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This is clueless understanding of economics (and very prevalent in HN) Economics 101 : There is no fixed pie of $$$$. $$ (as in wealth, productivity) can absol

This is clueless understanding of economics (and very prevalent in HN) Economics 101 : There is no fixed pie of $$$$. $$ (as in wealth, productivity) can absolutely disappear from the economy or grow from nothing.

Retric 2y ago
The economy grows or shrinks with productivity but advertising specifically is zero sum. Coke vs Pepsi makes a great deal of difference to those specific companies and little else. If anything it’s slightly negative due to inefficiency because the winner isn’t the best product.
- zooq_ai 2y ago
  [flagged]
  - codedokode 2y ago
    > cost of acquiring a customer > cost of serving a customer For a successful and popular product the cost of acquiring a customer is low. Heavy investments in advertising are needed for unpopular, overpriced products that naturally have a low demand. For example, almost everything that I buy I bought not because of advertising but based on the comparison of product price and quality.
  - mjhay 2y ago
    You're ignoring the fact that a customer buying from a business incurs an opportunity cost from other things they could have spent money on (or invested). In addition, it merely shifts the money. If someone is thinking about getting Subway, but sees a McDonald's ad and goes there instead, that helps McDonald's but hurts Subway.
  - deleted 2y ago
    [deleted]
  - JohnFen 2y ago
    And yet, somehow, businesses thrived even back when massively spying on people wasn't a thing they could do.
  - vundercind 2y ago
    Rivalrous advertising spending between two megacorps everyone already knows is zero-sum. You’re spending money just because the other guy increased spending, and market share stays the same. But you can’t not spend or you might lose market share. Now you’re both spending more to achieve the same result. [edit] zero sum in terms of the market-share game—the size of the pie stays the same, you’re just adjusting who gets how much. Negative sum for the overall game in the case that total spending increases.
  - deleted 2y ago
    [deleted]
- glitchc 2y ago
  Advertising is not zero-sum. It is a money multiplier. To illustrate this, we start from the position that a new business creates net new value in the economy (on top of existing value). This is an economic maxim that must be true otherwise our GDP would never grow from 1770 standards. Now, the new business has to allocate a percentage of its budget to advertising. It doesn't have a choice in the matter: 1) In a competitive market, not advertising places it at a competitive disadvantage to its rivals who are advertising. 2) In a non-competitive market, not advertising leads to a smaller overall market and a weaker position (loss of market cap and easier to disrupt). Once the new business start advertising, other businesses become aware of it and either (a) choose to enter the market themselves, or (b) invest in advertising targeted at blocking/reducing this new market. Both cases result in more money spent on advertising. That's the multiplier effect.
  - Retric 2y ago
    > Advertising is not zero-sum. It is a money multiplier. You misunderstand zero sum here. Gas stations can’t grow total gas sales making the selling of gas zero sum, but they very much provide a useful function in aggregate. Advertising is going to exist with and without tracking individual users, the difference is simply relative value of undifferentiated content. Selling camping supplies on an outdoor website is targeting, but linking user’s history allows anyone to get a cut of premium revenue even if it’s lowest common denominator crap. But remove tracking of users and specialty content like local news becomes a lot more valuable and clickbait far less, a major public good. > we start from the position that a new business creates net new value in the economy (on top of existing value). This is an economic maxim that must be true otherwise our GDP would never grow from 1770 standards. I understand the point you are trying to make but existing companies also evolve their offerings over time. Nintendo in 1889 wasn’t selling video games.
    - glitchc 2y ago
      I think you missed the forest for the trees. I will make it very clear. The advertising business is a growth vector. It grows with the size of the economy. Singular industries may rise and fall (ex. ads for riding crops) but in aggregate, advertising always continues to grow. Zero sum means explicitly that the total pie stays the same, which advertising is not. It forces the pie to grow. And that's for a straightforward reason, because advertising is an arms race. A company can't afford to drop out, can't afford to fall behind. > Advertising is going to exist with and without tracking individual users, the difference is simply relative value of undifferentiated content. So what you mean to say is that targeted advertising is the same as mass advertising, that there's no benefit, perceived or otherwise, of targeting users. Well, I'm afraid you're very wrong. Both buyers and sellers of advertising love targeted advertising. For buyers, it makes the most efficient use of their budget allocation, and for sellers, it allows them to to take maximum advantage of user self-segmentation. The analogy of indiscriminate bombing being superseded by precision munitions is an apt one. There's no going back at this point. Regulations will only distort the market further. The platforms will make the fines the cost of doing business, and pass them onto the buyers. The buyers, in turn, will pass that cost along to consumers in the form of higher prices. Every company will continue to pay for advertising because they can't afford not to. And so it will continue. All the fines will do is concentrate more wealth into the platforms and the government. And that's exactly what's happening in the EU with advent of GDPR.
treyd 2y ago
In advertising it can often be true in a sense though. A very illustrative example of this when regulations tightening advertising for cigarettes were introduced, cigarette companies started reporting more profits because they all collectively stopped advertising at the same time and got to pocket the money they would have spent on it. The pool of cigarette smokers isn't/wasn't growing that much, so all the advertising was really doing was trying to take consumers away from their competitors and the net effect was 0. To be fair, then they started investing in vape companies and things might have changed. I don't think that's a good thing, although vapes are probably less harmful than cigarettes.

