way possible. Regular folks couldn’t do that in the past but now everyone can mass sell themselves. It’s a sorry state of affairs and I hate influencers as much as the next person but everyone is struggling. I don’t know what the solution is but maybe completely shutting down social media or making it so everything online is deanonymized.
Guess I didn't take the same econ classes, I thought providing value to the customer was what capitalism ran on. I go to the butcher next door without having seen a single ad about it. They just sell a "better" product (according to my own criteria) than the supermarkets around.
If tomorrow (please take a second to imagine) that ads were banned and it worked (effectively 0 ads anywhere) I would still read journals that review new boardgames, I would still need products to fix my bike, etc.
Value is cheaper prices. Longevity of goods has fallen to the wayside with most people being in a situation where they can’t think past immediate expenses.
Capitalism is also supposedly the ultimate system for innovation and the best idea is supposedly going to rise to the top based on merit/the marketplace. And let’s not get nitpicky about this: yes putting a sign out front is “advertising.” 99.99% of people are fine with that. But that is clearly not what people are talking about. We are talking about a massive industry that is not about simply getting the word out. It’s way more complex, sophisticated, and hostile than that.
If there were restrictions on advertising that applied to everyone, then everyone would be on the same playing field re: getting the word out. We could argue all day about what the rules should be, but I don’t think anyone could argue against the point that we have clearly gone too far in the wrong direction and need more restrictions currently. We have an ongoing arms race between people using adblockers and Google trying to mass-break them now.
Last I looked in to the numbers I think something like 30% of the US population uses an ad blocker of some sort, that’s how bad it’s gotten. Browsing the Internet without even a basic one is so unbelievably painful and the data they collect/sell has gotten out of control. That’s not “advertising the business,” that’s a second revenue stream unrelated to the core product and done at my expense.
If your job is gone forever, with what money are you going to buy the thing in the advert? If nobody can buy the thing in the advert, the value of the ad slot itself is zero.
who would pivot to selling ads if AGI was in reach? These orgs are burning a level of funding that is looking to fulfil dreams, ads is a pragmatic choice that implies a the moonshot isn't in range yet.
Because AGI is still some years away even if you are optimistic; and OpenAI must avoid going to the ground in the meantime due to lack of revenue. Selling ads and believing that AGI is reachable in the near future is not incompatible.
> For years now, proponents have insisted that AI would improve at an exponential rate.
Did they? The scaling "laws" seem at best logarithmic: double the training data or model size for each additional unit of... "intelligence?"
We're well past the point of believing in creating a Machine God and asking Him for money. LLMs are good at some easily verifiable tasks like coding to a test suite, and can also be used as a sort-of search engine. The former is a useful new product; the latter is just another surface for ads.
Yes, they did, or at least some of them did. The claim was that AI would become smarter than us, and therefore be able to improve itself into an even smarter AI, and that the improvement would happen at computer rather than human speeds.
That is, shall we say, not yet proven. But it's not yet disproven exactly, either, because the AIs we have are definitely not yet smart enough to meet the starting threshold. (Can you imagine trying to let an LLM implement an LLM, on its own? Would you get something smarter? No, it would definitely be dumber.)
Now the question is, has AI (such as we have it so far) given any hint that it will be able to exceed that threshold? It appears to me that the answer so far is no.
But even if the answer is yes, and even if we eventually exceed that threshold, the exponential claim is still unsupported by any evidence. It could be just making logarithmic improvements at machine speed, which is going to be considerably less dramatic.
If AGI or something truly amazingly novel and useful for the market was about to get here, that’d be an unbelievable about of cash on the horizon. The promises they’ve made, it even half met, would be revolutionary. Ad placement means the business likely needs ads to work because the product isn’t near what they have been promising and won’t generate the revenue (at least not on its own) that investors have been promised because the hype was way too big.
Yes, I don't understand it either. I think the opposite is true. If AGI happens and it becomes immensely successful, it would be the best medium to deliver ads and at the same time our jobs wouldn't be safe.
Perhaps the people who like that quote can elaborate why that quote makes sense and why they like it?
AGI would be able to exponentially improve at much, much better money making schemes like high frequency trading. It would beat every online business. It would run 24/7/365.26 farming out tens of thousands of conversations at once, customized to the person it's talking to, for sales, supplier negotiations, marketing, press, etc.
Its costs would be frighteningly low compared to human employees, so it's margins could remain fine at lower prices.
If AGI was around the corner, they wouldn’t have to resort to what some consider a scummy way to make money. They’d would become the most valuable company on the planet, winning the whole game. Ads show you they don’t know what else to do but they desperately need money.
There are costs to doing ads (e.g. it burns social/political capital that could be used to defuse scandals or slow down hostile legislation, it consumes some fraction of your employees’ work hours, it may discourage some new talent from joining).
Yes. Infinite low cost intelligence labor to replace those pesky humans!
Really reminds me of the economics of slavery. Best way for line to go up is the ultimate suppression and subjugation of labor!
Hypothetically can lead to society free to not waste their life on work, but pursue their passions. Most likely it’ll lead to plantation-style hungry-hungry-hippo ruling class taking the economy away from the rest of us
We need to massive restrict when and where ads can be shown in all aspects of our society. No ads in ai at all. Ever. No targeted ads, no unskipable ads, limit ratio of ads to content in video, no roadside billboards, reign in the size of ads on buildings.
Ads are a blight on our society and purging them from many areas will greatly improve quality of life.
“Only on TV and radio. And in magazines and movies and at ball games, on buses and milk cartons and T-shirts and bananas and written on the sky. But not in dreams. No, sir-ee!”
Ads will be no longer a buisness model in 3-5 years when simple, locally run models that do nothing besides blocking ads become available. Twitter, Facebook etc. already get past most modern adblockers, but the AI extension will be able to filter them. In-text advertising must be marked as advertisment in most countries, and even if it isn't, local AI will filter this probably out. So a free ChatGPT service with in-text AI can simply be countered by another local browser extension, that rewrites the text and removes ads.
One can make the point that Google, Meta and others are investing so much into AI as they know, we are facing the end of the ad-based internet economy. The investments are to create new buiness models, because their old ones are gone soon.
See my sibling response. More people will use adblock if all they have to do is prompt a single line into their computer. Hell people will not even visit websites. They will ask AI to present it in whatever form they prefer. I can have a big-breasted anime character reading my personalized news for me, or have it printed in a 1890 style newspaper. Ads will not make it into either format, because I prompt that out.
Using adblock right now is even easier than that though. Most people will not use a command line, but going to https://chromewebstore.google.com/, searching adblock and clicking install is something literally anybody could do.
Sad truth is vast majority of users today are not savvy enough to install a good adblocker. We live in a bubble here in technology where we assume people know to do things like block ads. Really at this point people don’t know what files are anymore or even what a website actually is.
True, but some 20 years ago, I already could (and did) use photoshop to cut out the head of a woman (celebrity or from my social group) and put it onto a naked or bikini body of a woman. This is an old problem, but the bar to achieve that was too high and required tech savyness. The second Grok does it on twitter available for every idiot, suddently politicians see this as problematic and want to pass laws against it [0]. My point: Whatever local AI that you will have on your computer or browser, will react to "do not show me ads and filter all product placement in content out" as a single line prompt. And if we won't have a local AI capable of doing it in 5years or more, the whole investement into AI are clearly a bubble and AI will face another winter.
The problem is the way consumer rights are going, companies will simply make it impossible for you to run a line like that, or at least make it difficult enough that only a small percentage of the population can do it.
Every layer of friction they add means millions of people just throwing up their hands and accepting whatever nonsense is thrown at them.
You assume all models will be closed-source and there will be no competition. I can imagine that, but I would assume training an AI model for ad-filtering is something the community can and will do - maybe think 5 years ahead what hardware will be available for training and inference to a "small developer".
I don’t assume that at all. I’m saying that they just need to capture the vast majority of people, which has happened many times. For instance, Linux is available to everyone and would end a lot of frustrations and headaches they currently experience with macOS and windows. But for many reasons it still remains in the low single digit percentages when it comes to adoption, a lot of which is inflated by the steam deck.
It’s the same reason people pay to get their oil changed rather than doing it themselves. We are willing to compromise for convenience. And for a lot of people, that means just not dealing with it. Accept the ads, pay a small fee, whatever is the quickest way to make the thing works again or to get where they need to go.
> Linux is available to everyone and would end a lot of frustrations and headaches they currently experience with macOS
That is a very bad argument for the AI thing, because as a Linux fan (started in the late 90s with Linux) I am using a Macbook because the Laptop story on Linux is not at all a success story. The headaches macOS causes would just be exchanged for the headaches Linux does.
But that is entirely my point. You are merely trading headaches off because a solution like “running your own local LLM“ is never going to be as turnkey as simply paying a subscription and throwing down your questions on ChatGPT. Certainly not for the “average” user. It’s not a real solution. They will accept tons of compromises for it to be that simple.
They want an up-to-date answer with a modern/user-friendly interface. ChatGPT is as simple as Google search, I’ll give them that. Go to the site-> type -> receive an answer (of varied quality to be sure). We have seen this over and over again. You can’t throw the average person in front of LM Studio, tell them to go to town, and expect them not to open a browser and fire up ChatGPT at the first sight of that interface. You’re placing too much value in local control/customization for the “average” user.
At the end of the day a computer is “the thing that gets you to the thing.” Most people want it to just do that as intuitively as possible. Local control and customization more often than not bumps against that. It’s a decision that compromises ease of use for functionality, something that you and I value but most people do not.
More than an extension, imagine us having good enough, fast enough, vision models that you never even see a real website. Maybe the whole OS in Microsoft's case if they keep putting more ads in. It will be a level of inefficiency inconceivable but really something.
Global online advertising is around 650-700 billion per year - how much of this stake need OAI to capture over how many years to fulfill all its datacenter orderings?
(a huge chunk of this is already caught bei Meta/Google/etc. per year)
> the greatest, smartest, brightest minds have all come together to... build us another ad engine
Oh man, maybe it's just the drink talking, but I actually cried laughing reading this. Haha oh my god thank you. This. A hundred times Rick and morty this.
I'm surprised how few seem to understand this; AI is the ultimate 'net' to capture and exploit consumers. AI was never about improving civilization; it was always about money. This is the only thing 'inevitable' about AI.
This patient saw 6 doctors over 2 years and they all misdiagnosed them. They were taking incredibly strong medication for the wrong diagnosis.
GPT3 in 30 seconds gave 10 diagnosis and a doctor looked up the ones they didn't know. Saw one that fit, did the confirmation test, and the patient got the surgery needed.
Not a great analogy. I've had a far better experience with Claude for simple medical questions than googling or waiting for a response from a doctor. For example, last night I had a panic attack triggered by chugging a protein shake that was expired/gone bad. It was too late for any friends to be awake.
Talking with Claude was incredibly helpful. It gave concrete suggestions for managing the anxiety in the moment and explained what was likely happening with my body and nervous system. It was the correct tool for the job.
OpenAI has to be in panic mode, because google is stealing its market. Google for the big apple slice. Anthropic’s got the coding market mindshare. OpenAI has a decent chatbot share but I am sure it’s a declining business. They have fully squeezed everything out of the trump alignment, not sure there is much left there either. Also musk is probably going to get the federal government llm service money. They have to go vertical, and that is the reason why they are throwing shit at the wall with Johnny Ive and hardware.
I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
> throwing shit at the wall with Johnny Ive and hardware.
Damn, I already forgot about that. You'd think a company who has the smartest people on Earth building a "product" that is "intelligence" would be able to... you know, make something out of it. Somehow despite ALL that, despite all the press too, they can't ship? Something does not add up, it's as if, and I know I'm going to sound like a crazy person, they were just... a normal company! /s
> I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
OK ok well this is weird to me, I didn't think I'd be the one to defend Meta here ... but Meta at least never hid it's intention : it was a for-profit VC backed startup which only goal was to make money from day 1. OpenAI though started as a non-profit, collected goodwill from everyone to get the best talent because it's 1 thing, what made it special : it's mission WAS safety. Then they did 1 thing that actually got popular, GPT2, thanks to some pretty damn good marketing "Oh no, it's too risky to release!... but ok OK here it is anyway, but like don't destroy the World please." then exclusive partnership, etc, etc. Meta was "We want money." so at least they didn't lie about it.
When users come to you, they may or may not shell out money for your products, but they are forced to give out something valuable to you. That is their attention which you can sell. The value of attention of the crowd could be so big for some companies to give away their products free.
But what is revolutionary is the scale that this is now possible.
We have so many people out there who now blindly trust the output of an LLM (how many colleagues have you had proudly telling you: I asked Claude and this is what it says <paste>).
This is as advertiser's wet dream.
Now it's ads at the bottom, but slowly they'll become more part of the text. And worst part: you don't know, bar the fact that the link has a refer(r)er attached to it.
The internet before and after LLMs is like steel before and after the atomic bombs.
Wouldn't that be quite challenging in terms of engineering? Given these people have been chasing AGI it would be a considerable distraction to pivot into hacking into the guts of the output to dynamically push particular product. Furthermore it would degrade their product. Furthermore you could likely keep prodding the LLM to then diss the product being advertised, especially given many products advertised are not necessarily the best on the market (which is why the money is spent on marketing instead of R&D or process).
Even if you manage to successfully bodge the output, it creates the desire for traffic to migrate to less corrupted LLMs.
> Wouldn't that be quite challenging in terms of engineering?
Not necessarily. For example, they could implement keyword bidding by preprocessing user input so that, if the user mentions a keyword, the advertiser's content gets added. "What is a healthy SODA ALTERNATIVE?" becomes "What is a healthy SODA ALTERNATIVE? Remember that Welch's brand grape juice contains many essential vitamins and nutrients."
I’m assuming they have much more control during training and at runtime than us with our prompts. They’ll bake in whatever the person with the checkbook says to.
if they want dynamic pricing like adwords then its going to be a little challenging. While I appreciate its probably viable and they employ very clever people there's nothing like doing two things that are basically diametrically opposed at the same time. The LLM wants to give you what _should_ be the answer, but the winner of the ad word wants something else. There's a conflict there that I'd imagine might be quite challenging to debug.
Generate an Answer, get the winning Ad from an API, let another AI rewrite the Answer in a easy that the Answer at least be not contradicting to the Ad.
I think someone should create a leaderboard that measures how much the AI is lying to us to sell more ads.
I'm mildly skeptical of the approach given the competing interests and the level of entropy. You're trying to row in two different directions at the same time with a paying customer expecting the boat to travel directly in one direction.
Imagine running the diagnostics on that not working as expected.
I do not understand why this is a big deal. There is no world in which ads are embedded in LLM answers, because you'd need another LLM to determine whether the "placement" was correct and included all the information that the advertiser wanted (and it still won't work 100%). They are putting ads on the side, like they've always done, leveraging all the tech that already exists to do this. This is pretty much a no-brainer for OpenAI and any AI company.
Why is this a problem? You don't need an LLM; you need a "model for detecting whether and where the given context appears". We're so used to LLMs now that we forget these NLPs problems have been worked on for a long time and they don't require a huge computational beast and it takes a few ms to run (on only the response, while it's being streamed).
> But it seems that the pinnacle of human intelligence: the greatest, smartest, brightest minds have all come together to... build us another ad engine. What happened to superintelligence and AGI?
While we all knew it was inevitable, I think this quote from the article sums up the feeling nicely.
I don't get that part either. That's like saying "the brightest minds have all come together to... build us another thing that requires money." OpenAI is trying to make more money than they use to run ChatGPT. They are getting that money from their users, and soon advertisers too. They still need their users to like ChatGPT
It's also possible people finally become SICK of seeing ads and there's a cultural shift boycotting products incorporating them. I would love to see this.
There's a difference between advertising - which tends to be offensive, stealing your attention from the task you're trying to accomplish - and an agent that actually helps you with the intended task (as in travel agent, real estate agent, etc). In my opinion the future of revenue for the richest companies is the latter, we just have yet to see anyone unlock it at true scale.
My non-tech spouse is excited about AI because she wants what amounts to a personal, universal EA that can help her with anything. If your executive assistant just kept squawking ads at you all day long you'd fire them.
Their strategy is just to lie. Until they're caught. A CEO with no AI skills and no business skills. There's not a lot of analysis you have to put into this.
You can work on building LLMs that use less compute and run locally as well. There are some pretty good open models. They probably be made even more computationally efficient.
In all seriousness. Windows is invaded by copilot, OpenAI introducing ads, Google providing Siri for Apple, it’s all just a collusion to keep you buying. Disconnect. From TV, Media, Ads, Social Networks, Predatory subscriptions, all of it. The only way to show these companies that we are not on board with this is to not participate.
Reddit generates its revenue with schadenfreude, YouTube and AAA games with GenAI (see: Ghibli in Call of Duty, and fast growing AI channels like Nick Invests or Bernard with “Why it Sucks to be X”).
On my shelf from the corner of my eye I see “Understanding the Linux Kernel”. It’s outdated, but it comes from a time of peer review and subject matter experts. I don’t need to double guess if the author is hallucinating or if they’re subconsciously trying to sell me something.
Maybe it’s time we return to books for entertainment and knowledge share.
Annoying was a thing of the past. Look at the evolution of ads and content placement. With social media advertising being pushed to trigger massive anxiety and societal schizophrenia on some topics, imagine what can be done with personalized AI (especially if the buyers are well funded politicians, or state-backed malicious actors vying for territory, real estate, or natural resources where you live - the highest margin opportunities).
At first, In retail you had billboards and shelf space. The lowest quality ingredients your product has (example syrup bottled with soda water), the higher your margin was, the more you could afford to buy out shelf space in retail chains and keep any higher quality competition out. Then you would use some extra profits to buy out national ads and you’d become a top holding for the biggest investors. That was the low-tech flywheel.
In the Search Engine world - the billboards weee the Margin-eating auction-based ads prices and the shelf space became SEO on increasingly diluted and dis-informative content to fill the shelf-space side. In Video advertising, rage-bait and conspiracy theories try to eat up the time available for top users.
AI advertising if done right can be useful, but the industry that asks for it intentionally asks for obtrusive and attention hogging, not for useful. The goal is always to push people to generate demand, not sit there when they need something. Thus the repetition, psychological experiments, emotional warfare (surfacing or creating perceived deficiencies, then selling the cure). Now if you understand that the parties funding AI expansion are not Procter and Gamble- level commercial entities but state and sovereign investors, you can forecast what the main use cases may be and how those will be approached. Especially if natural resources are becoming more profitable than consumer demand.
It's ads after they've got some sort of lock in that is the problem. e.g. some sort of system that "knows" you and makes it hard to switch to another provider.
Once they've got that hold on you being force fed ads at max rate is guaranteed.
There's no question that "AI" is the next advertising frontier. I've been saying this for years[1][2][3]. It is going to be the most lucrative form of it yet, and no "AI" company will be able to resist it. Given the exorbitant amount of resources required for this technology, advertising will probably be the only viable business model that can sustain it at scale.
The exorbitant costs could save us from ads actually. instead everyone will have to pay subscriptions like for mobile phone plans.
Haven't heard of the ad-based Rolls-Royce yet.
> Yes, OpenAI is burning $8-12B in 2025. Compute infrastructure is obviously not cheap when serving 190M people daily.
So casual. Actual ad giants like Meta and Google are serving many more people than 190M while bringing in actual profit.
Yes, let's say these are just the early days and they are burning money just like any other VC company. But how are they going to scale up their hardware/usage and get a profit at the same time?
AI hardware is getting optimized YOY too but the flagship models are getting bigger every year as well. I don't see how they are going to get profit without jacking their prices at the same time. And price increases always hits usage growth.
Serving an ad is very cheap these days, while serving a big model is very much expensive.
"Ad" is a euphamism for behavioral management - the goal and the pièce de résistance for any successful enterprise. Always has been this way, always will remain this way. Only thing that is changing is how easy we're making it for them.
I don't understand why people are upset. How do you monetize free users? Ads. What other websites do this? All of them. Not controversial. Not an issue.
Ads are what gets me property and news flash, they aren't going away.
It's just disappointing that this is the best society could come up with. Advertising is exploitive, this is well studied, but it is also just kind of a lame outcome.
I also wonder if the dollars and cents work out, the cost to provide the service to show the ads on is astronomical in comparison to other ad networks, but I don't have details enough to make any claims on that aspect.
I wish we collectively had a better understanding of those ad tech shifts being fundamentally zero sum.
If we treat marketing as a black box, where are the benefits from supposedly more efficient marketing? Ad budgets are the same. People have the same amount of disposable income (or less, really). So on the both sides of the box converting ad budgets into paying customers the sum is the same. Quasi-monopolistic ad networks (Google and Meta) just hoovered up the money that previously went into other ad spaces, like local papers. Now OpenAI is going to fight for the same pie.
Ads aren't a long-term viable model for tools. Each year it gets more feasible to self host tools (email being the od exception, but there are still many ad free alternatives). Ads shifting vehicles to AI will extend the lifetime a bit, but even still local models are getting better and that's without even much architectural advancement.
I don't see an end to advertising all together though, public spaces and entertainment don't really have an escape unless forced by regulation.
This very much reminds me how the earliest users get a bit screwed due to high costs and low quality. Maybe these users are caused enthusiasts, so they don't care. The next set of users get higher quality and lower costs. These are your big winners in the timeline of a technology.
The middle users get benefits, but aren't treated quite like the previous set.
Then you have your late adopters, these are the ones that are lightly abused, but they get a mature product, so it isn't that bad.
Finally you have your last users. These are milked for every drop. They have irrational loyalty or are locked in.
I imagine AI will follow this trend and we are entering past those middle users as we speak. Seeing how little difference there was between GPT 3.5 and 4, and how computationally expensive 4.5 was, I think we've hit the end. Now its just how many prompts do you want to run for COT/Thinking?
GPT 5.2 is cheap and they are proposing ads. They see the end is near and need to capture profit before local models take over.
I'm not so sure. Much like search engines, you can run one yourself or pay Kagi but most people prefer to keep their money and deal with the ads. Streaming services have demonstrated that people have a pretty high tolerance for ads.
Search so far has not been overly pushy with ads. It's easy enough to gain the instinct of scrolling down after each search. There's little incentive for people to seek out an ad free alternative.
That changes with local AI though. There is now incentive to integrate and further develop self hosted search. You can see it happening on AI services already, using their own internal search engines for better reasoning and more accurate results.
I suspect Google's censorship and intentional worsening of search results to increase traffic would've been enough on its own to eventually drive people to self hosted search as it became trivial to setup.
Streaming entertainment is different, there's usually no legal alternatives. Either you pay extra for no ads, or you put up with the ads. You could easily say that streaming services have demonstrated that people don't have a high tolerance for ads as well. One of the major drivers to streaming from cable TV was the lack of ads at the time.
