Being an insane brand means literally nothing if people can trivially switch to competitors, which they can.
There isn't even a tenth of enough money if you group together all of advertising. Like, the entire industry. Ads is a bad, bad plan that wont work. Advertising is also extremely overvalued. And even at it's overvalued price tag, it's nowhere near enough.
It's Coca Cola vs Pepsi. Yes some might even say Pepsi has been shown to taste better, but people still buy loads of Coke.
Of course the tech savvy enterprises will use the best models. But the plumber down the road doesn't care whether she asks Gemini or ChatGPT about the sizing of some fittings.
Right, again, even if you take every advertiser in the world and shove them in a dungeon and then point a cannon at them and say "give me all the money you have", you won't even have 1/10th the money you need.
Everyone is vastly, vastly overestimating advertising. Advertising is a side hustle, because the product is the main hustle.
Yes, and if you take all that money, it's not even 1/10 enough.
Consumers can spend what they can spend. Not even 1 quadrillion dollars in advertising can change that. There is a hard, hard cap to the value of advertisement because of that. It's just how the thing works.
It's not enough to pay for the size of the rollout the AI companies are doing. The difference between Google and OpenAI is that Google's add revenue comes at basically 0 cost. Google serves multiple adds for every search, and actually completing the search costs a tiny fractions of a cent (the majority of which is the cost to figure out what add to display). OpenAI is in a totally different boat. They get a similar number of adds per search, but each query will cost them far more than a simple web search. A paragraph or a single image costs OpenAI over 1c to generate, so you can't even cover the marginal costs on ads alone (google adds cost ~.1c per view).
Furthermore, OpenAI has to make up for a ton of debt they are taking on. They've already lost $9B, and are planning on losing another $75B in the next 2 years. As such, they have a ton of digging to do to get themselves out of the massive hole they're digging.
> OpenAI is in a totally different boat. They get a similar number of adds per search, but each query will cost them far more than a simple web search. A paragraph or a single image costs OpenAI over 1c to generate
First of all, your numbers a off by an order of magnitude at least: even GPT-5 can generate 1000 tokens for 1c, which is much more than a paragraph.
And then again that's why my entire argument revolved around the fact that OpenAI would need to stop aiming for the technological edge. Deepseek generates 25k tokens for a cent and it's still a gigantic model. I'd you use a model comparable in size to gpt-oss-120b you can even increase that up to 100-200k tokens per cent (going from 32GB worth of active parameters, 32B at q8 for Deepseek, to 4GB, 8B using MXFP4 for gpt-oss-120b). That would mean being able to serve more than 100 answers per cent spent on inference.
If they can serve .1c worth of ads per request, that's 90% gross margin for you.
People could trivially switch their search engine to Bing or Yahoo, but they don't.
If ads are so overpriced, how big is your short position on google? Also ads are extremely inefficient in terms of conversion. Ads rendered by an intelligent, personalized system will be OOM more efficient, negating most of the "overvalue".
I'm not saying they should serve ads. It's a terrible strategy for other reasons.
Funny that you mention Yahoo, as in my mind they're the perfect example of what the poster above you noted: people quickly switched to Google once a better alternative to Yahoo appeared.
> People could trivially switch their search engine to Bing or Yahoo, but they don't.
Well those are obviously worse products.
> If ads are so overpriced, how big is your short position on google?
I hate hearing this stupid, stupid line.
Most companies are run by neanderthals with more money than brains. Companies burn money on advertising because why not? Making your product better is hard and takes time, advertising is the easiest thing you can do. Does it work? Not really, no, but you get extra business for as close to zero effort you can possibly get. Hit a wall? Just advertise more!
> Ads rendered by an intelligent, personalized system will be OOM more efficient, negating most of the "overvalue".
This is exactly what people said about personalized ads. "No you don't understand! It's not like a billboard!"
And that's true, but consumers are not fucking braindead, and there's also the laws of economics. If I have 50 bucks, I'm not spending 20 fucking dollars on your dumbass paint, no matter how much you advertise it. And that's not a me thing, that's a consumer thing. You can spend 1 quadrillion dollars advertising ferraris and guess what - you will STILL quickly saturate that market and hit a hard ceiling. Because consumer's can't afford it.
And that's not even touching on the fact that most of the metrics around advertisements are just obviously bullshit. How many human eyeballs are actually on ads? Much, much less than everyone thinks.
