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We absolutely should not. Advertising is almost pure rent-seeking; it's a horribly inefficient solution for the actual utility component it provides society. I

We absolutely should not. Advertising is almost pure rent-seeking; it's a horribly inefficient solution for the actual utility component it provides society. I think this is one of those situations where an inferior mechanism has won (at least in this phase of history) because it disproportionately benefits power holders and platform operators. Advertising is sanctioned manipulation and lying. It matches customers to products, but does so by focusing on lies, mind tricks and human hacks rather than desired customer outcome. It's broken at its core as a concept.

shaki-dora 9y ago
The majority of money spend on ads ends up with content creators, who, in turn, use it to produce the information their visitors value. It is therefore not "rent seeking" under any definition of the term.
- bzbarsky 9y ago
  > The majority of money spend on ads ends up with content creators Do you happen to have good data on this? I've been wondering how much ends up with various middlemen (including Google) and how much ends up with content creators. To put numbers to this, according to https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/ https://www.statista.com/statistics/237974/online-advertisin... about $194 billion was spent on internet advertising in 2016. Google's revenue in 2016 (not all from ads, but mostly) was ~$89 billion according to https://www.statista.com/statistics/266206/googles-annual-global-revenue/ https://www.statista.com/statistics/266206/googles-annual-gl... while Facebook's was ~$27 billion according to https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-... I did check a few other sources and https://investor.fb.com/investor-news/press-release-details/2017/facebook-Reports-Fourth-Quarter-and-Full-Year-2016-Results/default.aspx https://investor.fb.com/investor-news/press-release-details/... gives about the same $27b number for Facebook and https://www.sec.gov/Archives/edgar/data/1652044/000165204418000007/goog10-kq42017.htm#s8EA9B2C52778A3A42DF578DB9C94AC32 https://www.sec.gov/Archives/edgar/data/1652044/000165204418... lists ~$90b total revenues for Alphabet. Cross-checking the advertising number is harder; I see numbers around $70b for 2016 from the IAB, but maybe those are US-only. In any case, just the revenue for Facebook and Google is already 60% of the total ad spend if the numbers above are right. And that assumes there are no other middlemen. So I don't see how the content creators can be ending up with anything like a "majority" of the ad spend.
  - dgacmu 9y ago
    Sure - when you run ads on your own website with Google, you get 68% of the revenue share. (https://support.google.com/adsense/answer/180195?hl=en https://support.google.com/adsense/answer/180195?hl=en) It's harder to say with forms of advertising like referral links, since many of those are negotiated directly between the website and someone like Amazon, but others go through middlemen that probably take 20-30%, as Google does for AdSense. (source: I run ads, and have referral links, on the Pi Searcher for fun, and to pay the hosting bills. And some coffee money. I get paid by Google part-time, but this is based upon my experience as an ad hoster, nothing else.) But remember that a lot of advertising out there is search advertising (google, bing, baidu, etc.). In which case, Google/Bing/etc. are the content creators -- their content is a search engine -- and they monetize it by advertising.
- philipodonnell 9y ago
  Any cost required to be paid to a third party to conduct a transaction between two parties is "rent". Any entity attempting to establish or increase such a cost is "rent-seeking". Ad agencies try to encourage companies to buy more advertising. If they are successful, then other competitors will be forced to buy more advertising to maintain their existing customers. Whatever it cost before to have 5% of the market, it now costs more to maintain the same 5%. The additional advertising expenditure required because of the ad agency's actions is very much rent that was being seeked. The fact that the rent may not be paid to the same ad agency, or that ad agencies have costs themselves (such as content creators), does not