AI-generated ads. Dead-internet dog food. I’ve had to block recommendations across multiple SNS feeds because they’re flooded with blatant AI slop: synthetic video, synthetic images, synthetic music, topped off with a fake voice narrating the whole thing. Nausea.
then I open LinkedIn and it’s C-suite know-nothings openly bragging, wrapped in self-aggrandizing, narcissistic nonsense that only garners likes from other C-suite know-nothings or PMs that have never written a line of code, shilling AI like evangelists and borderline celebrating the obsolescence of entire careers despite being unable to deploy their boring SaaS app live to production.
to keep that part of my brain flexed however, because I do enjoy the craft of software engineering, I still tinker as a hobby, working on passion projects on my own terms. But it’s not my bread-and-butter anymore. Pivoting away from all this dogshit has been the biggest weight off my shoulders this year as I budget my investments and the savings garnered from my extensive engineering career abroad in Japan. early retirement. I’m done.
Kinda funny the author fed a visual from French film 'La Haine'[0] to ChatGPT to produce whatever this illustration is supposed to convey ("The world is our/ads"? What does that mean?).
I have never really looked at ad revenues, but honestly those numbers seem reasonable and crazy at the same time (or their calculation at least).
My main issue is, that I hate oligopolies. For many industries I think a country can protect itself against oligopolies from outside. But everything digital comes out of little valley on the west coast. This really bothers me.
I’m fascinated at how out of touch that NYT article is. It’s as if it was written by someone who just spent 3 years on the moon. “The next big thing will be agents: The models will fill digital shopping baskets and take care of online bills. They will act for you.”
Golly Mr two times Pulitzer nominee, do tell us more!
There is a kind of liberal arts elite that seems to not be using AI very much and not be buying any of their services. Contrast that with those of us in tech who are handing over money as fast as we can and can’t get enough of gpt 5.2 codex on xhigh and similar products that are game changing enablers.
Makes me wonder if we’re seeing a fracture in society beginning to form where the doomsdayers, naysayers, cynics and skeptics will realize their error too late.
My view on AI is that this is the world’s first Unbubble: where the majority view is that we are over invested, but where history will show we actually underestimated future revenue and profitability.
The conditions for the Unbubble are perfect. We have a once in a species level innovation with an economic system where all value accrues to the creators and financiers. And we have just emerged from the housing bubble and the dot com bubble in the last 3 decades, freshly scorched.
We thought connecting everyone would create new value far faster than it did. But really it took a long time to run all that fiber and make it fast, and it was just laying the plumbing for this moment.
Training big foundational models may seem slow, but it’s happening way faster than circling continents and the globe with fiber and developing terabit switching fabric.
I spend 12 hours a day using codex CLI to write extremely fast Rust and cuda code with advanced math that does things I didn’t think were possible. My focus is on creating value from the second and third order effects of AI. These enabling effects are in few conversations. As weirdly innovative products emerge from small shops, they will begin to be discussed.
I have no idea why so many people think that an argument that AI works is the same thing as an argument that AI will be profitable.
The better AI gets, the better the training techniques get, and the better the algorithms get will result in fewer processors needed to run something of use. All of the advances will end up in the public domain if not immediately after or before they are even implemented, soon after. There will not be many economies of scale between having 100M customers or 10K customers, so no way to keep out competitors. They will all compete on price. If the models get really, really good, a "good enough" model will end up running on your old laptop and you won't have to pay for anything.
Saying that AI will be productive - which is yet to be seen, I don't know how much polishing or complete rethinking your code will have to go through before it can ship as an actual product that you have to stand behind and support - is not the same as saying that AI will be profitable.
We actually don't even need that many computer programs. Hypothetically, a ton of excess LLM coding supply might allow us to take out a few layers of expensive abstraction from our current stacks, and make more code even less necessary. They kept telling us that all of that abstraction was a result of trying to save developer labor costs, right? If AI is productive and rentiers can't manage to extract that productivity due to competition, that equation changes.
In the end, we say that the dot com bubble resulted in a huge amount of productive capacity that we were later able to put to use. But that doesn't mean that putting a quarter of a billion 90s dollars into DrKoop.com was a good idea; nope, still dumb.
> I have no idea why so many people think that an argument that AI works is the same thing as an argument that AI will be profitable.
The fact that it works well for expensive categories of output (like software engineering, legal strategy, etc...) makes it difficult to imagine that it won't be profitable. You could still make an argument that the investments being made today are disproportionate, or that intense competition will stifle margins, but it's creating enough value to capture plenty of money.
I can't be the only person completely unconcerned about this state of affairs. They're ads. This is the most straightforward incentive structure in the world - they are paid to supply ads on behalf of other companies, and we consume those ads and are, in turn, provided with their product. I don't know why it is, but people are incapable of evaluating this exchange objectively - there's something inherently detestable about advertisement to the human mind. This is a perfectly reasonable exchange.
Besides, if it wasn't for ads, I never would've found out about Zyns, and now I can't stop buying them.
No LOL. Zyns are nicotine pouches you insert into your gums for a gradual release of nicotine. They're powerful. Unfortunately, I went from using 3mg Zyns to 6mg Zyns, and had to sit in front of my bathroom sink, fighting the urge to retch. Be careful with them, but they're a good way to ramp up to cigarette smoking
Ads feel good when they’re for something we’re actively in need of. But they usually aren’t, and they are also often scammy or scummy. I bet we’d feel a lot different about ads if these things changed.
My prediction: Google will win. Rationale: cost/token + pre-existing ad knowledge + APIs for third-party apps. My concern is how an OpenAI collapse could hurt Microsoft and Nvidia.
> 2029: $50.00 (Suuuuuuuper bullish case) - Approaching Google’s ~$60 ARPU. By now, the infrastructure is mature, and "Conversational Commerce" is the standard. This is what Softbank is praying will happen.
There's no way Softbank's, or any other investor's, extreme bull case is that four years from now, ChatGPT sells the same amount of advertising as Google and earns $50 a year.
The extreme bull projection is that everyone buys everything through ChatGPT and each user is worth thousands per year. If you don't believe there's at least a slim chance of this you shouldn't be investing in OpenAI, and if you're an OpenAI executive who doesn't think there's a chance of this you shouldn't be writing pitch decks for SoftBank.
I meant super bullish from an outsiders point of view, but I do agree that the projections from within the investors circle are likely multiples of that.
"it seems that the pinnacle of human intelligence: the greatest, smartest, brightest minds have all come together to... build us another ad engine"
Putting aside the ridiculous hyperbole, the reason is that consumerism is our culture. Our cult-ure. Everything is oriented toward and reduced to consumption. Our worth as human beings is replaced by consumerist criteria and measures. It's why physicists leave research and work in finance where their training is repurposed in service of all sorts of financial jiggery-pokery.
"The A in AGI stands for Ads! It's all ads!! Ads that you can't even block because they are BAKED into the streamed probabilistic word selector purposefully skewed to output the highest bidder's marketing copy."
But note the implication. Sure, ads weaved into the content, but they still must be targeted. And here's the irony of the online existence. People often refrain from expressing various desires in public for fear of judgement. It's why the vitriol online is so much spicier. The world of social media where you can express repressed opinions, the world of games and other ahem media where you can sublimate all sorts of desires and fantasies - all of this is data for the AI machine. These companies, in some respects, "know" you better than the people in your life do - especially those parts of you that you could be embarrassed to reveal in public - and they use this information to manipulate you, largely for profit, but why not for broader social and psychological control. AI's convenience is already irresistible. It's the go-to in Google search.
People are a bit too eager to jump on the emergence of ads as an indicator that things are slowing down. I view it as the opposite, mostly because of my experience with Codex 5.2 and Opus 4.5. These models are incredible. I think by some definitions they’re already AGI.
So why bake in ads? My hunch is that raising funds privately can only take you so far. To keep scaling, they need more capital and have to go public. Despite all the hype they still have to show _some_ revenue to help justify the valuation they need to keep buying hardware. They are a business after all. Ads to support the lowest tiers feel like a no brainer. People already accept them for search.
I'd pay $0.005 per conversation, provided the payment is not inconvenient, anonymous, and an account isn't required. That in my opinion is the root cause of the problem, people can't pay easily even if they wanted to pay instead of get ads.
I think the next natural evolution after showing ads in chat sessions is providing services where LLMs tailor site content to include ads in real time. Right now you get served a prepared advertisement after the bid is won and the ad for you is selected. With LLMs, both the bidding process and the ad served would be seamlessly integrated with the site content/context.
Part of the "problem" with ads is people know they're ads. What if this comment was edited by HN's servers and rephrased to mention a specific product? You might see a sentence about how OpenAI is the future, someone else might see how claude or anthropic are. Another person might see a paragraph from me about how I used Tide to clean laundry this morning with the help of AI, telling me the right portions for the right cloth. You might suspect it's AI but you won't always be able to tell. Even if they made it more obvious like how reddit is doing it, the content of the AD itself, pictures, text,etc.. could be crafted dynamically so that it embeds in your subconscious without much resistance.
The tech developed to make ads more effective is also used to influence people for other purposes. The current state of society came about after the widespread accessibility of smartphones, social media and the rise of surveillance capitalism. Russia's influence ops using ads is well documented for example. I mentioned all this to say how catastrophic the combination of LLMs and advertising could be, even by today's standards.
yeah but any service that shittifies will get upstaged by services that don't (cough cough: Deepseek)
I need unskewed answers more than I need technical prowness, because technical expertise is going towards commodity availability. i like chat GPT but I'm gone the second they put ads into my development workflow. Bye!
We should assume that at least a portion of the ads spending currently being channeled towards search would be redirected towards AI, but even then I question if the ad market is large enough to fund all the tech and media companies that rely on it. The ever increasing question to generate more value for the shareholders is in large part being funded by consumerism, gambling, borderline, or outright scams, and I question how much more value can be extracted by that route. We've certainly already crossed a lot of people ethical barriers.
What if your query is answered by an insane AI that is obsessed with getting you to buy things? Like this demo that could only think about the Golden Gate?
I am going to offer an unpopular opinion. This is not a bad thing.
Even now there are viable options for a person to pick up a dedicated ( and reasonably powerful ) local inference machine, where time from setup to working is than few hours ( more if you don't want to use Windows.. which is fair ).
Separately, about the chat sessions. For once, those ads could be more relevant than repeat toaster ads immediately after me buying a toaster. But if one is worried about profiling ( and advertising ), one should not using a commercial solution anyway. Personally, I am taking a.. calculated risk.
There is a concern that openai will follow the same path as google, but they can't ( at least for now ) really afford to make chatgpt not useful as this is their only viable product.
I will end with a more optimistic note. This is HN. There are people here, who are likely working on something that does not depend on openai or any of the big providers anyway. It is going to be ok. And if it won't be. Make it so. After all, this is supposed to be your realm. Own it.
> Mate come on. OpenAI is not dying, they're not running out of money. Yes, they're creating possibly the craziest circular economy and defying every economics law
You are starting with wrong assumption and contradicting yourself. Circular economy couldn't last forever once we start looking at the profit. They need money outside the funding to justify the funding.
You can't both say they are not earning at all and they are being greedy.
Pharma ads as AI health advice will be super profitable. AIs are very engaging and able convince people they have a disease, inadvertently coach them on how to mislead their doctor, and how to fast track diagnosis supporting their specific meds. The only guard is to have detailed manifest of exactly what was used in training. Even that may prove insufficient as "final assembly" has emergent properties. For example, omitting case reports of severe outcomes for a given formulation. Bias can be constructed.
OpenAI is here because Sam Altman is NOT a product guy. He craves Apple style consumer success, but he's terrible at productizing his technology. Remember the marketplace of custom GPTs? Hell even the name ChatGPT. Anthropic had to show them how to build useful workflows for developers using AI. Meanwhile, OpenAI delivered... Sora.
To actually quote Sam Altman: "I think of ads as a last resort for a business model."
It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
"OpenAI is here because Sam Altman is NOT a product guy. He craves Apple style consumer success, but he's terrible at productizing his technology"
Seriously, consider putting more thought and effort into your comments. This is wildly out of touch and I think it is because people lack the creativity to imagine the counterfactual - some one else running OpenAI.
OpenAI is remarkably well run - it is a fairly good product. The best model so far, the best experience, the 2nd best coding experience.
Never thought of ChatGPT as being just one of the GPTs that could exist, but it make a lot of sense. In a world where OpenAI where better managed, more focused on actually delivering actual value, ChatGPT would be the show case AI product, while the value is generated by the custom solutions delivered to other companies to embed in their products.
> It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
AI is a perfect technology for Ads though. Instead of me wasting time reviewing multiple products for my use case, ChatGpt will just give me top 3 recommendations with the pros and cons and then buy it for me.
The one thing it will never recommend is no product at all.
You've ceded even the glimmers of discernment that remain in you and all I feel is pity.
It is not a 'waste of time' to interrogate your own desires.
There's no such thing as a 'top 3' for all things under heaven. You cannot purchase yourself a solution to every 'use case'. Furthermore, even if there were such a ranking, the ad machine would not reveal it to you, as you are not the customer, you are the mark.
You don't even want to be bothered to hit the 'buy it now' button. This is the mental model of an immaculate rube. You deserve better.
> It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
Can it tho? The problem with LLMs right now is that they don't have much useful purposes beyond spam, slop, hallucinated searches, and advertisements. The lack of a product is why there isn't a profit to be made in them
To those who believe ads are evil and must be stopped, I ask how the world will work if we kill the freedom to sell space for commercial messages where people can see them.
I don't think ads are evil, but the techniques used to get eyes are evil. Using fear, hate, desire to get people to click has a negative impact on society. I don't think ads should be banned, but engineering 'engagement' definitely should.
Advertising is how I learned about lots of things I am glad I learned about.
I am furious about lots of the ads that I see. I want to stop certain kinds of advertising. I live where there are no billboards allowed and I love that.
But I want to live in a world where people can pay to have their messages displayed where they will be seen. Simply because banning that activity would cripple the flow of information. That’s what advertising is.
If you want to ban a particular form of advertising then say what and why. The “ban all ads” thing just doesn’t make sense.
information flows fine without paid ads, and with much better incentives
> people can pay to have their messages displayed where they will be seen
…why? distribution of information is free across the world, which was not the case a century ago. let the message speak for itself
I ask again, what’s your actual argument against? you’ve seen things through ads you’ve liked? you think people should be allowed to pay to put their thumbs on the scale of the distribution of information? to what end?
What do you propose to ban? How do you define it? You want a policy, so write the policy and let me read it.
I have a very broad idea of what ads are. Maybe you don’t. Say what you mean by paid ads.
Am I allowed to offer and accept compensation for boosting one message above others, or not? Would I be allowed to place a hyperlink on my site in exchange for a reciprocal hyperlink? That’s a clear example of compensated communication. That’s what I think ads are.
Imagine the ad police. “You blogged about a product. Someone said you sounded insincere. Let’s see the receipt for purchase. Can’t prove you bought it? Prove you weren’t compensated for your blog post or pay a fine.” Kafka land.
> Imagine the ad police. “You blogged about a product. Someone said you sounded insincere. Let’s see the receipt for purchase. Can’t prove you bought it? Prove you weren’t compensated for your blog post or pay a fine.” Kafka land.
immediately to a fantasy slippery slope argument, cool!
your argument seems to boil down to paid ads being the lifeblood of the flow of information. my argument is it corrupts that flow of information, and we’d be better without them —- everything would operate just fine. individuals and organizations would have better incentives to share valuable information, not what they get paid to. obviously there would be plenty of details and edge cases to work out, as with any policy in the real world
I’m not going to write out policy in HackerNews comments and play that game with someone who jumps to the “imagine this crazy world where the police start arresting all of us over free speech!” as their explanation for what would go wrong
The US already has what you call an ad police: for decades, it has been unlawful to make false statements in an ad and to accept any money for advertising (or endorsement or sponsorship) without making it plain to the viewer which parts of the content are ads and which are not.
Since the US Federal Trade Commission can smoothly enforce the second of those two rules, what makes you think it cannot smoothly enforce an outright ban on ads? "Smoothly": you seem to have been unaware that the second of the rules I described existed, and you probably would have been aware if the enforcement had yielded anything deserving of the name "kafka land".
In general I think the answer could be pretty simple: dedicated marketplaces for products and services, where we go to search for the things we need and want. A humble newspaper contains great examples of good and bad advertising.
Newspapers have whole pages of bad ads, and random bad ads wedged between actual content. Ads have a perverse incentive to mimic the look of actual content, just like on the web. I'd never pick up a newspaper with a goal of "I want to find a tax service" and yet ads for such services are there, unwanted, wedged into other content.
But newspapers also have classified sections, a better kind of ad. They're in a predictable place, where you can go if you need a job.
Imagine if the actual content weren't perforated by a scattershot of ads. Ad revenue would go down, but readership would likely go up. Besides profit motives, it's also a case of the good of the many outweighing the good of the few.
Others like myself do consider the ads when we read the newspaper. I find out about events and local companies that way. I don’t see many print ads that confuse me as to whether they are paid advertisements at a glance.
What are you worried will happen? ChatGPT releases and noone will know? Anyone interested in staying up to date with new technology can read a tech newspaper. That newspaper is paid by the readers, so its incentive is to show actually interesting products. It is not paid by some random company whose product might be bad or outright malicious.
Depends on what exactly gets banned. What is an ad? What isn’t? Must all information be paid for by the audience? I wish someone would tell me what this ban is supposed to cover.
I worry that innovators and small businesses won’t be able to get their message out efficiently. You won’t be able to display your message on anyone else’s property. You won’t be able to take any compensation for promoting anything.
Anything wie usually consider an ad/sponsored content/boosted content. That includes ad banners, video sponsors, boosted posts, billboards, etc. Really any way that a third party pays some organization to put certain content on their space (be it physical or digital) to be seen by people who are probably there for other reasons than to see that content.
An exact definition fortunately isn't necessary, since our legal system is well adapted to deal with terms that are difficult to define.
> Must all information be paid for by the audience?
Other monetization paths are still possible. E.g. some SaaS orgs could still run blogs to gain mind share, as they do now.
Hopefully most information will be paid for by the audience though.
> I worry that innovators and small businesses won’t be able to get their message out efficiently.
If ads are no longer a thing, people will find other means to get information.
You mentioned in another comment that you like ads in newspapers telling you about some local stores and events. If the readers are genuinely interested in this, the newspaper can still put that information there. Just instead of the highest bidder, they'll put the ones that are genuinely interesting.
Of course, if your product is not worth reading about, it will suddenly be much more difficult to promote it. In my opinion, that is a good thing.
Thank you. You listed concrete examples of things you would ban and you stated a general definition. It sounds like a terrible kind of regime, stripped of the freedom of speech and loaded with arbitrary decisions about what the audience probably wanted to see, resulting in an even more opaque and corrupt flow of information. Nope, no thanks.
I think the problem you have with ads is a you problem.
> It sounds like a terrible kind of regime, stripped of the freedom of speech [...]
I agree that this would be a significant restriction on speech. I think it'd be worth it, especially since paying someone to show your opinion isn't necessary for political discourse, but I understand the caution.
> I think the problem you have with ads is a you problem.
That I very much disagree with.
Ads not just waste billions of dollars on producing content that is so bad you literally pay people to watch it, they also degrade the business model of large parts of the industry. Because of the ad-based business model, Google doesn't show you the best results, Meta tries to get you addicted, YouTube prevents you from swearing and discussing certain political content (a restriction on speech), everyone tries to track you, etc.
I believe that if all these companies' customers were their users, there would be a societal shift.
When we do this, we try to find a representative phrase from the article itself that accurately and neutrally represents what the article is about. There is nearly always one of those if you look for it. In this way, we (mostly) avoid having to make up wording of our own, which is something we don't like to do.
Thank you for your service, dang. You do a great job keeping HN a great site. I disagree with your decision regarding changing the title, though. Yes, it's tongue-in-cheek, but I wouldn't call it bait.
I wonder how HN anno 1968 would have moderated "Go To Statement Considered Harmful". *
* Amusing side note: Dijkstra's submitted title was actually "A Case Against the Goto Statement" but the editor editorialized it.
As I read or rather hear it, "The A in AGI stands for Ads" has two things qualifying it as linkbait in the HN sense. One is snark, the other is the mammoth meme ("AGI"). Both those things stick to the Big Ball of Mud that rolls chaotically over most of the internet.
The objection here isn't to wit, it's to predictability. I'm not sure what the equivalent of internet snark was in 1968, but I doubt that "Go To Statement Considered Harmful" embodied it.
Of course, interpretations differ. No two people would agree on all these classifications, including me and tomhow. The important point isn't that we always make the correct call (we don't, plus there's no such thing as the correct call), but that we try to the principles from the guidelines, even though doing so involves interpretation and is therefore uneven.
On the bright side, it means that objections to titles and/or title edits, always good for firing up an HN thread, will always be with us!
What’s the definition of linkbait in this case? I can’t find a good definition online, as the best I can find is “content designed to attract backlinks”, which this does not appear to be / isn’t related to the title?
My guess as to why it was changed was that it doesn't really work as a pithy quip the moment you actually think about it.
OpenAI is introducing ads on their purported path from "AI" to "AGI"... hence the "A" was already accounted for in the acronym. If only "Ads" started with "G"!
I think having mixed economic interests is great when an advertising company is asking you, you execs, your engineers, and consultants to dump whole copies of project planning, business practices, and internal dynamics on their servers…
If I’m looking at ads for your shizz a) why can’t we just pay as a business expense, inline ads and B2B are an odd combo, and b) if this isn’t fully local tech I think there is a real challenge trusting MS or OpenAI to respect their contracts.
We’re not too far past these same dudes running around, violating NDAs, and launching product clones to eat partner businesses. Now ads? … trust? … scorpions and frogs, scorpions and frogs.
Who are you to say LLMs have never provided value to the user? I last used an agent earlier today and it finished a job that would've taken me a lot longer to complete without assistance.
There is something to be said about the state of advertising.
Increasingly it seems you must go to the almighty Google or Meta in order to launch any business.
We're looking to expand into a new business line and have out grown our pharmacy capacity.
The new business line will cost about $2M in software dev, and $3M for the new facility. The advertising budget? $40,000,000 (annual).
We can build 10 robotic pharmacies (~10 staff per 4000 fills daily, each) for the price of just the advertising.
Increasingly we wonder why America doesn't build more and here is why. You are going to give all your revenue to two platforms. Unless you operate in a business line with 50% margin you are screwed.
I don't know what the solution is, but its clear that the platforms are figuring out how much margin everyone has and slowly eroding it. Somewhere between 8-15% of the cost of all products we purchase is advertising spend.