Yes, sure, we can build highly personalized ads. Whatever. But at the end of the day, consumers still have the exact same amount of disposable income as before. We have created Z E R O value, what we have done is consolidated it.
Hmm, what happens when markets consolidate too much? Well, I guess that would mean advertising becomes completely worthless, wouldn't it? What a conundrum! It's a good thing our markets haven't been consolidating for the past 70 years...
Do you think consumer brands lose money when they pay Google to do advertising? Do you think digital ads have a negative ROI for the brands that buy them? If so, why do they keep buying more? Wouldn’t they lose to more efficient companies?
I think you underestimate how valuable being the top slot on google is. Just the other day i googled “bluetooth speaker” and bought the first result (an ad). One hour of that can net you millions of dollars. That’s why consumer brands bid more and more every year on digital advertising.
> Do you think consumer brands lose money when they pay Google to do advertising?
For many brands, yes, and they don't know it.
> I think you underestimate how valuable being the top slot on google is.
The more you advertise, the less valuable each ad space becomes. Consumers have a lot of money they have to dole out. Giving them more ads won't increase that pot of money - it will make your cut smaller and smaller as it's split across more brands.
Which brands lose money on ads? Why are they still in business?
> consumers have a lot of money that they dole out. More ads wont increase the cut of money
Consumer spending is not a fixed pie chart or a zero sum game. US consumer spending has grown from $14 to $19 trillion since 2020. $5 trillion in new pie!!
Your model of ads is: “I, a consumer, have decided to buy a bluetooth speaker, and the ads push and pull me towards particular brands”. But that’s not how ads work! Ads don’t just compete for fixed spending, they induce NEW spending. An ad can give a customer the idea of buying, and grow the market.
> US consumer spending has grown from $14 to $19 trillion since 2020. $5 trillion in new pie!!
All that's telling you is the economy is not doing nearly as well as some of our metrics would have you believe.
Real wages are about the same as before, probably lower. Consumers are buying the same amount of stuff - no value has been created. Rather, the dollar has been devalued, much more than we're willing to let on.
There's real value, like actual physical goods, service and labor, and fake value. Fake value tries to proxy real value, but historically it's often way off.
Money is fake value. Stocks are even more fake value. It doesn't matter if your stock price is through the roof if you're not selling a product people want, for example. The product is the value, the stock price is people trying to approximate the value and future value.
Look it's fine to have contrarian opinions that left is right, everything is backwards, whatever. But when it comes to business and money, these things are quantitative and falsifiable. If you have a better understanding than the idiots in charge, then go be rich! If you have a better model for real value, you'll outcompete them. Until you do that, you are playing word games, ones which have somehow deluded you into believing that the most profitable company on earth is not valuable.
It's not even contrarian, it's just true. Money has always been a proxy for real value, which we created because real value can be hard to measure.
> If you have a better understanding than the idiots in charge, then go be rich!
Doesn't work this way because most markets are dumb as rocks.
> If you have a better model for real value, you'll outcompete them.
Doesn't work this way because most markets are dumb as rocks.
Look, after a certain point you have to detach from what you're being told and look at the world around you.
Prime example: tobacco. For humanity, Tabacoo has a negative value. You should be getting paid to smoke. Why? Because it kills you, and that's very expensive.
But that's hard to measure, right? So we just sell the cigarettes and say their value is what they're sold for. But that's not their actual value.
Their actual value, in the real world, in your hands and in your lungs, is negative. That's not an opinion. That's objective. That's just what it is.
When you look around our markets, almost all products are like this to some degree. The value we're creating is not necessarily real value.
Ads are another prime example. Do they enrich the world? Do they help consumers? No. They have zero real value. They just move money around via manipulation. That's not my opinion. That's just the objective reality.
Eventually, the real world catches up to la la land. You can't just say "well do ads and you make money". When there's no more money to move around, then even our fake value estimates of ads approach zero.
> Being an insane brand means literally nothing if people can trivially switch to competitors, which they can.
Logically speaking, yes it is easy to switch between OAI and Gemini, or Coke and Pepsi. But brand loyalty is more about emotions (comfort, familiarity,..) rather logical reasoning.
There isn't even a tenth of enough money if you group together all of advertising. Like, the entire industry. Ads is a bad, bad plan that wont work. Advertising is also extremely overvalued. And even at it's overvalued price tag, it's nowhere near enough.