change the nature of their actions. Personally, I would like to live in a world where advertising was limited to industry/geographic-specific publications published by the government. A generic list of products, randomized once a day. Listings have a fixed fee and identical formats. Each listing has a description of the product, its price, and one or two photos. You can show people using the product but no faces. No other products/aspirational imagery/language unless it is required to demonstrate the use of the product. Plus curated confirmed reviews. Or just a law that said that ad-supported business models were illegal. You can sell a product or a service but that's it. No "give it away for free and sell ads".
  - petre 9y ago
    > geographic-specific publications published by the government Sounds like product advertising under totalitarian regimes. It goes like: "Register to purchase the national car!” as if you had a choice. Sometimes the choice was between two equally crappy national products. I don't have a solution to fix advertising, but government published ads are only going to fuel corruption. Maybe regulation of advertising would work, such as the EU's GDPR, maybe not. Government regulation is too slow to react to market challenges and there's always an agenda behind it.
    - philipodonnell 9y ago
      I don't think the government would need (or even want) to limit the number of advertisers for a given product. Its more like the registry that contractors sign up to when they want government contracts. Here's me and here's what I can do. Having the government control it would at least remove the profit motive behind the advertising service itself. A non-profit could potentially play the same role if having a government do so caused problems.
gowld 9y ago
How is advertising different from anything else in the market? The product can have hidden flaws, short lifespan, etc.
- bduerst 9y ago
  It's not. Advertising is the result of imperfect, asymmetric markets. The person you replied to conflating dark patterns from bad actors to equal all of advertising. If buyers had perfect knowledge of products/services, then they would instantly know what they were going to purchase. Seeing as they don't, there is demand for distributing market information for products/services to buyers. When there are substitute products/services, the demand is increased further.
leetcrew 9y ago
> Advertising is almost pure rent-seeking; it's a horribly inefficient solution for the actual utility component it provides society. disagree. as much as it pains me to admit it, I do actually think advertising benefits society. imo it's kind of like democracy in that it's the least shitty system we've devised so far. there's a lot about it that seems suboptimal, but what alternatives do we have? people can't be seriously expected to read third-party reviews for every single product they buy; it simply takes too much time. plus, depending on the product, there may not be any reputable reviewers, or the reviewers could be getting paid behind the scenes anyway. ultimately it's a lot better to walk into the store at least knowing what the different brands are supposed to mean. if I go to whole foods, I can be pretty confident that the food will be better than what I can get at walmart. if I want the cheapest food, I can expect to find it at walmart. when a choice between products is of low-moderate importance, advertising/branding saves us a lot of research.
- hyperbovine 9y ago
  People could simply buy less shit. Problem solved.
  - Buge 9y ago
    That would be better for the environment. Unfortunately people buying less stuff would cause a recession. The economy moves because people buy stuff.
    - robotresearcher 9y ago
      No, that’s the broken window fallacy. The economy moves because we invent more efficient ways to do things. Buying and selling stuff we don’t need is not good for the economy.
      - Johnny555 9y ago
        Buying and selling stuff we don’t need is not good for the economy. Is that true? It seems that the entire economy is based on people buying stuff they don't need. Does anyone really "need" a 60 inch 4K HDTV? The average car costs $33K -- do people really need a $33K car, or could they get by on a $12K economy car? Do people need a 2500 sq ft luxury house, or could they get by on a 600 sq ft spartanly furnished shack?