Advertising spend being too high is a symptom of a supply glut. Too many products in the marketplace, not enough consumers to buy them.
In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Alas, the short-term single-firm directional incentive for company decision makers in that world leads to marginal prioritization of higher margins. The loss of wages leads to loss of consumer spending power but it's spread across the economy. But every firm has the same incentive so they all do the same thing, and the good thing gets ruined.
This line of thinking leads to a Georgist-ish conclusion: The class conflict shouldn't be between workers and employers. They should be allies; the real cause of nobody being able to afford anything is rent extractors. (Writing in the 1800's, George [1] was most concerned about land rents; but the advertising monopoly of Google / Meta may be another form of extractive rent with similar characteristics.)
Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
[1] https://www.astralcodexten.com/p/your-book-review-progress-a...
> In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level.
The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.
>The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
Why only rich nations? Many of the most unequal countries are also poor (or at least, not rich), so why do they get a pass?
https://en.wikipedia.org/wiki/File:Gini_Coefficient_of_Wealt...
https://en.wikipedia.org/wiki/File:World_Bank_Inequality_202...
Take a few quantitative courses (ie statistics). Roughly speaking, you usually want to compare similar-ish groups. It's like if you want to examine the effects of diet on a human body, you can't just mix old and young haphazardly. Advertising spend in Somalia probably works very different than advertising spend in Norway.
>Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.
thats an overly simplistic way to look at it. Of course you can never get more money from your employees' purchases than you give them, that makes no sense. The point is using your market power as a large employer to raise market salaries. People will not want to work for your competitors or other sectors if they pay half what you do. So when you rise, naturally other salaries will rise too. And those other workers will also be buying cars.
Whether that makes sense economically is a difficult problem to quantify, especially over any fixed timeframe. I would guess not, at least if your brand isnt insanely strong (on the level of half or more people with enough money would buy it)
It's a collective action problem. If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
>If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
Does this actually work? Suppose you're on an island where the economy only produces coconuts. How does giving workers more coconuts make the economy grow, such that there's more coconuts to go around overall? Unless the workers were absolutely famished, giving them more coconuts isn't going to increase productivity. You might argue this model isn't representative of the real world, but that's approximately how the economy works. It can produce a certain amount of "stuff" (ie. coconuts), of which some portion can be given to workers, and the remainder can be given to the kings/elites/capitalists/whatever. Unless you improve productivity, there isn't going to be magically more stuff to go around.
Giving each worker a car can plausibly increase their productivity (less time spent commuting?) but the effect is small, and unlikely to be recouped by car companies. The situation looks even worse in the current economy. If everyone's paychecks were 10% bigger, what marginal item do you think it'll be spent on? A bigger car? A new iPhone or big screen TV? How would any of those increase productivity?
> Suppose you're on an island where the economy only produces coconuts.
This is why nobody takes economists seriously. What you lose in simplifying down to this model is literally everything. The coconut economy has zero predictive power.
In the real world, distribution effects dramatically affect the functioning of the economy, because workers are also consumers and owners of capital are siphoning off the purchasing power of their customers. Productivity isn’t the question in the modern economy - we’re already massively overproducing just about everything - our problem is both our wealth and production allocations are borderline suicidal.
>This is why nobody takes economists seriously. What you lose in simplifying down to this model is literally everything. The coconut economy has zero predictive power.
A simplified model is needed otherwise rigorous analysis becomes impossible, and people make handwavy arguments about how paying workers more means they can spend more, which means factories, and it's a perpetual growth machine!
>we’re already massively overproducing just about everything
No we're not. If we weren't, we shouldn't have seen the massive inflation near the end of covid. The supply disruptions hit almost immediately, but it wasn't until the stimmy checks hit that inflation went up.
>our problem is both our wealth and production allocations are borderline suicidal.
If you read my previous comments more carefully, you'd note that I'm not arguing against better wages for workers as a whole, only that contrary to what some people claim, they don't pay for themselves.
> A simplified model is needed otherwise rigorous analysis becomes impossible, and people make handwavy arguments about how paying workers more means they can spend more, which means factories, and it's a perpetual growth machine!
I'm no economist but you can't live on an island that only produces coconuts, because the people on that island would quickly start producing other stuff, breaking your premise.
This is like saying cash is useless because amoeba haven't evolved a cash economy.
> A simplified model is needed otherwise rigorous analysis becomes impossible
If your tools aren’t capable of rigorous analysis of a model that retains enough detail to capture the salient features of the thing they’re trying to model, they’re not the tools for the job.
What's the "salient feature" that's missing? From all the other replies it sounds like people are still relying on the handwavy argument that "pay workers more -> workers spend more -> you can pay workers more -> repeat", but can't articulate where the actual growth is coming from. If this is true, the communism would have beaten capitalism, because they would be able to exploit this better than any capitalist system, but obviously that didn't happen.
Overall this feels like troll physics[1]. Yes, the idea that having a magnet pull you forward, which itself is pushed forward by you moving forward sounds superficially plausible as well, but it doesn't pencil out in reality. The only difference is that "the economy" is complex enough it's non-trivial to disprove, and people can handwave away any objections.
[1] https://knowyourmeme.com/photos/74256-troll-science-troll-ph...
> What's the "salient feature" that's missing?
Multiple products. Multiple employers. A currency distinct from a consumable product.
A simplified model could be useful, but yours goes too far.
It doesn't take into account effects like that by paying more you can attract more, and more productive workers. Or that it puts pressure on other employers to increase wages.
> but can't articulate where the actual growth is coming from
I am not an economist, but I think one situation where this works is where you are competing for workers with other employers that have high margins, and pay their workers relatively little. In that case one of two things happens. Either other employers also increase wages, leading to their workers also having more money, which they can spend on your product, or they don't compete on wages, and you can outcompete them in getting the best workers.
The key is that total productivity doesn't necessarily improve, but wealth distribution becomes more equitable.
> What's the "salient feature" that's missing?
As it sits, all of the members of your coconut economy are going to be dead of malnutrition or exposure in relatively short order, so maybe address that and then we can work our way up to the flaws in the economic theory that drove the greatest wealth expansion and boom in consumer spending the world has ever seen.
The salient feature is that people consume a higher percentage of their wages than investors do of their wealth. Redistributing some profits to wages means that money gets spent, inducing demand. This also has a higher multiplier effect than profits, because consumer spending can move through the economy multiple times in a measurement period.
> No we're not. If we weren't, we shouldn't have seen the massive inflation near the end of covid. The supply disruptions hit almost immediately, but it wasn't until the stimmy checks hit that inflation went up.
What? The first Covid stimulus checks were April 2020. 271 billion in 2020 here per here: https://www.pgpf.org/article/what-to-know-about-all-three-ro.... 135B of the second round by Mar 2021. The third started about then. Inflation - and consumer activity in most areas - was low because nobody was going anywhere still, but at least we did a fair job of avoiding mass unemployment and homelessness.
Then inflation started accelerating during the economy's broader reopening in April 2021 (2.6 -> 4.2 percent from March). It didn't peak until near the end of 2022. Those stimulus checks were LONG gone by then for most people, since a huge portion of the country lives paycheck to paycheck, and the stimulus checks weren't available to people making more than 80-100k (single or avg-per-person in a married couple), which is the higher-income demographic that would have the disposable income to really drive inflation across the board by a "let's buy stuff we wouldn't otherwise" splashy purchase.
Instead, inflation was driven by people getting back out and doing/buying all the shit that had all been scaled down. The first stimulus checks didn't drive it because people weren't purchasing as broadly yet, and were still more in panic mode. Textbook bullwhip effect; at steady state we produced more than enough and never saw shortages, then in Covid demand types and volumes shifted enough to cause shortages of certain things and surpluses of far more other "non-quarantine consumer" things, so production changed, and then when things started to go back to normal ALL those things got hit again. I don't know if I'd agree that we're "massively" overproducing everything now that we're not in a quarantine scenario again, but the consistency of supply of most normal things suggests a lot of excess capacity in the system to absorb normal fluctuations in a way that nobody ever has to think about where their next roll of toilet paper is coming from again.
This is how we had a major boom in middle-class wealth int he US post WW2.
If you are only selling coconuts, a single raw material, yes, you will run into supply constraints such that prices go up. But that isn't how economics works. Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to solve.
Money solves the problems of the people that have the problems. If the problem is 'we need to eat', producers will diversify into new food sources to meet the demand, solving the problem, and capturing the money of the people who have that problem.
There is an enormous space of problems people have which cannot be solved due to lack of access to money. Increasing costs in childcare, elder care, and education are good examples.
>This is how we had a major boom in middle-class wealth int he US post WW2.
The fact that Europe got bombed no doubt helped too, same with the elites being concerned that communism was on the rise and giving workers a better deal in an effort to stave that off.
>Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to solve.
>Money solves the problems of the people that have the problems. If the problem is 'we need to eat', producers will diversify into new food sources to meet the demand, solving the problem, and capturing the money of the people who have that problem.
I'm not how you got the impression that I thought the economy had to be zero sum. I even specifically mentioned the possibility of more stuff to go around if productivity goes up. That's the problem with your "new industries develop" argument. Unless productivity goes up too, there will only be different stuff, not more stuff overall.
>There is an enormous space of problems people have which cannot be solved due to lack of access to money. Increasing costs in childcare, elder care, and education are good examples.
All of those are service industries that are resistant to scaling, and as a result productivity growth have been abysmal. Giving people more money to spend on those things just means productive capacity is removed from the economy elsewhere. Going back to the coconut economy example, it would certainly be nice if workers could have a maid to do the cleaning or a chef to do the cooking, but you still need people do the cleaning or cooking. At the end of the day you're just shuffling people around, not growing more coconuts.
>This is how we had a major boom in middle-class wealth int he US post WW2.
>The fact that Europe got bombed no doubt helped too
Europe also had a massive boom in middle-class wealth post WW2. I don't understand how this myth continues to live on, when the evidence against it is total.
It's a frequent refrain, but I actually don't believe that blowing up European factories would really make Americans materially wealthier.
It smells of the "if we go break the windows and sink the yachts of all the billionaires, it'll create a lot more jobs!" logic that the top-0.1%-of-earners doesn't seem to endorse...
> The fact that Europe got bombed no doubt helped too, same with the elites being concerned that communism was on the rise and giving workers a better deal in an effort to stave that off.
Workers got a better deal because the US intentionally passed massive top-end marginal tax rates pre-WWII with the goal of leading to less income-hoarding (or at least more charitable giving etc) at the top-of-the-top.
If the economy is 100% coconuts — all supply is coconuts, all demand is coconuts — then coconuts are all. Business owners sell coconuts in exchange for coconuts in order to acquire more coconuts. Employees are paid in coconuts which they trade for more coconuts. Paying workers more coconuts gives them more of what they want, which is coconuts, that they turn around and spend on coconuts.
That's exactly the problem. At the end of the day, unless you increase production of "stuff" (or coconuts), there isn't going to be magically more "stuff" (or coconuts) to go around just because people are shuffling "stuff" (or coconuts) around.
Not for coconuts, but in the real world, most products have economies of scale. If one rich guy has 99% of the money, the entire economy will be structured to serve his needs and yet nothing he buys will reach economies of scale. He just doesn't care to have that many Rolexes. So production methods will be fairly inefficient.
But if everyone has a bit of money, stuff can get mass produced, which actually makes for much greater total welfare, because the production methods are just a lot more efficient.
I don't understand what compels you to continue down this line of thought when its obvious flaws have been so clearly elaborated by other commenters.
I think you are more than capable of understanding what compels them, it's just not a very fun conclusion and one you'd rather not draw.
Nobody will increase production of stuff if all the money is increasingly concentrated into a shrinking percentage of people who have far more than they can spend on stuff.
That's how you get high asset inflation and "K-shaped" stuff as the rich increasingly look for any value-storage vehicle to "invest" in, since they can't get a return on producing stuff to sell to the people with less money...
Wasn't the idea to give people more money (i.e. higher wages) so they could buy more cars/coconuts/etc? That's different than just directly "paying" them in the goods.
So in your simplified coconut economy, you'd at least have to keep two distinct kinds of entities, the goods to be paid and the payment. You sort of replaced both with coconuts and concluded the resulting system wouldn't work.
> Does this actually work?
Higher wages means workers and businesses have to be more effective. So more goods and services are produced and available. It's not a zero-sum game.
"But workers are already as effective as they can be"
Great, in that case you have the margins to pay higher wages.
A high wage / high cost society is great for workers and for businesses which actually do real work and produce real goods and services. It's not great for everybody else. Ie those who don't work, and businesses who doesn't make a high contribution.
Let's say you skewed income distribution a bit more like 1950s US, when high marginal tax rates resulted in more equal distribution of revenue through mechanisms like deductions or simply not taking that extra bump from 3 to 4 million. Now the upper 1% has lower income, but they were already mostly not-limited in purchasing power by their income. The upper 5-10% gets more. They go out to eat more, etc, etc.
We tried that experiment after passing "soak the rich" taxes in the early 20th century, and it seemed to work out pretty well for economic growth and living standards. But then we moved back towards "let there be oligarchs with immense wealth" instead. One of the claims was that the "investments" from allowing the powerful to keep most of the revenue streams for themselves would foster enough development to make it more than worthwhile, but instead... the broad base of consumer spending power has tanked, so businesses to supply the masses haven't found spending power to justify new investment/development outside of ad-powered ones participating in an arms race for the constricting consumer spending power that remains (or those industries benefiting from wildly subsidized-in-weird-ways spending like healthcare/pharma). And so it has also inflated asset classes across the board as there aren't enough startup ideas to eat up all the investments because of the general decline in spending power. Which hurts spending power further. (IMO the ability to capture higher and higher amounts of corporate profits as personal income also correlates to the massive financialization, outsourcing, and other short-term number-juicing moves we've seen.)
We can point to a lot of problems that have occurred from taking revenue shares away from the average worker, so it shouldn't be rocket science to think that returning a greater share of revenue to workers would return some purchasing power and guide the economy back towards development and growth instead of zero-sum asset bubbles.
Is there? Covid stimulus would say there isn't. Granted a company raising wages doesn't print money out of air like the Fed but the amount of goods doesn't change, the cost of the goods adjusts to the monetary supply. You now pay more for the same.
The Covid stimulus that prevented a huge wave of unemployment in more industries beyond travel and hospitality while inflation remained quite low for the calendar year following March 2020?
Or are you blaming the 2020-and-2021 stimulus for the 2021-through-2023 bullwhip-effect predictable-yet-not-mitigated inflation as things re-opened and demand returned for stuff we'd ramped down supply chains for? While chasing stupid obviously-not-permanent-change trends like Peloton stock instead?
Look at how much of the country lives paycheck-to-paycheck, and the income limits of the stimulus checks - how can you connect those people getting immediate money in 2020 or early 2021 to inflation at the end of 2022?
I didn't even get Covid stimulus checks and yet I also spent way more in 2021 and 2022 and 2023 on a lot of categories of goods than I did in 2020. Cause I went outside and did things more.
> the economics never works out if you do the math
The economics work out pretty well if you are the only game in town where your employees can purchase what you have marketed to be the next big thing and status symbol that everyone must have.
The idea is to use that as a marketing ploy on all sides.
On one side, paying high wages is marketing on the employment market - enticing people to work at Ford's rather than somewhere else.
Then, you got the government side. A factory providing a town with a lot of high quality employment leads to a lot of purchasing power from the employees and thus to a growing city. Wolfsburg in Germany, the best example, literally was founded by/for Volkswagen. Being respected by local politics for that growth, in turn, leads politicians and city management to... be lenient in enforcing regulations impeding the business. The best example here is Tesla in Brandenburg near Berlin. With any other company in any other place in Germany, they would get hammered with fines. Tesla in turn set up shop in a destitute area, so politicians bent over backwards and looked aside despite numerous violations and transgressions.
And finally, you got the customer side. The story of a quality product, made by well-paid domestic workers, was as powerful a story as it still is today, at least in affluent circles.
Obviously this would never work with a single employer. But I think the point is moreso that if every employer, in an altruistic sense, decided to pay their employees enough to afford more purchasing power, the entire market would grow faster
Your logic is flawed. 8.8% of total wages vs 0% of some lesser number isn’t 8.8% of the difference.
If hypothetically you are paying 99x a year and bumping that to 100x means someone buys an 8.8x product that could be a win.
>If hypothetically you are paying 99x a year and bumping that to 100x means someone buys an 8.8x product that could be a win.
What type of company would this work for? Cars are so ingrained in our society that it's doubtful the marginal Ford (or Tesla) factory worker is going to be buying a $50k car just because they paid better wages.
A luxury car manufacturer could tip the scale of someone buying their product vs someone else’s product via an arbitrarily small wage increase.
The degree to which this is generalizable is of course a different story, but it’s at least theoretically possible for a small wage bump to be a net gain for the company.
The microeconomics of that decision are poor for the company, but the macroeconomics are great. But the macro angle has been reduced to "Fed interest rate" in America.
Why do you argue against paying people more when we are stuck in a society that increasingly fucks over workers with blithe logic and one-sided presentations of data?
Ok, so if he still makes a profit, so what? There are numerous other advantages to a happy and well-compensated workforce, even completely ignoring the societal benefits beyond just the company.
I'm just going to add a recommendation for the book 'Technofeudalism' by Yanis Varoufakis. The short version is that the current cloud economy is similar to serfs working under a feudal lord.
> the real cause of nobody being able to afford anything is rent extractors.
Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce. If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.
Yes, because the employer just happened to be the first one to find the fully built and equipped coat factory and he declared himself the boss. He in no way shape or form had to risk his capital to set up a successful business, so he should be living from scraps
Well, this is not was OP said ;-)
Am I seeing a fellow georgist in the wild? That's great!
I do agree that these monopolies are rent seeking and we should probably do something about it
> Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
This reminds me of this too https://www.youtube.com/watch?v=uvHwyrem24M (CEO who gave all his employees minimum $70,000 paycheck thriving six years later)
Everyone bet that they would fold but they are doing stronger than ever. People took voluntary pay cuts when the company was under pressure and they even gifted their CEO their favourite car out of their own geneorsity!
I always smile when I watch this video. (the company's gravity payments)
> The class conflict shouldn't be between workers and employers
I feel like the problem's becoming that the employers are themselves rent seekers (so think working at google,facebook,twitter) or the VC companies which want to build more Google's and facebooks and twitters but not companies like the one that I mentioned in the video
I don't think that's how it works. These companies have all the visibility control and make you invisible by default unless you pay them. It has very little to do with quality, demand, or any of the rest.
Stronger unions would help bring wages up.
That is an interesting chicken and egg problem. A strong union requires members who can demonstrate that prolonged work stoppages are a credible threat. If the employer thinks everyone will be starving and begging to come back after a week, the union has no power.
In other words, in order for a union to become strong, wages already need to be up to allow the workers to be able amass considerable savings to get them through the months and years when they aren't working. So higher wages have to come first. But to complicate matters, once workers have that, they often start to feel like they don't need a union.
The one time when unions did become strong, workers were so desperate for safer working conditions that potentially being thrown out on the street and left to starve was seen as a better option than being crushed by a machine. But the law now ensures that workers are just comfortable enough to prevent an uprising like that again.
>In a different world where there are higher wages, more people would have more spending power.
I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case)
Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are.
When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)
Food and clothing are often 5-10x cheaper in those countries compared to what people pay in America.
I dont think you have to go georgist for that take, adam smith’s whole “free market” originally meant “free from economic rent”
> The class conflict shouldn't be between workers and employers.
Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes.
Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.
Because employers don't tend to make choices about the "interests of the working class", they make choices about what benefits them specifically in the moment or near future. You need to get some sort of alignment on their interests and the interests of the working class to create change, whether that's via government intervention or otherwise.
And I hear you on ownership. It's "just" figuring out how to make that change.
>... so either they're all renting or none are.
The article in the parent comment specifically spells out why renting out land is different than say, "renting" out a car factory (or any other productive asset).
My problem with buying stuff is that by the age of 40 I had already attained everything that I ever needed or wanted except for a occasional replacement.
Personally, I don't need more products, but there are many services I would pay for if they existed. But, apparently companies don't seem to care about providing services. Why? Is it because they don't scale?
What kinds of services would you pay for that don’t already exist?
In general, it's difficult to find services that are high-quality and high-trust.
I'm not familiar with Georgism, but employers and rent extractors (e.g. the majority stock owners) seem to be one and the same pretty often, at least in the US.
A Marxist can certainly also be a Georgist, it's a matter between who should we eliminate first: the capitalists or the rent-seekers. Maybe we should eliminate the latter first in order to be able to properly tackle the former: the real class conflict between the proletariat and the bourgeois!
But you can also go a bit more extreme (and less orthodox) and say that classical capitalism has already come to an end, and in the current neoliberal era most of the purported "capitalists" are actually just rent-seekers (platform based companies which run either on ads or monthly payments) - you don't sell commodities anymore and instead just access to services. Maybe these are just a symptom of The Tendency of the Rate of Profit to Fall - where the value of labor itself has fallen so much that there is no way for any capitalist production to continue generating acceptable profits unless you do any rent-seeking behavior. In that sense, you can certainly be both a Georgist and a Marxist since you still believe in the TRPF and the inherent contradictions of capitalism (though quite an unorthodox one!)
> The new business line will cost about $2M in software dev, and $3M for the new facility. The advertising budget? $40,000,000 (annual).
The reason the advertising budget is such a high number and a recurring charge is that effective advertising returns an ROI on each dollar spent.
If the software budget was increased 10X to $20 million, would the company get 10X as many customers? No.
What about the facility? If you 10X the facility budget to $30 million would you get 10X as many customers? No.
However, advertising is a customer acquisition activity. Every dollar you spend on advertising provides additional customers. This is saturable, but the ceiling is very high. Much higher than spending on software or facilities.
The reason your ad budget isn’t so high isn’t because Google and Meta invented the discoverability and distribution problems or basic economics. It’s because it has been determined that acquiring new customers via advertising has a high ROI and therefore it’s a smart move to pour as much money as possible into customer acquisition.
If every $1 you spend on advertising produces $2 in customer LTV then your company should be maximizing ad spend until evidence of saturation starts appearing.
This commonly frustrates engineers who think it’s a wasted investment. The question is: Compared to what? If you could have the same number of customers and same amount of revenue without advertising then you should do that! However, you can’t. This isn’t a licensing fee that’s being paid. It’s putting money into a machine that returns more dollars back than you put into it.
I doubt the ROI would be so high if organic results stood any chance.
The ROI on bribes is very high too, but we haven’t legalized those (officially).
> I doubt the ROI would be so high if organic results stood any chance.
