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Ads over time extract profit margins from all other industries. For example at least 50% of all profits from mobile games are spent on acquiring users from ads.

• mattbettinson 9y ago
  Do you have a source on that? I'm not challenging, I believe it, I just wanna see some proof
  • xapata 9y ago
    What's your standard of proof? Do a thought experiment and you'll find a nugget of truth to the idea. Imagine two competitors who are otherwise identical. What would their AdWords buying strategy be?
  • Denzel 9y ago
    Maybe this will do it for you: https://www.bloomberg.com/news/articles/2014-03-03/advertisings-century-of-flat-line-growth https://www.bloomberg.com/news/articles/2014-03-03/advertisi.... Ad spend as a % of U.S. GDP remains relatively constant since the 1920s.
• coralreef 9y ago
  Hmm, not sure if "extracts profit margins" is the right terminology. In mobile games, you could have a lifetime value of a user that is higher than their acquisition cost. This generates a model where you can spend money to make money. In this instance, advertising is fuelling user acquisition which fuels profit.
  • icebraining 9y ago
    The question is whether the whole mobile game industry makes more money by advertising, or whether those games that advertise just make more money at the expense of others. Imagine that in a world without ads, game revenue is: Game A: 600, Game B: 600, Game C: 600 But then A spends 300 on ads: Game A: 1200 (-300), Game B: 300, Game C: 300 In this case, game A "spent money to make money", but the overall industry's revenue was the same, and part of the profits now went to ads. And it makes sense: advertising doesn't give consumers more money to spend, so the size of the pie is fixed, all they can do it redistribute it, extracting a slice in the process.
    • arjie 9y ago
      You're assuming perfect market saturation: every consumer has a max spending budget for this good that they're constantly up against and it's just how they distribute it that matters. This seems unlikely to me based on personal experience (if there's no game I like I play no games) but if you have better data than I do then I suppose you're right. For instance, my younger brother is a fan of the Darksiders game series. I saw an advertisement for the new instance of the game. I told him about it. When it reaches a price he wants he'll buy it. But until it does, he's not going to sit around buying other games just to fill up the budget.
      • icebraining 9y ago
        Maybe not other games, but surely he spends the money somewhere. Hence the claim that ads extract profit margins from all other industries.
        • arjie 9y ago
          Do you, really? For most of the people I know, our entertainment budget is fairly flexible. If I'd spend £100 on something and if I wanted it, I'm probably not going to spend £100 on my second choice thing. In fact, I may not spend anything at all and just choose to spend my time on things I've already spent money on like going out to skate or something. Mostly the cash budget is substantially higher than the time budget so people aren't​ going to buy a thing they don't like just to fill the time. If ads help with allocation closer to people's real preferences, they're a good thing.
          • icebraining 9y ago
            This is not restricted to the entertainment budget, the claim was that ads extract from all other industries. Unless you're burning the £100 you're not spending, that's still true. If ads help with allocation closer to people's real preferences, they're a good thing. Maybe, but is there any evidence that they actually do?