shaki-dora 9y ago

The majority of money spend on ads ends up with content creators, who, in turn, use it to produce the information their visitors value. It is therefore not "rent seeking" under any definition of the term.

bzbarsky 9y ago
> The majority of money spend on ads ends up with content creators Do you happen to have good data on this? I've been wondering how much ends up with various middlemen (including Google) and how much ends up with content creators. To put numbers to this, according to https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/ https://www.statista.com/statistics/237974/online-advertisin... about $194 billion was spent on internet advertising in 2016. Google's revenue in 2016 (not all from ads, but mostly) was ~$89 billion according to https://www.statista.com/statistics/266206/googles-annual-global-revenue/ https://www.statista.com/statistics/266206/googles-annual-gl... while Facebook's was ~$27 billion according to https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-... I did check a few other sources and https://investor.fb.com/investor-news/press-release-details/2017/facebook-Reports-Fourth-Quarter-and-Full-Year-2016-Results/default.aspx https://investor.fb.com/investor-news/press-release-details/... gives about the same $27b number for Facebook and https://www.sec.gov/Archives/edgar/data/1652044/000165204418000007/goog10-kq42017.htm#s8EA9B2C52778A3A42DF578DB9C94AC32 https://www.sec.gov/Archives/edgar/data/1652044/000165204418... lists ~$90b total revenues for Alphabet. Cross-checking the advertising number is harder; I see numbers around $70b for 2016 from the IAB, but maybe those are US-only. In any case, just the revenue for Facebook and Google is already 60% of the total ad spend if the numbers above are right. And that assumes there are no other middlemen. So I don't see how the content creators can be ending up with anything like a "majority" of the ad spend.
- dgacmu 9y ago
  Sure - when you run ads on your own website with Google, you get 68% of the revenue share. (https://support.google.com/adsense/answer/180195?hl=en https://support.google.com/adsense/answer/180195?hl=en) It's harder to say with forms of advertising like referral links, since many of those are negotiated directly between the website and someone like Amazon, but others go through middlemen that probably take 20-30%, as Google does for AdSense. (source: I run ads, and have referral links, on the Pi Searcher for fun, and to pay the hosting bills. And some coffee money. I get paid by Google part-time, but this is based upon my experience as an ad hoster, nothing else.) But remember that a lot of advertising out there is search advertising (google, bing, baidu, etc.). In which case, Google/Bing/etc. are the content creators -- their content is a search engine -- and they monetize it by advertising.
philipodonnell 9y ago
Any cost required to be paid to a third party to conduct a transaction between two parties is "rent". Any entity attempting to establish or increase such a cost is "rent-seeking". Ad agencies try to encourage companies to buy more advertising. If they are successful, then other competitors will be forced to buy more advertising to maintain their existing customers. Whatever it cost before to have 5% of the market, it now costs more to maintain the same 5%. The additional advertising expenditure required because of the ad agency's actions is very much rent that was being seeked. The fact that the rent may not be paid to the same ad agency, or that ad agencies have costs themselves (such as content creators), does not change the nature of their actions. Personally, I would like to live in a world where advertising was limited to industry/geographic-specific publications published by the government. A generic list of products, randomized once a day. Listings have a fixed fee and identical formats. Each listing has a description of the product, its price, and one or two photos. You can show people using the product but no faces. No other products/aspirational imagery/language unless it is required to demonstrate the use of the product. Plus curated confirmed reviews. Or just a law that said that ad-supported business models were illegal. You can sell a product or a service but that's it. No "give it away for free and sell ads".
- petre 9y ago
  > geographic-specific publications published by the government Sounds like product advertising under totalitarian regimes. It goes like: "Register to purchase the national car!” as if you had a choice. Sometimes the choice was between two equally crappy national products. I don't have a solution to fix advertising, but government published ads are only going to fuel corruption. Maybe regulation of advertising would work, such as the EU's GDPR, maybe not. Government regulation is too slow to react to market challenges and there's always an agenda behind it.
  - philipodonnell 9y ago
    I don't think the government would need (or even want) to limit the number of advertisers for a given product. Its more like the registry that contractors sign up to when they want government contracts. Here's me and here's what I can do. Having the government control it would at least remove the profit motive behind the advertising service itself. A non-profit could potentially play the same role if having a government do so caused problems.

gowld 9y ago

How is advertising different from anything else in the market? The product can have hidden flaws, short lifespan, etc.

bduerst 9y ago
It's not. Advertising is the result of imperfect, asymmetric markets. The person you replied to conflating dark patterns from bad actors to equal all of advertising. If buyers had perfect knowledge of products/services, then they would instantly know what they were going to purchase. Seeing as they don't, there is demand for distributing market information for products/services to buyers. When there are substitute products/services, the demand is increased further.

leetcrew 9y ago

> Advertising is almost pure rent-seeking; it's a horribly inefficient solution for the actual utility component it provides society. disagree. as much as it pains me to admit it, I do actually think advertising benefits society. imo it's kind of like democracy in that it's the least shitty system we've devised so far. there's a lot about it that seems suboptimal, but what alternatives do we have? people can't be seriously expected to read third-party reviews for every single product they buy; it simply takes too much time. plus, depending on the product, there may not be any reputable reviewers, or the reviewers could be getting paid behind the scenes anyway. ultimately it's a lot better to walk into the store at least knowing what the different brands are supposed to mean. if I go to whole foods, I can be pretty confident that the food will be better than what I can get at walmart. if I want the cheapest food, I can expect to find it at walmart. when a choice between products is of low-moderate importance, advertising/branding saves us a lot of research.

hyperbovine 9y ago
People could simply buy less shit. Problem solved.
- Buge 9y ago
  That would be better for the environment. Unfortunately people buying less stuff would cause a recession. The economy moves because people buy stuff.
  - robotresearcher 9y ago
    No, that’s the broken window fallacy. The economy moves because we invent more efficient ways to do things. Buying and selling stuff we don’t need is not good for the economy.
    - Johnny555 9y ago
      Buying and selling stuff we don’t need is not good for the economy. Is that true? It seems that the entire economy is based on people buying stuff they don't need. Does anyone really "need" a 60 inch 4K HDTV? The average car costs $33K -- do people really need a $33K car, or could they get by on a $12K economy car? Do people need a 2500 sq ft luxury house, or could they get by on a 600 sq ft spartanly furnished shack?