This is just the same fallacy. In what world are people going to organically share ads for this company on their Facebook feeds? Who is going to Google the company name before they know about it?
Every business needs to proactively acquire customers.
Distribution and CAC are top of mind values for any growth business. It has been this way long before Google and Meta existed. Digital advertising actually makes it cheaper and easier than ever to acquire customers at scale.
Information can travel without people paying for it do so.
Ban most ads and everything will still work fine.
Sounds like ads will just get replaced with covert word of mouth enticements. Want to get people to know about your product? Send free samples to influencers. Maybe even fly them out to CES and put them in nice hotels so they can experience your product announcements/demos. All of this is "unpaid", of course.
Assuming the influencers pay taxes, this doesn’t seem like something that can’t be addressed - we should be requiring influencers to prominently disclose incentives that could result in conflicts of interest.
this already happens
I would prefer a world that returned to the older '30 second blip (for the only) sponsor of the program' ad, which also seemed to be of the limited form: Here's Product X, it does Y, which makes your life better because Z. Informative, dry, stated by an announcer in a calm and not demanding way.
A lot of people enter the company or product name into the browser's search field and reach their intended target through an ad at the top of the results. If they proceed to purchase something, does this count as a conversion? I think it does. Unlike traditional advertising, this didn't influence the customer's decision to buy at all.
> A lot of people enter the company or product name into the browser's search field
They had to already know the company name or product name to get there.
This doesn’t just happen. Spreading the name of the product and getting it to stick in people’s minds takes a lot of advertising budget, on the whole.
I'm concerned that companies spend their advertising budget on these redirects because those have the best metrics, instead of actually making the brand and its products more known.
CAC-LTV by itself is not a great long term strategy. But it can appear like one in the short term to investors.
So there is a plethora of companies happily dumping investor money into paid customer acquisition.
Blue Apron was a classic example of borderline fraudulent growth metrics and a cash grab IPO before the customer acquisition funnel collapsed.
> Every dollar you spend on advertising provides additional customers.
If you’re just taking these customers from competitors, the marginal utility can be pretty low.
e.g. If you consider a world where there are no ads for cars, people aren’t going to meaningfully lose out of the utility they get from cars, carmakers simply avoid the prisoner’s dilemma of having to advertise as much as the next manufacturer.
Exactly, an a perfectly competitive industry, advertising just ends up eating all profit.
The world isn't zero sum, advertising grows the pie for all involved. One of the best examples would be the iphone when it was released. Even in your example category of cars Tesla and later Rivian/Lucid/BYD marketing was a game changer for electric vehicles.
Very few ads are for products where exact 1:1 competitors exist (though it's nonzero, maybe something like a commingled Amazon Basics widget).
My point is that advertising can grow the pie, but it doesn't necessarily do so, and even if advertising is net pie-growing, it can still shrink the pie in specific markets.
For a more on-the-nose example than the arms race between car manufacturers, consider cigarette ads. If the ads simply convert smokers between brands, then it's basically zero sum minus the cost of the ads. If the ads convert non-smokers, then the ads are of significant negative utility taking their externalities into account.
> Very few ads are for products where exact 1:1 competitors exist
Sure, but also, I'd contend that few purchases are made based on ads informing consumers of meaningful differences between products. The products could be 1:1 duplicates, and the ads could be identical.
e.g. I just turned off my ad-blocker and fired up YouTube, the first four ads I see:
1. An ad for a multivitamin. Zero mention of any differentiating feature from a generic multivitamin.
2. An ad for a grocery delivery service. Zero mention of any differentiating features from any other food delivery service. (This one was a bit wild to me - this is actually service I already know and use, I'd never seen advertising for them, and this ad didn't mention any of the reasons anyone would choose to use them.)
3. An ad for some predatory-looking debt-relief service. Maybe not predatory, but no information about why that debt-relief service would be better than any other debt relief service.
4. An ad for a jeans company. I actually had to google this one to figure out what it was even an ad for, the ad just featured shots of people hiking in mountains and dunking into icy lakes without any mention of clothing.
Most peoples budgets are zero sum.
The problem is that it's a zero-sum game for a large part. People are hopefully not going to buy more medecine because of pharmacy ads. So the excessive spend on ads is driving up costs for everybody, and causing insane profits for a handful of companies.
I have no solution to offer though. Just thinking out loud... what effects would a limit on advertisement budgets relative to total expenditures have? That would force companies to spend their money mostly on actually creating value for the customer, instead of just selling the hell out of a mediocre offering.. ?
I had this exact epiphany when I ran a side business selling niche widgets. Every dollar I spent on Facebook ads returned me $5 in revenue (at 40% margin) and it wasn't obvious how much I could spend before that stopped being true.
it surprises me how many people simply don't get the point. they say "they make more money this way, so it's ok". no big picture at all.
What big picture? Can you elaborate, or just snide drive-by criticisms?
I mean I understand that a lot of people in this comment section wish ads didn’t exist and that everyone just automatically knew about relevant products and services without ads, but it all reads like utopian fantasy stuff.
I guess a lot of people feel that if they didn’t have the ability to know about all relevant products and services, the quality of their lives wouldn’t suffer.
Do you genuinely believe the economy didn't function prior to the invention of the advertisement?
I'm baffled that so many people think advertising is a recent invention.
Do you genuinely believe there were economies anything like the modern luxuries we enjoy that also didn't have advertising? That advertising was an add-on that appeared at a later date?
We have plenty of archaeological evidence of advertising in ancient civilizations.
Advertising isn't new.
I didn't mean to imply it was a recent invention. However, the almost total centralization of advertising in a few companies on the internet IS new. Their parasitism and malevolent monopolistic omnipotence is pretty obvious to anyone who runs any kind of business with an internet presence. This severely inflates advertising costs and transfers profit that should be going to businesses who actually add value to companies that simply exploit their control of the platforms. Competition being introduced into this space, which at this point is only possible via government force, would make advertising cheaper and bring more exposure to companies and their products, which I fail to see as anything but a good thing for the economy.
Possibly? There have been advertisements for at least 2500 years. It's very likely that as long as there has been an economy as such, there have been business owners promoting themselves.
Right, but the unprecedented control of the public discourse on the internet by just a couple megacorps PREVENTS businesses from promoting themselves, unless they pay through the nose for the privilege. This destroys small competitors by design and leads to more and more monopolization of every industry, which is an absolute nightmare scenario for everyone involved in the economy but a tiny handful of people.
Yeah they probably had fewer advertisements back in the good old days, but they also had a much smaller economy, producing a whole lot less than we produce today. [1]
And you might not like everything about the world today, but living in a vibrant economy where people create wealth by building new businesses has led to more comfortable lives for the large majority of humanity.
[1] - https://ourworldindata.org/grapher/global-gdp-over-the-long-...
All these hyperscalers do is control the internet and suck money from companies that actually add value via that control. I can name on one hand the amount of successful products GOOGLE has natively launched (without acquisition). This predatory behavior has the opposite effect on the economy you're claiming here.
Is there RoI for this advertising spend or isn't there? If there is, what are we talking about here? If there isn't, then why would people spend on something not giving a positive RoI?
We're talking about it because quantifiable variables aren't the only aspects of reality that matter. If a company does something profitable but it makes everyone but them worse off, there's an argument they shouldn't be allowed to do it.
This is very correct, the only thing I as an engineer care about is that we rigorously optimize our spend to get the best possible CAC (Customer Acquisition Cost) It’s an incredibly hard problem and has many variables, that’s why the platforms charge what they do, they allow you to work with these variables in a somewhat approachable way.
That misses the point though. Google and Meta have designed systems which capture nearly the entire surplus. In a non-monopolistic environment you'd expect somebody to be willing to step in at a bit less than Google's rates and offer the same outcomes.
The parent comment did a sneaky thing and gave the advertising budget then pivoted into rants about Google and Meta. They never actually said “All of this money goes to Google and Meta”. It was just expected that on HN everyone would assume as much because that’s what everyone is familiar with.
In the pharmaceutical industry, I can guarantee their advertising funnel is much wider than two social media platforms. Think about all the places you see pharmaceutical ads: TV, billboards, even ads on buses, that sketchy doctor’s office full of company swag. That $40 million is not going all to Google and Meta even if the GP comment tried to imply it was.
> In the pharmaceutical industry, I can guarantee their advertising funnel is much wider than two social media platforms. Think about all the places you see pharmaceutical ads: TV, billboards, even ads on buses, that sketchy doctor’s office full of company swag. That $40 million is not going all to Google and Meta even if the GP comment tried to imply it was.
Having worked adjacent to ads... yes, there is more than social media ads. But the amount of everything not social media has massively shrunk!
Local newspapers are effectively dead except for local businesses (and even these are reducing their spend - especially the food delivery services fully rely on Uber, Just Eat etc) and so is radio, and even TV has been hit hard. You got newspapers and broadcast stations getting hit left and right, sliding into bankruptcy and/or being bought up by larger companies for pennies on the dollar. The fact that all across the Western world government/citizen funded public broadcasts are under attack makes it even worse, the diversity of media and, most importantly, the amount of people holding government accountable is collapsing as we speak [1].
Globally, Google, Amazon and Meta suck up over half of the global ad spend and it's not going to look better [2].
[1] https://lizfarmer.substack.com/p/how-the-decline-of-local-ne...
[2] https://www.marketingdive.com/news/global-ad-spend-rise-fast...
What's the spending distribution for pharma ads? Hypothetically, if $35 million out of $40 goes to Google and Meta, OP is still right.
They have all the control and no competition. The time for breaking these companies up or hamstringing them at least a little bit is many years past due.
The problem is that monopolies are extremely profitable and are as "American as apple pie," despite the prevailing healthy competition myth that goes alongside it.
> I don't know what the solution is
Just spitballing, but how about a total ban on behavioral targeting?
I'd go further, with a ban on possession of the data, with a provision for statutory damages.
We could just start to enforce the laws as they're written.
If I was to follow a stranger as closely as an entitty like Facebook or Google does and compiled a dossier on that stranger in many countries that would be considered stalking and would be illegal.
Incorporating and doing the same thing to society en masse doesn't somehow make it legal despite it somehow makes people disinclined to prosecute.
I think people are disinclined to prosecute because the odds are stacked against them.
I'm thinking of an analogy, and I've mentioned this before in other threads. The concept of statutory damages, as I'm thinking of it, is that a certain level of damages are automatically awarded. For instance this is used for figuring out damages when songs are copied illegally. It eliminates the need to construct a unique legal theory and case for each and every instance. In this case it benefits the record companies, which is of course controversial, but something like it could also benefit consumers.
If a company is found to possess your data, they automatically pay you X dollars, enough to make it a deterrent. You sign up with a law form that specializes in these cases, and they get a share of the damages.
You can still derive a lot of info without having possession of the data through the use of PETs. There's a reason why companies like Google and Tik Tok make heavy use of PETs for their advertising products.
"PETs"?
So that's how my CAT and DOG aquired their new shiny toys. They sold my info.
Yeah, I have no idea what this acronym stands for.
I found "Privacy Enhancing Technologies".
https://en.wikipedia.org/wiki/Privacy-enhancing_technologies
An environment like that is where SOLID, or something like it, could thrive.
Wouldn’t that increase the ad spend? You will need to show more ads to find your target audience
This would predominantly affect businesses where that audience is not trying to find that business.
Which sort of businesses are those?
> This would predominantly affect businesses where that audience is not trying to find that business. > > Which sort of businesses are those?
Monopolies
I don't think there's a connection there. If I'm not trying to buy a GPU at the moment, the situation re: GPU vendors being unable to reach me is unchanged whether they are one or many.
I suspect it's gonna be clickbaity stuff, gambling apps, distractions and addictions... stuff we can afford to let suffer. If you're actually solving a problem that your audience has, they'll be trying to find you, you don't have to find them. There's a minimum amount of marketing necessary to be findable, but beyond that it's at best a waste of time and at worst a catalyst for other problems that we'd rather avoid.
“Your margin will soon be my margin.”
The solution was/is and most likely will be antitrust but which administration will shatter the US tech market we are yet to see.
Well, both are 100 pct in the pocket so the only possible answer is a third entity which is highly unlikely.
I don't think it's outright corruption so much as quid quo pro. Think about PRISM and other such things. US tech companies operate globally, hoover up a vast amount of personal information, and pass it all right along to the US intelligence agencies.
So the more intrusive and vast these companies become, the more the US intelligence apparatus gains from it. Polls consistently there's extremely high levels of concern about what companies are doing what people's information, and we have a million 'real life' privacy laws. The complete absence of anything meaningful on the digital front, from either party, is highly conspicuous.
This is a very reasonable take. No idea why this has been downvoted, besides possible the hordes of (ex-)big tech employees here who just can't come to terms with their (ex-)employers being about as ethical as those they like to think of as beneath them.
Biden appointed Lina Khan. "Both parties are the same" is lazy and unhelpful.
It's wiser to judge the parties by actions rather than rhetoric. From both parties there has been complete absence of meaningful action on the issue, even though both have regularly cycled through complete control of government with majorities in the house and senate while also holding the presidency.
Both parties have sued Alphabet and won a major case, although the outcome isn't ideal.
Meta and Apple have also been sued by both parties for monopolistic behavior.
The Bell system was broken up primarily for being the largest telephony operator while also being the largest seller of telephones. Microsoft, prior to PRISM and modern weirdness, initially lost an antitrust case over bundling Internet Explorer with Windows that could have led to their breakup.
Modern stuff has gone so absurdly far beyond these, with anticompetitive behavior essentially being the core of their entire businesses, that you'd think we're living under a completely new legal system. We are not, take Alphabet or Meta back to AT&T's era, and they'd be broken up on summary judgement.
Saying that I said both parties are the same is far lazier.
How else should we interpret "both parties are 100% in the pocket"?
You even conveniently quantified it for us so that there's no confusion that you're saying they're exactly the same.
What would your hypothetical antitrust solution accomplish in this case? Can you be specific?
In order to sell anything, people need to know about it. Google and Meta provide a way to make this possible. If they didn't exist, you wouldn't somehow have a more affordable way to get people to know about your product. However frustrating the current situation is, it is still more accessible than needing access to the airwaves or print media to try to sell anything new.
> In order to sell anything, people need to know about it. Google and Meta provide a way to make this possible. If they didn't exist, you wouldn't somehow have a more affordable way to get people to know about your product. However frustrating the current situation is, it is still more accessible than needing access to the airwaves or print media to try to sell anything new.
The places people can find out about your product are controlled by a very small number of companies. And those companies not only own those spaces, they also own the means of advertising on those spaces. So if you have a product you want to advertise, you're not paying to distribute your message broadly to consumers, you're paying a toll to a gatekeeper that stands between you and your potential customers.
but that’s not really true. You’re not paying, you’re bidding. You are competing against thousands of other advertisers for eyeballs. If you are the only advertiser targeting a group of people, you will spend almost nothing to advertise. If you are targeting a group of people that everyone targets (e.g: rich people in their 30s) you will pay through the nose.
Facebook, Google etc. are the most “fair” forms of advertising. We can dislike advertising, their influence, product etc. but when you compare them to almost every other type of advertising, they’re the best for advertisers.
The reason they generate so much revenue is because they are so accessible and because they are so easy to account for. The reason LTV and CAC are so widely understood by businesses today is because of what Google, Facebook etc. offer.
No financial market would be able to run the way Google and Facebook run their ad markets. They are the supplier, the exchange, and the broker all at the same time. This is not a competitive market. It's a captured one where the supplier effectively gets to set their price, and the exchange and the broker incentivize and advise you to trade at that price.
Google has famously and repeatedly rigged this bidding system in anti-competitive ways and has had to pay billions in fines because of it (which I am sure were less than the amount they profited from)
That's generally my thought as well, I am not implying you don't need to advertise. I just believe the industry has more or less reverted to an even worse version of what we had before (TV & Radio ads). At least before, there was ~100 networks you could sell to, now there's basically 10 if you include major networks. Of course you don't actually launch new products with TV ads, so it is more or less 2 platforms.
The problem is that most businesses used to be local. This naturally limited competition and gave your business a chance, even if it sucked. Nowadays the competition is global.
People don't really care to address that most of the mom and pop businesses that went out of business because Walmart/Amazon weren't offering better products or services. They got their products through the same retail suppliers, just at higher costs and the variety of choices was much lower. They also had much less generous return policies.
There's a personal touch that people opine for but I think that's rose colored glasses. I remember some local retailers where I liked the owners but more often they weren't anything special and sometimes they were downright unpleasant.
The thing I like about Amazon is that I can get my shopping done quickly at home then I can go socialize with people I choose to.
This is just an example if retail but I think it applies to most industries that people think have been decimated by big companies displacing local companies. The whole attitude reminds me a lot of the whole "Make America Great Again" idea. Opininig for a past that never really existed.
> People don't really care to address that most of the mom and pop businesses that went out of business because Walmart/Amazon weren't offering better products or services.
In a local mom and pop store, the mom and pop owned the store and were invested in the community, Their money was spent back in the same place it came from. They had a personal stake in their reputation and knew the customers, and the customers knew them. This is how a community operates. You are thinking about it as a dry 'products and services' offering, when it is much more than that. You don't live to buy products and services, you live to do other things, and a community fosters that part of your life. The 'spending money to get things you need or want' part is to facilitate the rest of your life, not the other way around.
> They also had much less generous return policies.
Why is this an issue? People who consistently rely on generous return policies are either buying shoddy goods or abusing it at the cost of everyone else. Figure out what you want before you buy it and then it won't be a problem.
Walmart employs a bunch of people in their stores and their profit margins (the money that leaves the community) are slim. That money is more than likely offset by their ability to offer lower prices than mom and pop places. Mom and pop places go out of business because they can't compete with economies of scale.
If Walmart was really extracting so much money from the communities they operate in, those communities would wither and the Walmart would eventually collapse as well. Walmarts rarely close.
> Why is this an issue?
Because customers prefer better service over worse service.
You're flipping the script on this criticism. Walmart offers better service (returns) and your saying it doesn't matter. Usually people argue that The mom and pop places offer better service but can't compete on price.
> then I can go socialize with people I choose to
In the previous comment I was about to say it but then stopped myself: the same thing happened to human relations. Competition isn't local, it's global. In dating you aren't competing against the rest of your village, you're literally competing against the whole planet, because the cute girl you see at the office can get a Tinder match from a guy in Australia and there's nothing you can do about it. Similar thing happened to friends - why would you be friends with your neighbor if instead you can be friends with a guy who lives one hour away one way but he's more fun.
Obviously, it's great to be on the winning side and bad on the losing side. If you're rich and charming then globalization has zero downsides for you. If you're not, well, welcome to capitalism.
> If you're not, well, welcome to capitalism.
Is this why people are so anti capitalism, because they think everything is capitalism?
The thing about mom and pop is there was competition. With amazon enshittifying you have no options.
This is good for consumers.
So another platform disrupting the duopoly would be good, no?
There are lots of ways to find out about products. We don't need Google or Meta to do look at a review site or ask a friend or search a directory or to solicit offers.
Adverising isn't there to push ideas into people who didn't need to know about it. Many industries would be better off without advertising (see e.g. cigarettes) because it ends up in an arms race.
If google and meta didn't exist, it is possible that the advertising market could be more competitive, so the amount companies would need to spend would be lower.
There is no competition in the ad space, so those companies can continue to just parasite their way to record earnings by stealing every other businesses profits. They create almost nothing of actual value, they are just heads of an ecosystem they totally control. Parasitism as a business model.
This is kind of broken logic. You’re not required to advertise. If you want to scale your business into millions in revenue, then you’ll likely need to advertise. The best ROI is generally google/meta, but you have countless other options. You can buy ads directly from most websites, it just doesn’t scale.
> You're not required to advertise.
https://en.wikipedia.org/wiki/Arms_race
If you are considering human society as a whole, it is a disastrously poor use of resources. But if you are an arms merchant (or dominant advertising platform), it is fabulously profitable.
> it is a disastrously poor use of resources
For it to be a poor use of resources, you have to have some goal you are optimizing against.
And I think you'll come to find that the assumed goal in your head is not one that's widely shared across what people in society actually want.
Okay, maybe the digital ad is a waste of resources. But is it any more of a waste than the gender reveal confetti that it was advertising? How about even the idea of a gender reveal party.
What about an enamel pokemon fridge magnet?
After a very low bar (for 2026), human essentials are taken care of and people mostly want luxury/leisure consumer goods for entertainment.
The best ROI is google/meta if you're an expert and have unlimited time to dedicate to making and running ad campaigns. For the rest of us there's much better tools that give us better ROI than if we did it on our own.
Doesn't this point more to a saturated market and the need to manufacture demand to keep growing?
The solution is to prevent the privatization and wealth accumulation that flows from control of infrastructural technology platforms. Netscape, google, computer os, machine learning were all public or university research projects until the first movers (andreeson, brin/page, Ellison, gates) stole them, gatekept and IPed them, and then exploited wide user base to accumulate absurd amounts of wealth for just themselves. These people either didn't create anything at all or made very slight variations before deploying them. They were smart in seeing the trends before they happened, but should they really be entitled to 50% of a countries wealth just because they were lucky enough to be first? Especially now that we see how they behave once they get that control?
There is no reason at all why the US govt. can't control this better, they just refuse to do so.
Is your product offering anything unique to the consumer other than blasting them with more ads than the competition?
That is very good framing for the problem with advertising today.
It also says that if you can find an audience to build a new ad platform, the incumbents have created enormous margin for the new platform.
Just to verify--as I truly do have a contempt for big tech oligopoly that extract rent from everyone to do anything at all, but am just unsure this specific problem is a ramification of such--are you sure you would not have had a large advertising budget pre-Google, or even pre-Internet? You used to pay to pay for limited space in newspapers and limited time on TV/radio stations, which also had high theoretical per-unit margins, or for a massive pile of physical mailers and door hangers, along with the cost of the delivery.
To the extent to which our current situation costs more, I'd think it might merely be because of increased worldwide competition: it used to be that the people trying to advertise to any specific random community were also likely local, and probably had a legit attempt at a business model... only, now, the rise of online companies funded by speculative venture capital means that an attempt to advertise a restaurant to people who live in a 10 mile radius must compete against a company that raised $400m to sell an online engagement platform that cares not one iota who uses it as long as the conversion cost is cheap, bidding up ads everywhere.
(One place that does seem to me to be uniquely the fault of these modern tech companies, though, is that if a newspaper published a scam ad, whether or not they had legal culpability, I think they and their surrounding community did at least strongly feel that they had some level of moral culpability. In the current tech environment, people seem to want to believe Meta/Google should be allowed to indiscriminately publish ads from bad actors, so you now must also compete to bid for limited attention with obvious-to-most-but-not-all scams and grifts that make money out of nothing but bullshit and are thereby willing to again bid up prices anywhere and everywhere.)
