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> If they aren't, than the whole system becomes a zero sum game Careful. You need to be more specific. The ad industry itself is a zero-sum market for the mark

• majewsky 9y ago
  > the ad industry has caused the PPF (production possibility frontier) of the economy to move outwards by introducing allocation efficiency Can you explain? That's a lot of jargon for a non-economist. > > skip the advertising middleman. > Just like people use advertising networks so that they don't have to deal with millions of content creators. So it's been with newspapers, magazines, radio, television... and so it is with the web. You're missing grandparent's point. "Skipping the advertising middleman" in his argument refers not to advertising networks, but to advertising altogether. He refers to content creators taking money directly from their consumers, rather than going through the indirection of advertisers (whom take money from their clients, whom get their money from the consumers, thus completing the indirection chain). (I'm not agreeing or disagreeing with either side here, just attempting to clarify.)
  • Denzel 9y ago
    > Can you explain? Sure. Imagine for a second that all the copper in the world has been unearthed. There's a finite supply, i.e., it's a scare resource. So if we want to produce more iPhones with this copper, then there's less copper to produce pennies. There's a trade-off -- the copper market is zero-sum: allocating copper to one thing takes it away from another. So, with that said, we have a maximum amount of iPhones we can produce with this copper and a maximum amount of pennies. If we use all the copper to produce iPhones, then no pennies can be made... and vice versa. That's the PPF for copper as it stands now... we can produce anywhere from 0-100 iPhones or 0-100 pennies. How can we grow this PPF? Two ways: (1) we could find more copper somewhere, or (2) we could increase the efficiency with which we use copper, i.e., technological progress. Say some PhD-whiz figures out how to use less copper to produce iPhones and pennies of the same quality by doping it. Well now we can make anywhere from 0-500 iPhones or 0-500 pennies with our copper. Our PPF has grown outward. The pie has grown bigger. When you move the PPF it creates a non-zero-sum dynamic because there's more to go around for everyone. How does this apply to the ad industry? Well, let's look at another hypothetical example. The United Launch Alliance has been charging the government $100M per rocket launch. That's the only supplier the government knows about. A plucky young startup comes along and believes they can get the price down to $1M per launch. And they do it! But the government doesn't hear about it... so they keep paying $100M until one day they see an announcement (an ad) for this startup's rockets. Now they're only paying $1M per launch. Thus they're able to allocate their funds more efficiently (technological progress) because they're able to hear about more opportunities. > You're missing grandparent's point. Thanks for clarifying. If that's indeed the point, then the argument is orthogonal to what we're discussing. Whether all content creators wake up tomorrow and decide to charge for their content instead of displaying ads or not, we'll still have advertising, and advertising will still be useful. It will just shift to different medium since the digital ad inventory has reduced. That's what I think people aren't getting. For content creators to charge consumers directly, that means that consumers must somehow discover the content creators. And how does that discovery happen? Well, now, the content creators have become advertisers. They need to get the word out about their product (content) like everybody else somehow. [1]: https://en.wikipedia.org/wiki/Production%E2%80%93possibility_frontier https://en.wikipedia.org/wiki/Production%E2%80%93possibility...