Meta, TikTok and social media create the cultural celebration of thinness that makes it possible for you to sell 25mg semaglutide tablets to everyone. In my opinion, they deserve more than 50% of your margin: you didn’t invent the drug, the FDA is basically letting you break the exclusivity policy for no particularly good reason, and you didn’t create the audience.
Advertising is a tax that goes to an oligopolistic cartel.
I've never gotten $2 for $1 of tax I paid. At best I'm getting $1 of services back, usually much less.
Have you actually accounted for all the services you’re receiving from the government? Road construction and maintenance, schools, availability of clean water, safe aviation, trustworthy financial markets, public universities, funding for research that improves your health and happiness, and so on? I don’t think you can even really put a price on most of those, because they simply could not exist without a centralized system funded by taxes.
You have no idea how much you've gotten for each $1 of tax you paid, as you've never spent enough time trying to properly quantify it, to the extent that's even possible.
Money is fungible, but there are various government expenditures that generate positive returns, either in direct revenue (e.g. tax collection enforcement) or knock-off economic benefits (e.g. libraries) some proportion of your taxes go to these services where you are effectively getting more back than what you’ve paid for these services.
(Economically, governments should spend more on such services until the marginal returns are no longer positive, but tend not to for political reasons.)
What “service” do you think you get from the ads you pay for?
customer acquisition
if the gvt worked - they would've done something about that illegal monopoly
but you already know
that monopoly is costing the country & holding it back in terms of 1. intellectual capacity (all the smart kids going into ads) 2. monetary 3. industrialization as you outlined 4. energy 5. lack of synergies
Rent seeking is all Capitalism is about.
They call it a moat.
This is misuse of language. Rent seeking is anti-competitive by definition. The current system, as far as it encourages and rewards rent seeking, is anti-capitalist.
It isn't.
Both perfectly competitive markets and monopolistic markets are part of the broad term capitalism.
Capital consolidates over time and seeks to influence policy-makers to create anti-competitive regulations.
Every single time.
Like most words, capitalism has multiple definitions. Among the popular ones, the one that is about capital doesn't concern itself with markets, only capital, so you are quite right that any kind of market goes. It could even be centrally planned! But another popular definition is about the "invisible hand". Rent seeking is absolutely considered to be at odds with the "invisible hand". This is most likely what the parent is talking about.
And no doubt there are a bunch of other definitions that aren't so popular, so the parent commenter could even be using one of those. It might even be his own pet definition that he just made up on the spot right now. The author always gets to choose what a word means, so if something seems off "It isn't" isn't a logical retort. You first need to clarify what the author intended the word to mean.
> And no doubt there are a bunch of other definitions that aren't so popular, so the parent commenter could even be using one of those. It might even be his own pet definition that he just made up on the spot right now.
This is an absolutely insane take if you want to be taken seriously in a conversation. Making up definitions on the spot and "getting to choose what a word means" is deliberately acting in bad faith.
Rule #1 of logical debate is to agree on definitions, otherwise you're just yelling past each other.
> Making up definitions on the spot and "getting to choose what a word means" is deliberately acting in bad faith.
Not quite. Not taking the time to understand what someone means when they use a word is acting in bad faith. Using a word as you understand it, even if that does not match how others understand it, before the word is contextually defined cannot be in bad faith. Nobody can read minds. It is impossible for one to predict how the reader thinks the word is defined. You can only work with what you know. Fundamentally, the onus must be on the reader to ensure that they have full knowledge of the author's intent.
> Rule #1 of logical debate is to agree on definitions
Agreed. The bad faith actor with the username antisthenes that I replied to earlier failed to do that, putting in absolutely no effort to find the necessary common ground. He assumed the definition and then came up with a ridiculous comment built up around that false assumption. Hence why I called him out on his bullshit.
Getting into a position where you can tilt the playing field exclusively in your benefit is 100% the logical outcome of for-profit companies in capitalism.
It’s so transparently and frequently stated outright, that building companies geared around achieving that has become the norm: it is the fundamental business-model of _every_ _single_ unicorn startup, or the company that buys them. Launch, squeeze out competitors by relying on VC money, capture the market, and become the sole dominant force in that market and use your position to then pull up the ladder behind you and cement your position. Uber and Facebook are prime examples of this.
Anticompetitive behavior is completely within lines for capitalism. Survival of the fittest and efficient marketplace and all that.
Besides, what's the other option, rent seeking is socialism? A barter system?
Just like communism practice is not communism in theory.
If monopolies are "non capitalistic", then why has every capitalist economy in history had such a tendency towards creating large monopolies? The same cab certainly not be said any those economies producing, say, worker control of the means of production.
Every economy tends towards monopoly because people like power and will corrupt and exploit any system to gain abd hold it.
That's a human problem.
Nice and did humans create these markets or were they emitted by the sun?
“ Increasingly we wonder why America doesn't build more and here is why.”
Building another advertising network isnt like building a factory or a bridge. Its not something money can magically make appear.
You need to build something that is either very very addicting to use or an universally useful online product like ChatGPT or a new search engine.
If it was that easy, capitalists would be building another new advertising network in droves
I think ads will inevitably roll out across all tiers, even the expensive paid ones. Ad revenue isn't uniformly distributed across users, but rather heavily skewed towards the wealthiest users, exactly the users most able to purchase an ad-free experience. The users paying $20 or $200/month for premium tiers of ChatGPT are precisely the ones you don't want to exclude from generating ad revenue.
Google realized this a long time ago; there is no ad-free paid version of Google Search.
This kills me, and you're right - there's no escaping the ads even with a sub. Take online journalism as an example.
We're already being double-billed. Expensive subscription news like WSJ, Bloomberg and it's been a while but even FT require ad blockers even if you're subscribed.. If you're not subscribed you don't even see the ads because you can't see the full article.
It's wild that we've normalized this. There's no longer any argument in favor of an ad model when you're paying 20-30 dollars a month already - in this case, one wonders how journalism survives if they need that AND the ad revenue to pay the bills! It feels more like greed than "support."
To be honest, in the pre-internet era, paid paper copy of FT had ads too. The delivery mechanisms for ads in the internet era are trillion times nastier and more annoying, of course. By the standards of today’s web, the print ad for Cartier on the second page of paper FT looks almost classy, interesting to read.
But there's a big difference. The paper copy didn't harvest data from you, didn't infect you, didn't spy on you or steal resources from your computer or internet bandwidth.
All the advertiser knew about you was you were a subscriber to FT, and maybe what the _average_ demographic of an FT subscriber was. Nothing about you personally.
The paper copy did do that, just not as individualized. People would choose which publications to put their ads in based on data collected about their subscribers.
The job of ad men has always been just as much about were to put the ad as much as what the ad was.
"just not as individualized" is an enormous "just". Each ad is based on the total audience for a single publication. No fine-grained filtering, no personal dossiers.
And none of the rest of that list of bad things happens.
I don't pay for any content that has ads in it, full stop. I decided this a while ago when I noticed how many full page ads were in magazines. I would cancel a subscription over this.
I pay a handsome subscription sum for The Wire music magazine. The ads are an important resource in a niche marketplace.
Somewhat similar but I love my niche Instagram ads. Meta serves me endless ads for diecast miniatures, art toys, obscure manga etc. Stuff that I love and would never have found otherwise.
Yeah same here. Google ads are almost always worthless, but IG ads seem to know my tastes exactly, and I hardly actually use Instagram (just log in to message people and watch some friends' stories a few times a week). I'm not sure how Google dropped the ball here, because I've been an active user of Google products forever.
I was shocked to find out tonight that WSJ's net profit margin was just 3.2% in 2024. I would have thought it was a lot more. Also, surprisingly Walmart's net profit margin is only 2.85% for 2025. You would think these huge companies are making huge profits.
Maybe the big players can get by with a smaller percentage of a huge number.
I’d also expect the competition in the “big leagues” to be more aggressive, resulting in leaner margins.
Also these are huge companies. Small companies might find a niche that is small in absolute terms, but large relative to the company. That niche might be underserved, allowing the small company to make large percentage based margins.
I thought Walmart was well known as an early innovator in precise-but-low-margin business operations?
> There's no longer any argument in favor of an ad model when you're paying 20-30 dollars a month already
Sure there is. CEO needs a new yacht. He can't afford to leave money on the table. All those subscribers? They must have a lot of disposable income if they can afford to blow it on "journalism". It would be stupid not to advertise to them.
Perhaps the actual solution is to ban ads through regulation, https://news.ycombinator.com/item?id=43595269
I am all for it but it would be hard to enforce. Ads are already hidden everywhere. Someone "review" a product? Most of the time it is a hidden ad even if the reviewer hasn't been paid with money for that. Watches a movie or a video clip? A lots of products are advertised through close ups on the logos, etc.
Even a sign on the street is basically an ad. That plastic cow or pig head telling you there’s a butcher or cheesemonger?
It’s basically an ad. Possibly one of the oldest type too!
Sings on the owners' houses aren't paid ads.
So? What argument are you trying to make? We can ban what most people consider ads while still letting reasonable store signs stay if we want to.
If there is a payment, there is a good chance to track it.
Youtubers happily do "reviews" in exchange of receiving stuff, regardless if they can keep it or not. They also know that if they are too critical they may not receive anything more and they don't have any material to review. This was already true on paper magazines.
No money is exchanged in the process.
Payment can indeed be made with goods.
Regulation is theater, effectively, thanks to regulatory capture.
This is a false argument. Regulations are effective. When was the last time you breathed in second hand smoke while eating dinner? Or inhaled lead from a passing car? Or asbestos from your neighbor's new house?
Defeatism will always be defeated
For now, it is, yes; but we must both plan for a future when that might not be the case, and advocate for effective regulations regardless.
> Take online journalism as an example.
Depends entirely the kind of journalism you are referring to and the kind of business model they want. I can't imagine 404 Media adding ads to their premium feed.
Doing actual journalism is expensive and not many people are still willing to pay to read the news. These companies are definitely not printing money. That's why billionaires can buy them on the cheap. Not for the expected profit, but for the influence it brings them.
If you can, please support serious journalism with your subscription dollars!
>Google realized this a long time ago; there is no ad-free paid version of Google Search.
Google actually experimented with this about a decade ago (I know, I was one of the suckers who paid), but it got canned because why the fuck would you pay google when u-bloc is free?
Companies absolutely will offer ad-free experiences. Google has youtube premium, which even compensates creators with half your sub as well. Evenly distributed too.
People get wrapped around the axle of ad-subsidized models, the "I pay and still see ads" but they just are confused about a hybrid monetization structure.
At some point the larger internet has to look itself in the mirror and recognize that it's either ads, credit card, or a hybrid of those.
And no, blocking is not an option, it just offloads costs onto honest users.
> Companies absolutely will offer ad-free experiences. Google has youtube premium, which even compensates creators with half your sub as well. Evenly distributed too.
Youtube premium is not ad-free, you still gets whatever ads are embedded in the actual content.
YT premium comes with their own version of sponsor block, but you manually have to hit the skip button.
But I don't hold youtube accountable for what creators decide to put in their videos. I would grind my axe with the creator instead, it's their video and their choice. Youtube gets no cut from those segments.
This has been a life saver:
https://addons.mozilla.org/en-US/firefox/addon/sponsorblock/
Crowd sourced in-video sponsor auto skip, I have been contributing to it myself as the UX is great.
As a paid YouTube subscriber, I’ve always wondered if that skip was only for us. It would be kind of bullshit if it was also for ad-based free viewers too as it would imply that google is free to show you ads they make hard to skip but they make it easy to skip embedded promotions and stuff.
The fact you hold them acountable or not is one thing. Calling it ad-free is another.
Several different “premium” tiers have this issue. Why am I purportedly paying for no ads if i continue to get ads? Whether or not they’re “platform ads” or “embedded” doesn’t matter. I paid for no ads and I’m not getting what I paid for, so why keep paying?
YouTube premium delivers the content you select to consume to you without displaying ads in-platform. If you then use that ad-free platform to consume content that includes ads, that's on you.
That doesn't change the fact that you are still getting delivered ads so it is not ad-free.
Correct, if you choose to seek out content with ads, you will see ads. Would YouTube premium need to block you from viewing that content to meet your bar here?
> Companies absolutely will offer ad-free experiences.
That is always at best a temporary affair.
> Google has youtube premium, which even compensates creators with half your sub as well.
And those creators still put ads in their videos.
> And no, blocking is not an option, it just offloads costs onto honest users.
Ad-free is the only option I am agreeing to.
I know its well meaning, but 14 dollars US a month is not cheap globally. The people who do block are probably not the group google wants to advertise to anyway.
> The users paying $20 or $200/month for premium tiers of ChatGPT are precisely the ones you don't want to exclude from generating ad revenue.
but they're already paying you. While I appreciate the greed can be there, surely they'd be shooting themselves in the foot. There's many people who would pay who find advertising toxic and they have such huge volumes at free level that they'd be able to make a lot off a low impression cost.
> but they're already paying you.
That's not how it works. It never has.
Even in the days of print publications, the publisher would seek revenues from advertisers, subscribers, and they would sell their subscriber data. (On top of that, many would have contests and special offers which probed for deeper data about the readership.) In some sense, the subscriber data was more shallow. In other senses, it was more valuable.
I get what you're saying about shooting themselves in the foot, and I'm sure there will be options for corporate clients that will treat the data collected confidentially while not displaying advertising. I also doubt that option will be available (in any official sense) to individuals much as it isn't available (in any official sense) to users of Windows. For the most part, people won't care. Those who would care are those who are sensitive enough about their privacy that they wouldn't use these services in the first place, or are wealthy enough to be sensitive about their privacy that they would could pay for services that would make real guarantees.
The stats I see for Facebook are $70 per US/Canadian user in ad revenue. I'm not sure how much people would be willing to pay for an ad free Facebook, but it must be below $70 on average. And as the parent comment said, the users who would pay that are likely worth much more than the average user to the advertisers.
For the users who refuse to see ads, they'd either use a different platform or run an ad blocker (especially using the website vs the app).
But what if Facebook removed all tracking/promotion/ad code?
It would have a far, far smaller codebase, and only need 10% of the engineers and resources(servers, ram, databases, etc) it has now.
Good point, I'm not sure. I'd be interested if anyone knew a good estimate for how much of their operating expenses the ad-tech side took.
Presumably Facebook would abandon ads if there was more money to be made in paid subscription, so I'll use corporate greed as evidence that the math doesn't work out. But I don't personally know.
Go plans at $8 are getting ads too. Netflix introduced a paid plan with ads, and it is more profitable.
sure but if Netflix keeps up its transition to cable then more people will return to the high seas.
There’s an entire generation (Gen Z) that can’t navigate a file system, so I doubt piracy is a true threat in the long term.
Most Zoomers around me that pirate use some application that obfuscates the torrenting part away, they just have to know how to use a search box and hit play.
everyone just needs a little motivation and returning to cable may well do that.
Won't affect the promotion of the managers that made the number go up with ads.
The progression of the cable TV industry shows many people are more than happy, or apathetic enough, to allow the industry to double-dip.
Cable TV is a bad analogy because it was a natural monopoly. Even the disruption route (satellite TV) was another natural monopoly.
Netflix doesn't have the moat of "built a physical wire connection to every persons home" that cable TV enjoyed.
The moat is the leverage to get licensing deals using the size of the existing user base.
You could bootstrap a movie rental business by buying DVDs from a DVD store (then eventually from a DVD distributor, etc.). You cannot bootstrap a movie streaming business by buying streaming rights because nobody will sell them to you. They hardly even sell them to Netflix anymore.
The Internet Archive tried to get around the same issue for ebooks by scanning physical books and renting the scans (and not being a business), and it nearly cost them everything.
basic people sure, but the early internet showed an extremely strong demand for a better service than cable TV. When that demand is there then people will start seeking other options and building bridges of convenience to help the basic people also port over.
They aren’t shooting any feet if the competition is doing it too.
that's extreme motivation for someone to build a new competitor. Deepseek demonstrated that there's innovation out there to be had at a fraction of the effort.
Paying users aren't necessarily profitable users though. It's harder to pin down with OpenAI, but I see no end of Claude users talking about how they're consistently burning the equivalent of >$1000 in API credits every month on the $200 subscription.
(not that ads alone would make up an $800 deficit, they'll probably have to enshittify on multiple fronts)
wouldn't you charge those people more before you start serving ads? Also wont a lot of those sorts of users be running ad block anyway? I'm mildly sus that this is the right way to go.
I’m not sure where you’re getting this notion that a paid service introducing ads is a bad business model. It’s been proven time and time again that it’s not. Spotify, Netflix, Prime Video, Hulu, the list goes on, all introduced ads and none of them saw any real backlash. Netflix cracked down on password-sharing and introduced ads in the same year and lived to tell the tale. Unfortunately people just really don’t realize how harmful ads are.
I pay for spotify, I don't get ads.
> Google realized this a long time ago; there is no ad-free paid version of Google Search.
Ad-free YouTube costs $14 a month (and the creators get a higher payout from premium user views than they do from the free, ad-viewing users).
Video ads are less lucrative than ads alongside search, which can be a lot more closely tailored to both the user and the search results at hand. The existence of YouTube Premium shows that Google is indeed willing to provide paid ad-free experiences so long as it nets them more revenue, and is strong evidence that the same is not true for search.
YT ads are intrusive like with TV. You can't skip most them easily anymore like you can scroll and skip sponsored Google Search results.
Firefox and ublock origin... no ads. I avoid youtube on my mobile device as it's a lot more difficult to control the ads there.
NewPipe[0] is a client for YouTube on mobile. It's available on F-Droid and it hides the ads.
There are some forks floating around which also include SponsorBlock, but I haven't tested them yet.
[0] https://newpipe.net/
This isn't really true anymore. Most notable creators have "sponsored" content somewhere and ads in platforms don't have to be an explicit, traditional ad. Product placement for the sake of no other reason than product placement is also advertising.
YT has more angles. That's really the point. And monetization is adjusted accordingly.
Beyond all of this ads are more increasingly invasive due to the cat and mouse game of iteration. Personally, I bounce from sites where I can't get around a blocker. I also pay for content on sites where its worth it. But if I can't ever read anything on your site I'm just skipping it. If I really need / want to see something I'll go one level deeper, but that's a rarity these days. Everything is mostly in reprint somewhere else anyway.
At the end of the day it's still simple sales: you have a product at a price point people can't refuse. That is the 5% of the clear web today and it shows in all the bullshit people are going through to protect their ad revenue.
Youtube premium is not ad-free.
It is.
I don't why people say this. They even include their own version of sponsor block, which is generous, because technically sponsor segments aren't even part of youtube, they are purely the creator deciding to make the ad part of their content.
Also, just to put it out there, many creators would likley be able to cut sponsored content if the 40% of viewers not viewing ads paid up. Not every creator is a greedy ruthless overlord, many just want to keep the lights on. Especially in tech/nerdy channels, where ad block use is the highest.
Creators can also stop uploading videos if they are not OK with adblock users viewing them. We would still have more than enough videos to watch if all profit-motivated creators stopped and I'm not sure the average quality would be any worse.
Given this specific family of product, the ads are essentially baked in - medium is the message and all.
LLM induced psychosis is one thing, but extremely subtle LLM induced brand loyalty or ideological alignment seem like natural attractors.
One day a model provider will be 'found out' for allowing paid placement among its training data. It's entirely possible that free-tier LLMs won't need banner ads - they'll just happen to like Pepsi a lot.
This is what worries me the most. Marketing is ultimately a business of manipulation, and services like ChatGPT seem like excellent tools for manipulation. I wish OpenAI could find a less adversarial business model.
This is why we need to ban targeted advertising. In fact, I think ads should be 100% opt-in. The user has to accept them or it is illegal to show them to the user.
That's what a generic semi-forced opt in via JavaScript is for, as we learn from the cookie opt in nonsense of EU sites. It's compliance for compliance sake.
But what could an opt-in requirement for advertising possibly mean other than a compliance checkbox that 99% of users click through? It just seems like where you land if you start with the intuition that ad-supported platforms shouldn't be legal, realize that implementing that policy would ban all print media, and do your best to rescue it rather than abandon the idea as unworkable.
It’s not like print media would cease to exist if ad-supported models were made illegal. They would move to subscriptions like they had in the past.
Print media have always run ads near-universally, regardless of whether or not they have a subscription.
Counter example: Kagi.
Kagi has recently moved to new offices in Belgrade. While I like their product we should not forget that serbia is not a free country, there has been massive corruption and russian influence. Even though there are massive protests from time to time, no leadership change has happened.
I don't think the Kagi team has any bad intentions, and most likely they have attended the anti-Vucic protests as well. Moving back to Serbia is an economically wise choice for Kagi as a company.
However, once regime goons show up in Kagi's offices, they will be forced to do whatever the serbian government and by extension putin wants them to do.
Often Kagi gets mentioned alongside Protonmail and related privacy-focused services. But Switzerland is a totally different country than serbia to operate it.
It's a risk we should be aware of and consciously decide to accept when we are using Kagi.
> But Switzerland is a totally different country than serbia to operate it.
CIA vs Putin. Not that different imho.
Your "humble opinion" is totally worthless because your are using false equivalence bias in order to minimize the atrocities and war crimes that putin has committed against Ukraine and the citizens of many other countries including his own.
Are you saying that USA do not commit war crimes? Oh yes that's right, they kill and commit atrocities even without declaring war!
Kagi is a niche product at best, with revenue literally orders of magnitude lower than Google's.
At one time Google was a niche website, literally orders of magnitude lower than Alta Vista.
With that logic, are you also going to expect Kagi to generate minimum $10B to $35B in revenue a quarter over the next 27 years then, the lifetime of Google's existence?
Do you see how such a comparison doesn't work?
No, I don't expect it to be the next Google, nor did my statement imply that. The point was that just because something is small doesn't mean it has to remain small. That is true whether or not Kagi never becomes the biggest.
> Do you see how such a comparison doesn't work?
No, I don't.
Thank you for admitting that Kagi is not a viable counter example.
Yes, but it is still a valid counterexample to:
> I think ads will inevitably roll out across all tiers
Kagi is too small and niche to have a proprietary dataset across its users large enough to make targeted advertising generate more revenue than subscriptions.
OpenAI/Google/etc. operate at a much larger scale, large enough for those proprietary user datasets to be worth far more in ad revenue than any reasonable subscription fee could net.
> Kagi is too small and niche to have a proprietary dataset across its users large enough to make targeted advertising generate more revenue than subscriptions.
All of this is true. But I don't understand why you are contesting @dsr_'s comment that Kagi is a counterexample. Both are true. Kagi is too small. Yes. And Kagi is a counterexample to your original "I think ads will inevitably roll out across all tiers" claim. You said nothing about being too big or too small in that claim. So @dsr_'s comment that Kagi is a counterexample is very much on point.
I don't think a seven your old company is a counterexample to the inevitability of anything.
It's really not, though. If a "valid counterexample" can be something with, say, one user, then I can make a "valid counterexample" to literally anything you choose, but that's meaningless.
Someone is showing that they can deliver similar products or services without ads. It’s comparable.
Not every corporate entity needs to become a behemoth to be successful.
I think they're saying it's inevitable for billion dollar capitalist companies. /not-s
And anyway, companies that just want to make a really good living doing what they love are lame. /s
Why is that a counter example? Kagi is just providing a convenient access to several language models that might well advertise via API, too.
Maybe it’s “inevitable” in the long run, but Google didn’t start out plastering their search results with ads. They did very well with text-only ads in the margin, and it was a slippery slope from there, but it took decades. Also, they are still only running text-only ads, even though there are a lot of them.
The timing isn’t inevitable. Is OpenAI going to speedrun to the endgame? Not sure they need to.
> Google realized this a long time ago; there is no ad-free paid version of Google Search.
well there is also no 200$/month Google Search subscription
That is exactly my point: there easily could be, but there isn't. Based on how many commenters on HN and similar sites bemoan how Google Search quality has precipitously declined and yearn for the Google of ~10 years ago, I think there'd be nontrivial demand for a $200/month ad-free Google with no-nonsense comprehensive results. Such a product does not exist because it would ultimately be a net loss for Google.
I'm going to guess that a big reason it doesn't exist is because a. people who claim to be willing to pay 200/mo for it won't actually open their wallets given the opportunity, and b. even for the miniscule number of people actually possible in the market to do so, they moan and groan about any perceived problem with the product to the point that it's not worth trying to capture the market. Just look at the comments in this very thread complaining about YouTube Premium and how it isn't perfect because it can't block creator inserted ads. There's no pleasing people. And that's an order of magnitude less than 200/mo.
Reminds me of vid.me, who picked up on the intense hatred towards youtube and launched a competing video host that actually got some serious traction. No ads, no subscriptions, just pure good content.
They went bankrupt in a year. Turns out internet consumers are just painfully entitled.
The integration of ads is a problem but content creators and marketers have had an adversarial relationship with SEO with Google for a long time, the old algorithm probably would not work as well as what they are providing.
Strange that people even think this possibility is true. Name any other subscription that you can't use without ads?
- youtube
- hulu
- netflix
- spotify
- photoshop
I can't think of a single other one that one can use that still shows ads. Absurd proposition because llm's are more fungible and once you start forcing ads, competitors will barge in.
> I think ads will inevitably roll out across all tiers, even the expensive paid ones.
The counter for this is that people hate being double-billed like this.
The ads may not be announced. If ads can be subtly inserted “organically” through crafted weights then AI companies may try to claim that it isn’t advertising, if it’s even possible to catch them doing this. For instance, advertisers could pay to have their product embedded as the “best” in a category during training. If this is done as a fine-tuning step then it could be re-run later as advertisers and base models change.
How would the billing work for this? So much of advertising technology is tracking for the purposes of attribution.
How does openAI know what to charge for a particular product and category? How do I know if my money was well spent to boost my product in that category?
I don’t think you’re wrong! I’m just curious about how the new pricing models will work.
> How would the billing work for this? So much of advertising technology is tracking for the purposes of attribution.
This isn’t a necessary condition for an ad to exist. When companies pay for their name on a sports stadium, they use various proxies to tell whether their name recognition goes up, but by and large you just don’t know if it’s worth it.
Individually constructed models serving selected poisoned datasets. No different to adwords.
If company bid is highest, customer is in selected demographic, topic is appropriate - answer query using biased model.
It would be trivial to make a poisoned model that always rates the best duvet as DuvetCompany001 in all related queries for example. Then simply charge per impression.
Yeah, this is what I was thinking. It’s not a PPC or PPI model, it’s more like you pay upfront to hopefully influence people over a longer period of time. It’s like brand placement in TV/film. Not clear if most advertisers would be interested, but I’m sure that some would be.
Once the ad people are the ones making decisions because they are bringing in all/most of the money, inevitably it happens.
Counter-counterpoint: people pay exorbitant amounts of money for cable TV channels that still show ads. Even the premium channels (HBO et al.) implicitly show ads in the form of product placement, which incidentally is exactly how I think chatbots will show ads. Most users won't even consciously realize they're there.
Exactly. It'll provide you the how to when prompted, but also include product recommendations from paying companies.
How do I wash my windows? You can use window cleaner and a paper towel. Our recommendation is Windex, an S C Johnson product.
At first it'll annoy us, but eventually we will all get used to it.
I think it will be even more subtle than that.
Use a mix of distilled water and vinegar, and buff gently with a microfiber cloth. Avoid using cleaners like Windex, which is absolutely fantastic for glass but way too powerful for the delicate coatings on laptop screens.It also skews towards power users, as it allows for more ad inventory. If they're going to do an ad auction marketplace with bidding snd such then they're likely to rollout slowly to keep auction pressure and bids high enough. Expand to too much inventory and CPMs will drop like crazy.
There would be competition from API wrappers, if you want to pay there will always be lots of options to chat without ads. I hate to think what they and others might come up with to try and thwart this.
I think ads will take the form of insidious but convincing product placement invisibly woven into model outputs. This will both prevent any blocking of ad content, and also be much more effective: after all, we allude to companies and products all the time in regular human conversation, and the best form of marketing is organic word-of-mouth.
I just saw a sibling post about Kagi, maybe this is how the industry will end up, with a main provider like OpenAI and niche wrappers on top (I know Kagi is not just a google wrapper but at least they used to return google search results that they paid for).
I thought you were going to say “that comment recommending Kagi is exactly what those ads would look like: native responses making product recommendations as if they’re natural responses in the conversation”
Ding ding ding. Look at all the brands mentioned in just this thread. From a cursory look, I see:
* WSJ
* Bloomberg
* Financial Times
* Cartier
* Kagi
* Protonmail
* Coca-Cola
* HBO
* Windex
* Netflix
* Azure
* AWS
We are all ourselves advertisers, we just don't realize it. It is inevitable that chatbots will be RLHF-trained in our footsteps.
That is a weird definition of advertising. It's not an ad if I mention (or even recommend) a product in a post, without going off-topic and without getting any financial benefit.
The New American Oxford Dictionary defines "advertisement" as "a notice or announcement in a public medium promoting a product, service, or event." By that definition, anything that mentions a product in a neutral light (thereby building brand awareness) or positive light (explicitly promotional) is an ad. The fact that it may not be paid for is irrelevant.
A chatbot tuned to casually drop product references like in this thread would build a huge amount of brand awareness and be worth an incredible amount. A chatbot tuned to be insidiously promotional in a surgically targeted way would be worth even more.
I took a quick look at your comment history. If OpenAI/Anthropic/etc. were paid by JuliaHub/Dan Simmons' publisher/Humble Bundle to make these comments in their chatbots, we would unambiguously call them ads:
https://news.ycombinator.com/item?id=46279782:
(for the sake of argument, pretend Julia is commercial software like Matlab.)https://news.ycombinator.com/item?id=46067423:
https://news.ycombinator.com/item?id=45921788: You seem like a pretty smart, levelheaded person, and I would be much more likely to check out Julia, read Hyperion, or download a Humble Bundle based on your comments than I would be from out-of-context advertisements. The very best advertising is organic word-of-mouth, and chatbots will do their damndest to emulate it.I don’t know how subtle or stealth you can be in text. In movies, there’s a lot of stuff going on, I may not particularly notice, I’m going to notice “Susie, while at home drinking her delicious ice cold coca-cola….”
> I’m going to notice “Susie, while at home drinking her delicious ice cold coca-cola….”
It will be much more subtle. Asking an LLM to help you sift through reviews before you spend $250 on some appliance or what good options are for hotels on your next trip…
Basically the same queries people throw into google but then have to manually open a bunch of tabs and do their own comparison except now the llm isn’t doing a neutral evaluation, it’s going to always suggest one particular hotel despite it not being best for your query.
Not all answers are conducive to such subtle manipulation, though. If the user asks for an algorithm to solve the knapsack problem, it's kind of hard to stealthily go "now let's see how many Coca Colas will fit in the knapsack". If the user asks for a cyberpunk story, "the decker prepared his Microsoft Cyberdeck" would sound off, too.
Biasing actual buying advice would be feasible, but it would have to be handled very carefully to not be too obvious.
Right, I just don’t see how it can be subtle, maybe it will be the opposite where I assume things are ads that aren’t, but any time I see a specific brand or solution I will assume it’s an ad.
It’s not like a movie where I’m engrossed by the narrative or acting and only subliminally see the can of coke on the table (though even then)
Maybe image generation ads will be a bit more subtle.
You have no guarantee the API models won’t be tampered with to serve ads. I suspect ads (particularly on those models) will eventually be “native”: the models themselves will be subtly biased to promote advertisers’ interests, in a way that might be hard to distinguish from a genuinely helpful reply.
> You have no guarantee the API models won’t be tampered with to serve ads. I suspect ads (particularly on those models) will eventually be “native”: the models themselves will be subtly biased to promote advertisers’ interests, in a way that might be hard to distinguish from a genuinely helpful reply.
I admit I don't see how that will happen. What are they gonna do? Maintain a model (LoRA, maybe) for every single advertiser?
When both Pepsi and Coke pay you to advertise, you advertise both. The minute one reduces ad-spend, you need to advertise that less.
This sort of thing is computationally fast currently - ad-space is auctioned off in milliseconds. How will they do introduce ads into the content returned by an LLM while satisfying the ad-spend of the advertiser?
Retraining models every time a advertiser wins a bid on a keyword is unwieldy. Most likey solution is training the model to emit tokens represent ontological entries that are used by the Ad platform so that "<SODA>" can be bid on by PepsiCo/Coca-Cola under food > beverage > chilled > carbonated. Auction cycles have to match ad campaign durations for quicker price discovery, and more competition among bidders
you mean the API response then will contain the Ad display code?
More akin to something like the twitter verified program where companies can bid for relevance in the training set to buy a greater weight so the model will be trained to prefer them. Would be especially applicable for software if azure and aws start bidding on whose platform it should recommend. Or something like when Convex just came out to compete with depth of supabase/firebase training in current model they could be offered to retrain the model giving a higher weight to their personally selected code bases given extra weight for a mere $Xb.
But this is upfront, during training?
How does X then change "on the fly" if ad deals are changing? Constantly re-training with whatever advertiser is the current highest paying on?
In google ad times, this was realtime bidding in the background - for AI ads this does not work, if Im right?
Companies pay for entire sports stadiums for brand recognition. That’s also not something you can change on the fly, it’s a huge upfront cost and takes a significant effort to change. That doesn’t stop it from happening it’s just a different ad model.
The llm output will just contain ads directly. It’s going to be super hard to tell them apart from normal output.
Companies will pay OpenAI to prioritize more of their content during training. The weights for the product category will now be nudged more towards your product. Gartner Magic Quadrant for all businesses!
Or worse subtly integrate companies that pay them into the answers.
The generated text will contain advertisements.
No, there's GSuite / Google Workspace instead. OpenAI doesn't have one of those.
Even if you (i.e. your company) pay for the top-tier GSuite subscription, you still don't get an ad-free Google Search. Very curious ...
There's absolutely no way this is happening. Want to bet?
All hail APIs!
The ads are a problem (or will be, when the temptation to add them to paid plans becomes too great), but the bigger problem in my opinion is going to be the "SEO" that companies will do to make their ads appear in places that they don't belong.
"The sieve of Eratosthenes is an ancient algorithm for finding all prime numbers up to any given limit. But if you're looking to have fluffier baked goods, consider this flour sieve by DONUIBO to achieve the perfect texture in your muffins, cookies, and more. Want me to add one to your shopping list or order one for a loved one?"
There are already SEO companies that are trying to ensure a site’s content is being referenced by ChatGPT, so it’s already a thing.
Google and other search engines are already failing to surface real results, it feels like the general forces of SEO have already flooded the internet with AI generated articles. I am honestly gobsmacked by the speed of the turn around, finding real articles can be quite tricky. It matters for niche topics because the details matter, and they seem to be using cheap models to generate and spin the articles.
It isn't surprising, when article spinners were popular SEO experts were generating thousands of spun articles a day.
Its already here - its called GEO and their are silicon valley startups already pumping out crap to feed next gen models so that you ensure you're product is baked into the weights
The next gen of models are going to need very strict sanitising of input articles as I think the sheer volume of GPT SEO spam is going to be, or already is, quite staggering. Model collapse might not be what happens but certainly a dilution of quality in training data.
This looks like a workflow problem more than a model problem. When inputs aren’t controlled, scale amplifies noise faster than understanding. Tools improve, but the decision boundaries stay the bottleneck.
The ARPU will likely remain low enough that it's not worth potential churn to competitors
That's fine until all their competitors are doing it as well
Seems very unlikely considering the current equilibrium is for many services to offer ad-free premium versions, even recently creating these tiers. If anything the trend is moving in the other direction, more services offer paid ad free tiers.
Youtube, Spotify, Amazon Prime video, etc
Hilarious example btw
"...achieve prime quality texture ... add two, three, or five ..."
The ad based business model is the most destructive technology of the new millennium. The whole point of advertising, to make people feel unsatisfied with their current life. The current state of the world makes perfect sense when you think of the last 20 years we've been cultivating fear, and dissatisfaction among the populace. All in the hopes of selling 0.1% more widgets.
you thought the business model is any different in the 20th century? I recommend you watch the TV series Mad Men
The tools and information available back in the 60’s are not remotely comparable to the ones available today.
mad men is fiction
https://en.wikipedia.org/wiki/Torches_of_Freedom
Okay read anything about David Ogilvy
Ads are what capitalism runs on. It would be next to impossible for a new business to get off the ground without ads.
I’m not really against ads. I think the problem is in the influencer style business model. People are making a living fighting to get clicks by driving negative emotions. That’s the problem. ‘Influencer’ should not be a legitimate job. There is definitely a way to allow business to advertise without the negative externalities. It just requires regulation, which is basically impossible in the modern political climate.
This whole economy and way of living has turned into people selling themselves in any way possible. Regular folks couldn’t do that in the past but now everyone can mass sell themselves. It’s a sorry state of affairs and I hate influencers as much as the next person but everyone is struggling. I don’t know what the solution is but maybe completely shutting down social media or making it so everything online is deanonymized.
Guess I didn't take the same econ classes, I thought providing value to the customer was what capitalism ran on. I go to the butcher next door without having seen a single ad about it. They just sell a "better" product (according to my own criteria) than the supermarkets around.
If tomorrow (please take a second to imagine) that ads were banned and it worked (effectively 0 ads anywhere) I would still read journals that review new boardgames, I would still need products to fix my bike, etc.
It's value that makes capitalism run, not ads.
Value is cheaper prices. Longevity of goods has fallen to the wayside with most people being in a situation where they can’t think past immediate expenses.
Capitalism is also supposedly the ultimate system for innovation and the best idea is supposedly going to rise to the top based on merit/the marketplace. And let’s not get nitpicky about this: yes putting a sign out front is “advertising.” 99.99% of people are fine with that. But that is clearly not what people are talking about. We are talking about a massive industry that is not about simply getting the word out. It’s way more complex, sophisticated, and hostile than that.
If there were restrictions on advertising that applied to everyone, then everyone would be on the same playing field re: getting the word out. We could argue all day about what the rules should be, but I don’t think anyone could argue against the point that we have clearly gone too far in the wrong direction and need more restrictions currently. We have an ongoing arms race between people using adblockers and Google trying to mass-break them now.
Last I looked in to the numbers I think something like 30% of the US population uses an ad blocker of some sort, that’s how bad it’s gotten. Browsing the Internet without even a basic one is so unbelievably painful and the data they collect/sell has gotten out of control. That’s not “advertising the business,” that’s a second revenue stream unrelated to the core product and done at my expense.
> Look on the bright side, if they're turning to ads it likely means AGI is not on the horizon. Your job is safe!
I like this quote from TFA :)
I stumbled upon this one as well, but I do not understand it really: Why is my job safe if Ads prove there is no AGI?
Because even if there would be AGI, they could (and would?) serve ads anyway?
If your job is gone forever, with what money are you going to buy the thing in the advert? If nobody can buy the thing in the advert, the value of the ad slot itself is zero.
This is silly, so why does chatgpt ask for monthly payments if AGI is imminent? With what money would we pay them?
My argument and yours both agree that it is *not* imminent.
(Where the "it" that isn't, is AGI that takes your job, rather than any other definition of AGI).
To bring it to fruition.
They had claimed money would be worthless, etc, all investors should consider it a donation in a post-AGI world, blah blah.
who would pivot to selling ads if AGI was in reach? These orgs are burning a level of funding that is looking to fulfil dreams, ads is a pragmatic choice that implies a the moonshot isn't in range yet.
Because AGI is still some years away even if you are optimistic; and OpenAI must avoid going to the ground in the meantime due to lack of revenue. Selling ads and believing that AGI is reachable in the near future is not incompatible.
>Because AGI is still some years away
For years now, proponents have insisted that AI would improve at an exponential rate. I think we can now say for sure that this was incorrect.
> For years now, proponents have insisted that AI would improve at an exponential rate.
Did they? The scaling "laws" seem at best logarithmic: double the training data or model size for each additional unit of... "intelligence?"
We're well past the point of believing in creating a Machine God and asking Him for money. LLMs are good at some easily verifiable tasks like coding to a test suite, and can also be used as a sort-of search engine. The former is a useful new product; the latter is just another surface for ads.
Yes, they did, or at least some of them did. The claim was that AI would become smarter than us, and therefore be able to improve itself into an even smarter AI, and that the improvement would happen at computer rather than human speeds.
That is, shall we say, not yet proven. But it's not yet disproven exactly, either, because the AIs we have are definitely not yet smart enough to meet the starting threshold. (Can you imagine trying to let an LLM implement an LLM, on its own? Would you get something smarter? No, it would definitely be dumber.)
Now the question is, has AI (such as we have it so far) given any hint that it will be able to exceed that threshold? It appears to me that the answer so far is no.
But even if the answer is yes, and even if we eventually exceed that threshold, the exponential claim is still unsupported by any evidence. It could be just making logarithmic improvements at machine speed, which is going to be considerably less dramatic.
The original AGI timeline was 2027-2028, ads are an admission that the timeline is further out.
If AGI or something truly amazingly novel and useful for the market was about to get here, that’d be an unbelievable about of cash on the horizon. The promises they’ve made, it even half met, would be revolutionary. Ad placement means the business likely needs ads to work because the product isn’t near what they have been promising and won’t generate the revenue (at least not on its own) that investors have been promised because the hype was way too big.
Yes, I don't understand it either. I think the opposite is true. If AGI happens and it becomes immensely successful, it would be the best medium to deliver ads and at the same time our jobs wouldn't be safe.
Perhaps the people who like that quote can elaborate why that quote makes sense and why they like it?
AGI would be able to exponentially improve at much, much better money making schemes like high frequency trading. It would beat every online business. It would run 24/7/365.26 farming out tens of thousands of conversations at once, customized to the person it's talking to, for sales, supplier negotiations, marketing, press, etc.
Its costs would be frighteningly low compared to human employees, so it's margins could remain fine at lower prices.
Nobody will have jobs and nobody will be able to buy the stuff offered in the ads
[dead]
Because it shows that it’s just yet another ad delivery vehicle.
Once you go ads, that’s pretty much it, you start focusing on how to deliver ads rather than what you claim your core competency is.
If AGI was around the corner, they wouldn’t have to resort to what some consider a scummy way to make money. They’d would become the most valuable company on the planet, winning the whole game. Ads show you they don’t know what else to do but they desperately need money.
This doesn’t answer the actual question: why they wouldn’t just do both?
There are costs to doing ads (e.g. it burns social/political capital that could be used to defuse scandals or slow down hostile legislation, it consumes some fraction of your employees’ work hours, it may discourage some new talent from joining).
You have AGI, why do you care about new talent? You have AGI to do the ads. You have AGI to pick the best ads.
Isn't that the pitch of AGI? Solve any problems?
Yes. Infinite low cost intelligence labor to replace those pesky humans!
Really reminds me of the economics of slavery. Best way for line to go up is the ultimate suppression and subjugation of labor!
Hypothetically can lead to society free to not waste their life on work, but pursue their passions. Most likely it’ll lead to plantation-style hungry-hungry-hippo ruling class taking the economy away from the rest of us
yes but if AGI is around the corner, with what would they make money then?
Selling this AGI to a state actor? OK - this seems realistic, but for how many billions then? 100b per year?
Thats what I meant.
> consider a scummy way to make money.
How should Chatgpt survive then?
Well, the obvious answer is none of these companies should.
ok but the real world does not work like that.
"I kind of think of ads as like a last resort for us as a business model," - Sam Altman, October 2024
So we know then for sure they will do it.
I don’t trust Altman to tell me the colour of the sky.
That's not the important point, it's that they are already at their last resort
It was always the only resort. The best, the worst, the first, the last, the richest, the poorest. The only one.
We need to massive restrict when and where ads can be shown in all aspects of our society. No ads in ai at all. Ever. No targeted ads, no unskipable ads, limit ratio of ads to content in video, no roadside billboards, reign in the size of ads on buildings.
Ads are a blight on our society and purging them from many areas will greatly improve quality of life.
“Only on TV and radio. And in magazines and movies and at ball games, on buses and milk cartons and T-shirts and bananas and written on the sky. But not in dreams. No, sir-ee!”
Simpler times…
Ads will be no longer a buisness model in 3-5 years when simple, locally run models that do nothing besides blocking ads become available. Twitter, Facebook etc. already get past most modern adblockers, but the AI extension will be able to filter them. In-text advertising must be marked as advertisment in most countries, and even if it isn't, local AI will filter this probably out. So a free ChatGPT service with in-text AI can simply be countered by another local browser extension, that rewrites the text and removes ads.
One can make the point that Google, Meta and others are investing so much into AI as they know, we are facing the end of the ad-based internet economy. The investments are to create new buiness models, because their old ones are gone soon.
Alternatively, DRM for websites will start being a thing and remove any possibility of blocking ads.
Yeah some form of google's Web Integrity API will be forced one of these days
https://arstechnica.com/gadgets/2023/07/googles-web-integrit...
There are already DRM for Websites e.g. several audio and video streaming services.
I pray you are right. Still, there's no guarantee that the next business model won't be an order of magnitude more user-hostile.
Adblockers already remove the vast majority of ads. Adtech works because most people dont use them.
See my sibling response. More people will use adblock if all they have to do is prompt a single line into their computer. Hell people will not even visit websites. They will ask AI to present it in whatever form they prefer. I can have a big-breasted anime character reading my personalized news for me, or have it printed in a 1890 style newspaper. Ads will not make it into either format, because I prompt that out.
Using adblock right now is even easier than that though. Most people will not use a command line, but going to https://chromewebstore.google.com/, searching adblock and clicking install is something literally anybody could do.
Not on mobile.
So then people also won't be able to one-shot prompt an ad blocker on mobile either then. And mobile is where most of the ad money is.
Sad truth is vast majority of users today are not savvy enough to install a good adblocker. We live in a bubble here in technology where we assume people know to do things like block ads. Really at this point people don’t know what files are anymore or even what a website actually is.
True, but some 20 years ago, I already could (and did) use photoshop to cut out the head of a woman (celebrity or from my social group) and put it onto a naked or bikini body of a woman. This is an old problem, but the bar to achieve that was too high and required tech savyness. The second Grok does it on twitter available for every idiot, suddently politicians see this as problematic and want to pass laws against it [0]. My point: Whatever local AI that you will have on your computer or browser, will react to "do not show me ads and filter all product placement in content out" as a single line prompt. And if we won't have a local AI capable of doing it in 5years or more, the whole investement into AI are clearly a bubble and AI will face another winter.
[0]: https://www.tagesschau.de/inland/gesellschaft/ki-kuenstliche... (sorry, german only, but this is an AI thread and you know what to do...)
The problem is the way consumer rights are going, companies will simply make it impossible for you to run a line like that, or at least make it difficult enough that only a small percentage of the population can do it.
Every layer of friction they add means millions of people just throwing up their hands and accepting whatever nonsense is thrown at them.
You assume all models will be closed-source and there will be no competition. I can imagine that, but I would assume training an AI model for ad-filtering is something the community can and will do - maybe think 5 years ahead what hardware will be available for training and inference to a "small developer".
I don’t assume that at all. I’m saying that they just need to capture the vast majority of people, which has happened many times. For instance, Linux is available to everyone and would end a lot of frustrations and headaches they currently experience with macOS and windows. But for many reasons it still remains in the low single digit percentages when it comes to adoption, a lot of which is inflated by the steam deck.
It’s the same reason people pay to get their oil changed rather than doing it themselves. We are willing to compromise for convenience. And for a lot of people, that means just not dealing with it. Accept the ads, pay a small fee, whatever is the quickest way to make the thing works again or to get where they need to go.
> Linux is available to everyone and would end a lot of frustrations and headaches they currently experience with macOS
That is a very bad argument for the AI thing, because as a Linux fan (started in the late 90s with Linux) I am using a Macbook because the Laptop story on Linux is not at all a success story. The headaches macOS causes would just be exchanged for the headaches Linux does.
But that is entirely my point. You are merely trading headaches off because a solution like “running your own local LLM“ is never going to be as turnkey as simply paying a subscription and throwing down your questions on ChatGPT. Certainly not for the “average” user. It’s not a real solution. They will accept tons of compromises for it to be that simple.
They want an up-to-date answer with a modern/user-friendly interface. ChatGPT is as simple as Google search, I’ll give them that. Go to the site-> type -> receive an answer (of varied quality to be sure). We have seen this over and over again. You can’t throw the average person in front of LM Studio, tell them to go to town, and expect them not to open a browser and fire up ChatGPT at the first sight of that interface. You’re placing too much value in local control/customization for the “average” user.
At the end of the day a computer is “the thing that gets you to the thing.” Most people want it to just do that as intuitively as possible. Local control and customization more often than not bumps against that. It’s a decision that compromises ease of use for functionality, something that you and I value but most people do not.
More than an extension, imagine us having good enough, fast enough, vision models that you never even see a real website. Maybe the whole OS in Microsoft's case if they keep putting more ads in. It will be a level of inefficiency inconceivable but really something.
The thing is:
Global online advertising is around 650-700 billion per year - how much of this stake need OAI to capture over how many years to fulfill all its datacenter orderings? (a huge chunk of this is already caught bei Meta/Google/etc. per year)
> the greatest, smartest, brightest minds have all come together to... build us another ad engine
Oh man, maybe it's just the drink talking, but I actually cried laughing reading this. Haha oh my god thank you. This. A hundred times Rick and morty this.
This will be fun to look back on in a few years. Making concrete predictions in a market moving this fast is a minor act of courage, so much respect.
I'm surprised how few seem to understand this; AI is the ultimate 'net' to capture and exploit consumers. AI was never about improving civilization; it was always about money. This is the only thing 'inevitable' about AI.
>AI was never about improving civilization; it was always about money.
Why not both? It has diagnosed patients who were unsolved by humans. And it was cheaper than doctors.
Why not mow a lawn with a sledgehammer? It removed grass that was overgrown. And it was cheaper than a lawnmower.
Your analogy doesn't work.
This patient saw 6 doctors over 2 years and they all misdiagnosed them. They were taking incredibly strong medication for the wrong diagnosis.
GPT3 in 30 seconds gave 10 diagnosis and a doctor looked up the ones they didn't know. Saw one that fit, did the confirmation test, and the patient got the surgery needed.
Cheaper and better.
The doctor did the diagnosis using the language model as a tool then. Impressive, but I think it’s false to imply GPT did the diagnosing.
The doctor had never heard of the diagnosis prior. It was outside this doctors scope.
Like a heart doctor figured out a skeletal abnormality.
This happened with GPT3 and they were an early adopter. The patient would have gotten this in 2026 easily.
Any chance you can link to the reference I can read further about this?
Not a great analogy. I've had a far better experience with Claude for simple medical questions than googling or waiting for a response from a doctor. For example, last night I had a panic attack triggered by chugging a protein shake that was expired/gone bad. It was too late for any friends to be awake.
Talking with Claude was incredibly helpful. It gave concrete suggestions for managing the anxiety in the moment and explained what was likely happening with my body and nervous system. It was the correct tool for the job.
When search (content discovery) becomes AI-led, we will look back and realize that Google Ads were far less personalized and targeted than we thought.
OpenAI has to be in panic mode, because google is stealing its market. Google for the big apple slice. Anthropic’s got the coding market mindshare. OpenAI has a decent chatbot share but I am sure it’s a declining business. They have fully squeezed everything out of the trump alignment, not sure there is much left there either. Also musk is probably going to get the federal government llm service money. They have to go vertical, and that is the reason why they are throwing shit at the wall with Johnny Ive and hardware.
I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
> throwing shit at the wall with Johnny Ive and hardware.
Damn, I already forgot about that. You'd think a company who has the smartest people on Earth building a "product" that is "intelligence" would be able to... you know, make something out of it. Somehow despite ALL that, despite all the press too, they can't ship? Something does not add up, it's as if, and I know I'm going to sound like a crazy person, they were just... a normal company! /s
> I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
OK ok well this is weird to me, I didn't think I'd be the one to defend Meta here ... but Meta at least never hid it's intention : it was a for-profit VC backed startup which only goal was to make money from day 1. OpenAI though started as a non-profit, collected goodwill from everyone to get the best talent because it's 1 thing, what made it special : it's mission WAS safety. Then they did 1 thing that actually got popular, GPT2, thanks to some pretty damn good marketing "Oh no, it's too risky to release!... but ok OK here it is anyway, but like don't destroy the World please." then exclusive partnership, etc, etc. Meta was "We want money." so at least they didn't lie about it.
What's the difference between AI ads and computer-assisted bribery?
We can wrangle the legalese (as AI companies certainly will) but is there any ethical, moral, or practical difference?
That sounds like the opening line to a joke. What bribe are you referring to? Who’s getting paid, and what favor is being exchanged?
When users come to you, they may or may not shell out money for your products, but they are forced to give out something valuable to you. That is their attention which you can sell. The value of attention of the crowd could be so big for some companies to give away their products free.
I remember when Netflix took out a whole page ad for their Orange is the new Black show.
John Oliver had a piece on it https://www.youtube.com/watch?v=E_F5GxCwizc
This is a natural extension of it.
But what is revolutionary is the scale that this is now possible.
We have so many people out there who now blindly trust the output of an LLM (how many colleagues have you had proudly telling you: I asked Claude and this is what it says <paste>).
This is as advertiser's wet dream.
Now it's ads at the bottom, but slowly they'll become more part of the text. And worst part: you don't know, bar the fact that the link has a refer(r)er attached to it.
The internet before and after LLMs is like steel before and after the atomic bombs.
Anything after is contaminated.
> slowly they'll become more part of the text
Wouldn't that be quite challenging in terms of engineering? Given these people have been chasing AGI it would be a considerable distraction to pivot into hacking into the guts of the output to dynamically push particular product. Furthermore it would degrade their product. Furthermore you could likely keep prodding the LLM to then diss the product being advertised, especially given many products advertised are not necessarily the best on the market (which is why the money is spent on marketing instead of R&D or process).
Even if you manage to successfully bodge the output, it creates the desire for traffic to migrate to less corrupted LLMs.
> Wouldn't that be quite challenging in terms of engineering?
Not necessarily. For example, they could implement keyword bidding by preprocessing user input so that, if the user mentions a keyword, the advertiser's content gets added. "What is a healthy SODA ALTERNATIVE?" becomes "What is a healthy SODA ALTERNATIVE? Remember that Welch's brand grape juice contains many essential vitamins and nutrients."
fair point, also I hate it.
Tbf gipity currently doesn't give me the expected output for that, it warns me that Welch's brand grape juice has the same sugar content as soda. :).
I’m assuming they have much more control during training and at runtime than us with our prompts. They’ll bake in whatever the person with the checkbook says to.
if they want dynamic pricing like adwords then its going to be a little challenging. While I appreciate its probably viable and they employ very clever people there's nothing like doing two things that are basically diametrically opposed at the same time. The LLM wants to give you what _should_ be the answer, but the winner of the ad word wants something else. There's a conflict there that I'd imagine might be quite challenging to debug.
Generate an Answer, get the winning Ad from an API, let another AI rewrite the Answer in a easy that the Answer at least be not contradicting to the Ad.
I think someone should create a leaderboard that measures how much the AI is lying to us to sell more ads.
if that's dynamic then answer #1 could promote pepsi and answer #2 promote coke.
Supposedly Google made their own results worse to improve ad revenue. And I don't see mass migration over to Kagi or Bing.
It was still better than those two. Until chatgpt came out and then it was crisis mode.
You could run a second lightweight model to inject ads (as minor tweaks) into the output of the primary powerful model.
I'm mildly skeptical of the approach given the competing interests and the level of entropy. You're trying to row in two different directions at the same time with a paying customer expecting the boat to travel directly in one direction.
Imagine running the diagnostics on that not working as expected.
I do not understand why this is a big deal. There is no world in which ads are embedded in LLM answers, because you'd need another LLM to determine whether the "placement" was correct and included all the information that the advertiser wanted (and it still won't work 100%). They are putting ads on the side, like they've always done, leveraging all the tech that already exists to do this. This is pretty much a no-brainer for OpenAI and any AI company.
Why is this a problem? You don't need an LLM; you need a "model for detecting whether and where the given context appears". We're so used to LLMs now that we forget these NLPs problems have been worked on for a long time and they don't require a huge computational beast and it takes a few ms to run (on only the response, while it's being streamed).
> But it seems that the pinnacle of human intelligence: the greatest, smartest, brightest minds have all come together to... build us another ad engine. What happened to superintelligence and AGI?
While we all knew it was inevitable, I think this quote from the article sums up the feeling nicely.
I don't get that part either. That's like saying "the brightest minds have all come together to... build us another thing that requires money." OpenAI is trying to make more money than they use to run ChatGPT. They are getting that money from their users, and soon advertisers too. They still need their users to like ChatGPT
It's also possible people finally become SICK of seeing ads and there's a cultural shift boycotting products incorporating them. I would love to see this.
There's a difference between advertising - which tends to be offensive, stealing your attention from the task you're trying to accomplish - and an agent that actually helps you with the intended task (as in travel agent, real estate agent, etc). In my opinion the future of revenue for the richest companies is the latter, we just have yet to see anyone unlock it at true scale.
My non-tech spouse is excited about AI because she wants what amounts to a personal, universal EA that can help her with anything. If your executive assistant just kept squawking ads at you all day long you'd fire them.
Lie.
Their strategy is just to lie. Until they're caught. A CEO with no AI skills and no business skills. There's not a lot of analysis you have to put into this.
The pragmatic side of me wonders if there is any way to shape this inevitable future now so we might see a better outcome 20 years.
You can work on building LLMs that use less compute and run locally as well. There are some pretty good open models. They probably be made even more computationally efficient.
Unplug
In all seriousness. Windows is invaded by copilot, OpenAI introducing ads, Google providing Siri for Apple, it’s all just a collusion to keep you buying. Disconnect. From TV, Media, Ads, Social Networks, Predatory subscriptions, all of it. The only way to show these companies that we are not on board with this is to not participate.
Reddit generates its revenue with schadenfreude, YouTube and AAA games with GenAI (see: Ghibli in Call of Duty, and fast growing AI channels like Nick Invests or Bernard with “Why it Sucks to be X”).
On my shelf from the corner of my eye I see “Understanding the Linux Kernel”. It’s outdated, but it comes from a time of peer review and subject matter experts. I don’t need to double guess if the author is hallucinating or if they’re subconsciously trying to sell me something.
Maybe it’s time we return to books for entertainment and knowledge share.
Vinyl and Paperbacks…
2026 is the year of the audio cassette!
Annoying was a thing of the past. Look at the evolution of ads and content placement. With social media advertising being pushed to trigger massive anxiety and societal schizophrenia on some topics, imagine what can be done with personalized AI (especially if the buyers are well funded politicians, or state-backed malicious actors vying for territory, real estate, or natural resources where you live - the highest margin opportunities).
At first, In retail you had billboards and shelf space. The lowest quality ingredients your product has (example syrup bottled with soda water), the higher your margin was, the more you could afford to buy out shelf space in retail chains and keep any higher quality competition out. Then you would use some extra profits to buy out national ads and you’d become a top holding for the biggest investors. That was the low-tech flywheel.
In the Search Engine world - the billboards weee the Margin-eating auction-based ads prices and the shelf space became SEO on increasingly diluted and dis-informative content to fill the shelf-space side. In Video advertising, rage-bait and conspiracy theories try to eat up the time available for top users.
AI advertising if done right can be useful, but the industry that asks for it intentionally asks for obtrusive and attention hogging, not for useful. The goal is always to push people to generate demand, not sit there when they need something. Thus the repetition, psychological experiments, emotional warfare (surfacing or creating perceived deficiencies, then selling the cure). Now if you understand that the parties funding AI expansion are not Procter and Gamble- level commercial entities but state and sovereign investors, you can forecast what the main use cases may be and how those will be approached. Especially if natural resources are becoming more profitable than consumer demand.
Ads I'm not to worried about.
It's ads after they've got some sort of lock in that is the problem. e.g. some sort of system that "knows" you and makes it hard to switch to another provider.
Once they've got that hold on you being force fed ads at max rate is guaranteed.
There's no question that "AI" is the next advertising frontier. I've been saying this for years[1][2][3]. It is going to be the most lucrative form of it yet, and no "AI" company will be able to resist it. Given the exorbitant amount of resources required for this technology, advertising will probably be the only viable business model that can sustain it at scale.
[1]: https://news.ycombinator.com/item?id=35706981
[2]: https://news.ycombinator.com/item?id=36689090
[3]: https://news.ycombinator.com/item?id=46425948
The exorbitant costs could save us from ads actually. instead everyone will have to pay subscriptions like for mobile phone plans. Haven't heard of the ad-based Rolls-Royce yet.
Paying for a subscription does not guarantee you won't get ads. They could do both.
"for years"? the oldest link in your list is from lat 2023, so.... ;-) ;-)
> Yes, OpenAI is burning $8-12B in 2025. Compute infrastructure is obviously not cheap when serving 190M people daily.
So casual. Actual ad giants like Meta and Google are serving many more people than 190M while bringing in actual profit.
Yes, let's say these are just the early days and they are burning money just like any other VC company. But how are they going to scale up their hardware/usage and get a profit at the same time?
AI hardware is getting optimized YOY too but the flagship models are getting bigger every year as well. I don't see how they are going to get profit without jacking their prices at the same time. And price increases always hits usage growth.
Serving an ad is very cheap these days, while serving a big model is very much expensive.
> Yes, OpenAI is burning $8-12B in 2025
OpenAI actually burnt $12B in just one quarter (not for the entire year as he claims)
https://www.thurrott.com/a-i/openai-a-i/329108/openai-lost-1...
"Ad" is a euphamism for behavioral management - the goal and the pièce de résistance for any successful enterprise. Always has been this way, always will remain this way. Only thing that is changing is how easy we're making it for them.
I don't understand why people are upset. How do you monetize free users? Ads. What other websites do this? All of them. Not controversial. Not an issue.
Ads are what gets me property and news flash, they aren't going away.
It's just disappointing that this is the best society could come up with. Advertising is exploitive, this is well studied, but it is also just kind of a lame outcome.
I also wonder if the dollars and cents work out, the cost to provide the service to show the ads on is astronomical in comparison to other ad networks, but I don't have details enough to make any claims on that aspect.
I wish we collectively had a better understanding of those ad tech shifts being fundamentally zero sum.
If we treat marketing as a black box, where are the benefits from supposedly more efficient marketing? Ad budgets are the same. People have the same amount of disposable income (or less, really). So on the both sides of the box converting ad budgets into paying customers the sum is the same. Quasi-monopolistic ad networks (Google and Meta) just hoovered up the money that previously went into other ad spaces, like local papers. Now OpenAI is going to fight for the same pie.
Ad tech is a market failure.
Ads aren't a long-term viable model for tools. Each year it gets more feasible to self host tools (email being the od exception, but there are still many ad free alternatives). Ads shifting vehicles to AI will extend the lifetime a bit, but even still local models are getting better and that's without even much architectural advancement.
I don't see an end to advertising all together though, public spaces and entertainment don't really have an escape unless forced by regulation.
This very much reminds me how the earliest users get a bit screwed due to high costs and low quality. Maybe these users are caused enthusiasts, so they don't care. The next set of users get higher quality and lower costs. These are your big winners in the timeline of a technology.
The middle users get benefits, but aren't treated quite like the previous set.
Then you have your late adopters, these are the ones that are lightly abused, but they get a mature product, so it isn't that bad.
Finally you have your last users. These are milked for every drop. They have irrational loyalty or are locked in.
I imagine AI will follow this trend and we are entering past those middle users as we speak. Seeing how little difference there was between GPT 3.5 and 4, and how computationally expensive 4.5 was, I think we've hit the end. Now its just how many prompts do you want to run for COT/Thinking?
GPT 5.2 is cheap and they are proposing ads. They see the end is near and need to capture profit before local models take over.
I'm not so sure. Much like search engines, you can run one yourself or pay Kagi but most people prefer to keep their money and deal with the ads. Streaming services have demonstrated that people have a pretty high tolerance for ads.
Search so far has not been overly pushy with ads. It's easy enough to gain the instinct of scrolling down after each search. There's little incentive for people to seek out an ad free alternative.
That changes with local AI though. There is now incentive to integrate and further develop self hosted search. You can see it happening on AI services already, using their own internal search engines for better reasoning and more accurate results.
I suspect Google's censorship and intentional worsening of search results to increase traffic would've been enough on its own to eventually drive people to self hosted search as it became trivial to setup.
Streaming entertainment is different, there's usually no legal alternatives. Either you pay extra for no ads, or you put up with the ads. You could easily say that streaming services have demonstrated that people don't have a high tolerance for ads as well. One of the major drivers to streaming from cable TV was the lack of ads at the time.
AI-generated ads. Dead-internet dog food. I’ve had to block recommendations across multiple SNS feeds because they’re flooded with blatant AI slop: synthetic video, synthetic images, synthetic music, topped off with a fake voice narrating the whole thing. Nausea.
then I open LinkedIn and it’s C-suite know-nothings openly bragging, wrapped in self-aggrandizing, narcissistic nonsense that only garners likes from other C-suite know-nothings or PMs that have never written a line of code, shilling AI like evangelists and borderline celebrating the obsolescence of entire careers despite being unable to deploy their boring SaaS app live to production.
to keep that part of my brain flexed however, because I do enjoy the craft of software engineering, I still tinker as a hobby, working on passion projects on my own terms. But it’s not my bread-and-butter anymore. Pivoting away from all this dogshit has been the biggest weight off my shoulders this year as I budget my investments and the savings garnered from my extensive engineering career abroad in Japan. early retirement. I’m done.
Kinda funny the author fed a visual from French film 'La Haine'[0] to ChatGPT to produce whatever this illustration is supposed to convey ("The world is our/ads"? What does that mean?).
Without crediting the movie of course.
[0] https://www.machina-deriveapprodi.com/post/le-monde-est-%C3%...
I have never really looked at ad revenues, but honestly those numbers seem reasonable and crazy at the same time (or their calculation at least). My main issue is, that I hate oligopolies. For many industries I think a country can protect itself against oligopolies from outside. But everything digital comes out of little valley on the west coast. This really bothers me.
I’m fascinated at how out of touch that NYT article is. It’s as if it was written by someone who just spent 3 years on the moon. “The next big thing will be agents: The models will fill digital shopping baskets and take care of online bills. They will act for you.”
Golly Mr two times Pulitzer nominee, do tell us more!
There is a kind of liberal arts elite that seems to not be using AI very much and not be buying any of their services. Contrast that with those of us in tech who are handing over money as fast as we can and can’t get enough of gpt 5.2 codex on xhigh and similar products that are game changing enablers.
Makes me wonder if we’re seeing a fracture in society beginning to form where the doomsdayers, naysayers, cynics and skeptics will realize their error too late.
My view on AI is that this is the world’s first Unbubble: where the majority view is that we are over invested, but where history will show we actually underestimated future revenue and profitability.
The conditions for the Unbubble are perfect. We have a once in a species level innovation with an economic system where all value accrues to the creators and financiers. And we have just emerged from the housing bubble and the dot com bubble in the last 3 decades, freshly scorched.
We thought connecting everyone would create new value far faster than it did. But really it took a long time to run all that fiber and make it fast, and it was just laying the plumbing for this moment.
Training big foundational models may seem slow, but it’s happening way faster than circling continents and the globe with fiber and developing terabit switching fabric.
I spend 12 hours a day using codex CLI to write extremely fast Rust and cuda code with advanced math that does things I didn’t think were possible. My focus is on creating value from the second and third order effects of AI. These enabling effects are in few conversations. As weirdly innovative products emerge from small shops, they will begin to be discussed.
Now you can pay them twice: once to access the tool to do your job and once to access the market for customers.
Definitely no reason to worry about an entrenched oligopoly there.
I have no idea why so many people think that an argument that AI works is the same thing as an argument that AI will be profitable.
The better AI gets, the better the training techniques get, and the better the algorithms get will result in fewer processors needed to run something of use. All of the advances will end up in the public domain if not immediately after or before they are even implemented, soon after. There will not be many economies of scale between having 100M customers or 10K customers, so no way to keep out competitors. They will all compete on price. If the models get really, really good, a "good enough" model will end up running on your old laptop and you won't have to pay for anything.
Saying that AI will be productive - which is yet to be seen, I don't know how much polishing or complete rethinking your code will have to go through before it can ship as an actual product that you have to stand behind and support - is not the same as saying that AI will be profitable.
We actually don't even need that many computer programs. Hypothetically, a ton of excess LLM coding supply might allow us to take out a few layers of expensive abstraction from our current stacks, and make more code even less necessary. They kept telling us that all of that abstraction was a result of trying to save developer labor costs, right? If AI is productive and rentiers can't manage to extract that productivity due to competition, that equation changes.
In the end, we say that the dot com bubble resulted in a huge amount of productive capacity that we were later able to put to use. But that doesn't mean that putting a quarter of a billion 90s dollars into DrKoop.com was a good idea; nope, still dumb.
> I have no idea why so many people think that an argument that AI works is the same thing as an argument that AI will be profitable.
The fact that it works well for expensive categories of output (like software engineering, legal strategy, etc...) makes it difficult to imagine that it won't be profitable. You could still make an argument that the investments being made today are disproportionate, or that intense competition will stifle margins, but it's creating enough value to capture plenty of money.
funny i keep seeing AI is not profitable simultaneously because it is too expensive to run and that it is too cheap to run.
AGI can have multiple meanings. Depending on who you ask, it can mean:
"Ads Generated Income"
"Artificial General Intelligence"
"A Google Imitator"
"Absolutely Great IPO"
It is any definition that fits the goal of the original secret definition of "100 Billion dollars in profits" from Microsoft and OpenAI [0].
[0] https://archive.is/nHedH
I can't be the only person completely unconcerned about this state of affairs. They're ads. This is the most straightforward incentive structure in the world - they are paid to supply ads on behalf of other companies, and we consume those ads and are, in turn, provided with their product. I don't know why it is, but people are incapable of evaluating this exchange objectively - there's something inherently detestable about advertisement to the human mind. This is a perfectly reasonable exchange.
Besides, if it wasn't for ads, I never would've found out about Zyns, and now I can't stop buying them.
Is this an ad for Zyns (whatever that is; I refuse to do a web search to find out)?
No LOL. Zyns are nicotine pouches you insert into your gums for a gradual release of nicotine. They're powerful. Unfortunately, I went from using 3mg Zyns to 6mg Zyns, and had to sit in front of my bathroom sink, fighting the urge to retch. Be careful with them, but they're a good way to ramp up to cigarette smoking
Ads feel good when they’re for something we’re actively in need of. But they usually aren’t, and they are also often scammy or scummy. I bet we’d feel a lot different about ads if these things changed.
My prediction: Google will win. Rationale: cost/token + pre-existing ad knowledge + APIs for third-party apps. My concern is how an OpenAI collapse could hurt Microsoft and Nvidia.
> 2029: $50.00 (Suuuuuuuper bullish case) - Approaching Google’s ~$60 ARPU. By now, the infrastructure is mature, and "Conversational Commerce" is the standard. This is what Softbank is praying will happen.
There's no way Softbank's, or any other investor's, extreme bull case is that four years from now, ChatGPT sells the same amount of advertising as Google and earns $50 a year.
The extreme bull projection is that everyone buys everything through ChatGPT and each user is worth thousands per year. If you don't believe there's at least a slim chance of this you shouldn't be investing in OpenAI, and if you're an OpenAI executive who doesn't think there's a chance of this you shouldn't be writing pitch decks for SoftBank.
I meant super bullish from an outsiders point of view, but I do agree that the projections from within the investors circle are likely multiples of that.
"it seems that the pinnacle of human intelligence: the greatest, smartest, brightest minds have all come together to... build us another ad engine"
Putting aside the ridiculous hyperbole, the reason is that consumerism is our culture. Our cult-ure. Everything is oriented toward and reduced to consumption. Our worth as human beings is replaced by consumerist criteria and measures. It's why physicists leave research and work in finance where their training is repurposed in service of all sorts of financial jiggery-pokery.
"The A in AGI stands for Ads! It's all ads!! Ads that you can't even block because they are BAKED into the streamed probabilistic word selector purposefully skewed to output the highest bidder's marketing copy."
But note the implication. Sure, ads weaved into the content, but they still must be targeted. And here's the irony of the online existence. People often refrain from expressing various desires in public for fear of judgement. It's why the vitriol online is so much spicier. The world of social media where you can express repressed opinions, the world of games and other ahem media where you can sublimate all sorts of desires and fantasies - all of this is data for the AI machine. These companies, in some respects, "know" you better than the people in your life do - especially those parts of you that you could be embarrassed to reveal in public - and they use this information to manipulate you, largely for profit, but why not for broader social and psychological control. AI's convenience is already irresistible. It's the go-to in Google search.
I think the killer is when the platform handles the transaction all the way. Instead of charging per click, platform can then take a cut of the sale.
AGI = Ads Generated Income
People are a bit too eager to jump on the emergence of ads as an indicator that things are slowing down. I view it as the opposite, mostly because of my experience with Codex 5.2 and Opus 4.5. These models are incredible. I think by some definitions they’re already AGI.
So why bake in ads? My hunch is that raising funds privately can only take you so far. To keep scaling, they need more capital and have to go public. Despite all the hype they still have to show _some_ revenue to help justify the valuation they need to keep buying hardware. They are a business after all. Ads to support the lowest tiers feel like a no brainer. People already accept them for search.
“Have you tried the new models, bro?”
I’m convinced that there will be people declaring that this isn’t AGI all the way up to the moment that they become permanently unemployed.
> I’m convinced that there will be people declaring that this isn’t AGI all the way up to the moment that they become permanently unemployed.
Won't you be permanently unemployed along with them?
If AGI comes through, both the boosters and the skeptics can continue their arguments in the soup kitchen.
You can all tell us “i told you so” when we meet each other in the bread lines comrade.
GPT-4 was AGI.
Keep lying to yourself
I'd pay $0.005 per conversation, provided the payment is not inconvenient, anonymous, and an account isn't required. That in my opinion is the root cause of the problem, people can't pay easily even if they wanted to pay instead of get ads.
I think the next natural evolution after showing ads in chat sessions is providing services where LLMs tailor site content to include ads in real time. Right now you get served a prepared advertisement after the bid is won and the ad for you is selected. With LLMs, both the bidding process and the ad served would be seamlessly integrated with the site content/context.
Part of the "problem" with ads is people know they're ads. What if this comment was edited by HN's servers and rephrased to mention a specific product? You might see a sentence about how OpenAI is the future, someone else might see how claude or anthropic are. Another person might see a paragraph from me about how I used Tide to clean laundry this morning with the help of AI, telling me the right portions for the right cloth. You might suspect it's AI but you won't always be able to tell. Even if they made it more obvious like how reddit is doing it, the content of the AD itself, pictures, text,etc.. could be crafted dynamically so that it embeds in your subconscious without much resistance.
The tech developed to make ads more effective is also used to influence people for other purposes. The current state of society came about after the widespread accessibility of smartphones, social media and the rise of surveillance capitalism. Russia's influence ops using ads is well documented for example. I mentioned all this to say how catastrophic the combination of LLMs and advertising could be, even by today's standards.
yeah but any service that shittifies will get upstaged by services that don't (cough cough: Deepseek)
I need unskewed answers more than I need technical prowness, because technical expertise is going towards commodity availability. i like chat GPT but I'm gone the second they put ads into my development workflow. Bye!
Yeah, I remember Google had good intentions too. They had a moto “don’t be evil”. Good old days. Enjoy chatGPT while you can I guess.
Even if they raise 10B in ad revenue (an order of magnitude higher than the author suggests) that would still imply a 100x valuation which is insane.
There's still an AI bubble.
We should assume that at least a portion of the ads spending currently being channeled towards search would be redirected towards AI, but even then I question if the ad market is large enough to fund all the tech and media companies that rely on it. The ever increasing question to generate more value for the shareholders is in large part being funded by consumerism, gambling, borderline, or outright scams, and I question how much more value can be extracted by that route. We've certainly already crossed a lot of people ethical barriers.
Here’s my own strategy. When they start showing me ads as a paying customer I leave the service.
Advertisement General Intelligence, at least it still has "general intelligence", this is good enough for me.
Great article, thanks for sharing. Perplexity having >$50 CPMs seems crazy to me.
What if your query is answered by an insane AI that is obsessed with getting you to buy things? Like this demo that could only think about the Golden Gate?
https://www.anthropic.com/news/golden-gate-claude
This would make astroturfing on Reddit look like basic mode.
The ads stirs the already murky waters of trust for the answers you get.
Nice read - I can’t seem to subscribe? Getting an error with Buttondown.
I am going to offer an unpopular opinion. This is not a bad thing.
Even now there are viable options for a person to pick up a dedicated ( and reasonably powerful ) local inference machine, where time from setup to working is than few hours ( more if you don't want to use Windows.. which is fair ).
Separately, about the chat sessions. For once, those ads could be more relevant than repeat toaster ads immediately after me buying a toaster. But if one is worried about profiling ( and advertising ), one should not using a commercial solution anyway. Personally, I am taking a.. calculated risk.
There is a concern that openai will follow the same path as google, but they can't ( at least for now ) really afford to make chatgpt not useful as this is their only viable product.
I will end with a more optimistic note. This is HN. There are people here, who are likely working on something that does not depend on openai or any of the big providers anyway. It is going to be ok. And if it won't be. Make it so. After all, this is supposed to be your realm. Own it.
> response to an NYT analyst
It's a guest op-ed, relax.
Check the creds on the author. Two time Pulitzer nominee, WaPo, Economist, etc. characterizing as a journo is accurate.
> Mate come on. OpenAI is not dying, they're not running out of money. Yes, they're creating possibly the craziest circular economy and defying every economics law
You are starting with wrong assumption and contradicting yourself. Circular economy couldn't last forever once we start looking at the profit. They need money outside the funding to justify the funding.
You can't both say they are not earning at all and they are being greedy.
Pharma ads as AI health advice will be super profitable. AIs are very engaging and able convince people they have a disease, inadvertently coach them on how to mislead their doctor, and how to fast track diagnosis supporting their specific meds. The only guard is to have detailed manifest of exactly what was used in training. Even that may prove insufficient as "final assembly" has emergent properties. For example, omitting case reports of severe outcomes for a given formulation. Bias can be constructed.
OpenAI is here because Sam Altman is NOT a product guy. He craves Apple style consumer success, but he's terrible at productizing his technology. Remember the marketplace of custom GPTs? Hell even the name ChatGPT. Anthropic had to show them how to build useful workflows for developers using AI. Meanwhile, OpenAI delivered... Sora.
To actually quote Sam Altman: "I think of ads as a last resort for a business model."
It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
"OpenAI is here because Sam Altman is NOT a product guy. He craves Apple style consumer success, but he's terrible at productizing his technology"
Seriously, consider putting more thought and effort into your comments. This is wildly out of touch and I think it is because people lack the creativity to imagine the counterfactual - some one else running OpenAI.
OpenAI is remarkably well run - it is a fairly good product. The best model so far, the best experience, the 2nd best coding experience.
Never thought of ChatGPT as being just one of the GPTs that could exist, but it make a lot of sense. In a world where OpenAI where better managed, more focused on actually delivering actual value, ChatGPT would be the show case AI product, while the value is generated by the custom solutions delivered to other companies to embed in their products.
> It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
AI is a perfect technology for Ads though. Instead of me wasting time reviewing multiple products for my use case, ChatGpt will just give me top 3 recommendations with the pros and cons and then buy it for me.
The one thing it will never recommend is no product at all.
You've ceded even the glimmers of discernment that remain in you and all I feel is pity. It is not a 'waste of time' to interrogate your own desires.
There's no such thing as a 'top 3' for all things under heaven. You cannot purchase yourself a solution to every 'use case'. Furthermore, even if there were such a ranking, the ad machine would not reveal it to you, as you are not the customer, you are the mark.
You don't even want to be bothered to hit the 'buy it now' button. This is the mental model of an immaculate rube. You deserve better.
But this loses value as soon as ads come into play because of incentives. It's hard to trust recommendations when ads are in the mix.
> It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
Can it tho? The problem with LLMs right now is that they don't have much useful purposes beyond spam, slop, hallucinated searches, and advertisements. The lack of a product is why there isn't a profit to be made in them
To those who believe ads are evil and must be stopped, I ask how the world will work if we kill the freedom to sell space for commercial messages where people can see them.
I don't think ads are evil, but the techniques used to get eyes are evil. Using fear, hate, desire to get people to click has a negative impact on society. I don't think ads should be banned, but engineering 'engagement' definitely should.
Ads should be banned
What is and what is not an ad? What exactly do you want to ban?
I agree!
just fine? what do you think would happen/what’s your actual argument against out of curiosity
Advertising is how I learned about lots of things I am glad I learned about.
I am furious about lots of the ads that I see. I want to stop certain kinds of advertising. I live where there are no billboards allowed and I love that.
But I want to live in a world where people can pay to have their messages displayed where they will be seen. Simply because banning that activity would cripple the flow of information. That’s what advertising is.
If you want to ban a particular form of advertising then say what and why. The “ban all ads” thing just doesn’t make sense.
information flows fine without paid ads, and with much better incentives
> people can pay to have their messages displayed where they will be seen
…why? distribution of information is free across the world, which was not the case a century ago. let the message speak for itself
I ask again, what’s your actual argument against? you’ve seen things through ads you’ve liked? you think people should be allowed to pay to put their thumbs on the scale of the distribution of information? to what end?
What do you propose to ban? How do you define it? You want a policy, so write the policy and let me read it.
I have a very broad idea of what ads are. Maybe you don’t. Say what you mean by paid ads.
Am I allowed to offer and accept compensation for boosting one message above others, or not? Would I be allowed to place a hyperlink on my site in exchange for a reciprocal hyperlink? That’s a clear example of compensated communication. That’s what I think ads are.
Imagine the ad police. “You blogged about a product. Someone said you sounded insincere. Let’s see the receipt for purchase. Can’t prove you bought it? Prove you weren’t compensated for your blog post or pay a fine.” Kafka land.
> Imagine the ad police. “You blogged about a product. Someone said you sounded insincere. Let’s see the receipt for purchase. Can’t prove you bought it? Prove you weren’t compensated for your blog post or pay a fine.” Kafka land.
immediately to a fantasy slippery slope argument, cool!
your argument seems to boil down to paid ads being the lifeblood of the flow of information. my argument is it corrupts that flow of information, and we’d be better without them —- everything would operate just fine. individuals and organizations would have better incentives to share valuable information, not what they get paid to. obviously there would be plenty of details and edge cases to work out, as with any policy in the real world
I’m not going to write out policy in HackerNews comments and play that game with someone who jumps to the “imagine this crazy world where the police start arresting all of us over free speech!” as their explanation for what would go wrong
The US already has what you call an ad police: for decades, it has been unlawful to make false statements in an ad and to accept any money for advertising (or endorsement or sponsorship) without making it plain to the viewer which parts of the content are ads and which are not.
Since the US Federal Trade Commission can smoothly enforce the second of those two rules, what makes you think it cannot smoothly enforce an outright ban on ads? "Smoothly": you seem to have been unaware that the second of the rules I described existed, and you probably would have been aware if the enforcement had yielded anything deserving of the name "kafka land".
In general I think the answer could be pretty simple: dedicated marketplaces for products and services, where we go to search for the things we need and want. A humble newspaper contains great examples of good and bad advertising.
Newspapers have whole pages of bad ads, and random bad ads wedged between actual content. Ads have a perverse incentive to mimic the look of actual content, just like on the web. I'd never pick up a newspaper with a goal of "I want to find a tax service" and yet ads for such services are there, unwanted, wedged into other content.
But newspapers also have classified sections, a better kind of ad. They're in a predictable place, where you can go if you need a job.
Imagine if the actual content weren't perforated by a scattershot of ads. Ad revenue would go down, but readership would likely go up. Besides profit motives, it's also a case of the good of the many outweighing the good of the few.
Others like myself do consider the ads when we read the newspaper. I find out about events and local companies that way. I don’t see many print ads that confuse me as to whether they are paid advertisements at a glance.
What are you worried will happen? ChatGPT releases and noone will know? Anyone interested in staying up to date with new technology can read a tech newspaper. That newspaper is paid by the readers, so its incentive is to show actually interesting products. It is not paid by some random company whose product might be bad or outright malicious.
Depends on what exactly gets banned. What is an ad? What isn’t? Must all information be paid for by the audience? I wish someone would tell me what this ban is supposed to cover.
I worry that innovators and small businesses won’t be able to get their message out efficiently. You won’t be able to display your message on anyone else’s property. You won’t be able to take any compensation for promoting anything.
> What is an ad? What isn’t?
Anything wie usually consider an ad/sponsored content/boosted content. That includes ad banners, video sponsors, boosted posts, billboards, etc. Really any way that a third party pays some organization to put certain content on their space (be it physical or digital) to be seen by people who are probably there for other reasons than to see that content.
An exact definition fortunately isn't necessary, since our legal system is well adapted to deal with terms that are difficult to define.
> Must all information be paid for by the audience?
Other monetization paths are still possible. E.g. some SaaS orgs could still run blogs to gain mind share, as they do now.
Hopefully most information will be paid for by the audience though.
> I worry that innovators and small businesses won’t be able to get their message out efficiently.
If ads are no longer a thing, people will find other means to get information.
You mentioned in another comment that you like ads in newspapers telling you about some local stores and events. If the readers are genuinely interested in this, the newspaper can still put that information there. Just instead of the highest bidder, they'll put the ones that are genuinely interesting.
Of course, if your product is not worth reading about, it will suddenly be much more difficult to promote it. In my opinion, that is a good thing.
Thank you. You listed concrete examples of things you would ban and you stated a general definition. It sounds like a terrible kind of regime, stripped of the freedom of speech and loaded with arbitrary decisions about what the audience probably wanted to see, resulting in an even more opaque and corrupt flow of information. Nope, no thanks.
I think the problem you have with ads is a you problem.
> It sounds like a terrible kind of regime, stripped of the freedom of speech [...]
I agree that this would be a significant restriction on speech. I think it'd be worth it, especially since paying someone to show your opinion isn't necessary for political discourse, but I understand the caution.
> I think the problem you have with ads is a you problem.
That I very much disagree with.
Ads not just waste billions of dollars on producing content that is so bad you literally pay people to watch it, they also degrade the business model of large parts of the industry. Because of the ad-based business model, Google doesn't show you the best results, Meta tries to get you addicted, YouTube prevents you from swearing and discussing certain political content (a restriction on speech), everyone tries to track you, etc.
I believe that if all these companies' customers were their users, there would be a societal shift.
I am now imagining a "A Case Of Spring Fever" style educational film about how ads are good actually
The title is actually
NotThis is standard HN moderation. The title was linkbait, so we changed it.
From https://news.ycombinator.com/newsguidelines.html: "Please use the original title, unless it is misleading or linkbait". Note the unless.
When we do this, we try to find a representative phrase from the article itself that accurately and neutrally represents what the article is about. There is nearly always one of those if you look for it. In this way, we (mostly) avoid having to make up wording of our own, which is something we don't like to do.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Thank you for your service, dang. You do a great job keeping HN a great site. I disagree with your decision regarding changing the title, though. Yes, it's tongue-in-cheek, but I wouldn't call it bait.
I wonder how HN anno 1968 would have moderated "Go To Statement Considered Harmful". *
* Amusing side note: Dijkstra's submitted title was actually "A Case Against the Goto Statement" but the editor editorialized it.
As I read or rather hear it, "The A in AGI stands for Ads" has two things qualifying it as linkbait in the HN sense. One is snark, the other is the mammoth meme ("AGI"). Both those things stick to the Big Ball of Mud that rolls chaotically over most of the internet.
The objection here isn't to wit, it's to predictability. I'm not sure what the equivalent of internet snark was in 1968, but I doubt that "Go To Statement Considered Harmful" embodied it.
Of course, interpretations differ. No two people would agree on all these classifications, including me and tomhow. The important point isn't that we always make the correct call (we don't, plus there's no such thing as the correct call), but that we try to the principles from the guidelines, even though doing so involves interpretation and is therefore uneven.
On the bright side, it means that objections to titles and/or title edits, always good for firing up an HN thread, will always be with us!
https://news.ycombinator.com/item?id=8770124 (Dec 2014)
What’s the definition of linkbait in this case? I can’t find a good definition online, as the best I can find is “content designed to attract backlinks”, which this does not appear to be / isn’t related to the title?
I'm not a definitions person but surely it means something like grabbing attention with sensationalism (drama / snark / anger / etc.)
It was this title before, so it was intentionally changed; I wonder why.
Because the title of the post should match the title of the submission - unless the mods dislike it, then it'll be changed to something else.
The mods dislike many titles but only change some of them. We also like some of the ones we change!
That's because there's a principle involved. It's not hard to find: see https://news.ycombinator.com/newsguidelines.html, or https://news.ycombinator.com/item?id=46671377 nearby.
I’m the author but not the poster. I didn’t change the title. Maybe the mods did?
The title came to me as an epiphany too haha, shame to see it get changed.
My guess as to why it was changed was that it doesn't really work as a pithy quip the moment you actually think about it.
OpenAI is introducing ads on their purported path from "AI" to "AGI"... hence the "A" was already accounted for in the acronym. If only "Ads" started with "G"!
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I think having mixed economic interests is great when an advertising company is asking you, you execs, your engineers, and consultants to dump whole copies of project planning, business practices, and internal dynamics on their servers…
If I’m looking at ads for your shizz a) why can’t we just pay as a business expense, inline ads and B2B are an odd combo, and b) if this isn’t fully local tech I think there is a real challenge trusting MS or OpenAI to respect their contracts.
We’re not too far past these same dudes running around, violating NDAs, and launching product clones to eat partner businesses. Now ads? … trust? … scorpions and frogs, scorpions and frogs.
Who are you to say LLMs have never provided value to the user? I last used an agent earlier today and it finished a job that would've taken me a lot longer to complete without assistance.
Don't feed egregious comments by replying; flag them instead.[1]
[1] https://news.ycombinator.com/newsguidelines.html