Retric 2y ago

The economy grows or shrinks with productivity but advertising specifically is zero sum. Coke vs Pepsi makes a great deal of difference to those specific companies and little else. If anything it’s slightly negative due to inefficiency because the winner isn’t the best product.

zooq_ai 2y ago
[flagged]
- codedokode 2y ago
  > cost of acquiring a customer > cost of serving a customer For a successful and popular product the cost of acquiring a customer is low. Heavy investments in advertising are needed for unpopular, overpriced products that naturally have a low demand. For example, almost everything that I buy I bought not because of advertising but based on the comparison of product price and quality.
- mjhay 2y ago
  You're ignoring the fact that a customer buying from a business incurs an opportunity cost from other things they could have spent money on (or invested). In addition, it merely shifts the money. If someone is thinking about getting Subway, but sees a McDonald's ad and goes there instead, that helps McDonald's but hurts Subway.
- deleted 2y ago
  [deleted]
- JohnFen 2y ago
  And yet, somehow, businesses thrived even back when massively spying on people wasn't a thing they could do.
- vundercind 2y ago
  Rivalrous advertising spending between two megacorps everyone already knows is zero-sum. You’re spending money just because the other guy increased spending, and market share stays the same. But you can’t not spend or you might lose market share. Now you’re both spending more to achieve the same result. [edit] zero sum in terms of the market-share game—the size of the pie stays the same, you’re just adjusting who gets how much. Negative sum for the overall game in the case that total spending increases.
- deleted 2y ago
  [deleted]
glitchc 2y ago
Advertising is not zero-sum. It is a money multiplier. To illustrate this, we start from the position that a new business creates net new value in the economy (on top of existing value). This is an economic maxim that must be true otherwise our GDP would never grow from 1770 standards. Now, the new business has to allocate a percentage of its budget to advertising. It doesn't have a choice in the matter: 1) In a competitive market, not advertising places it at a competitive disadvantage to its rivals who are advertising. 2) In a non-competitive market, not advertising leads to a smaller overall market and a weaker position (loss of market cap and easier to disrupt). Once the new business start advertising, other businesses become aware of it and either (a) choose to enter the market themselves, or (b) invest in advertising targeted at blocking/reducing this new market. Both cases result in more money spent on advertising. That's the multiplier effect.
- Retric 2y ago
  > Advertising is not zero-sum. It is a money multiplier. You misunderstand zero sum here. Gas stations can’t grow total gas sales making the selling of gas zero sum, but they very much provide a useful function in aggregate. Advertising is going to exist with and without tracking individual users, the difference is simply relative value of undifferentiated content. Selling camping supplies on an outdoor website is targeting, but linking user’s history allows anyone to get a cut of premium revenue even if it’s lowest common denominator crap. But remove tracking of users and specialty content like local news becomes a lot more valuable and clickbait far less, a major public good. > we start from the position that a new business creates net new value in the economy (on top of existing value). This is an economic maxim that must be true otherwise our GDP would never grow from 1770 standards. I understand the point you are trying to make but existing companies also evolve their offerings over time. Nintendo in 1889 wasn’t selling video games.
  - glitchc 2y ago
    I think you missed the forest for the trees. I will make it very clear. The advertising business is a growth vector. It grows with the size of the economy. Singular industries may rise and fall (ex. ads for riding crops) but in aggregate, advertising always continues to grow. Zero sum means explicitly that the total pie stays the same, which advertising is not. It forces the pie to grow. And that's for a straightforward reason, because advertising is an arms race. A company can't afford to drop out, can't afford to fall behind. > Advertising is going to exist with and without tracking individual users, the difference is simply relative value of undifferentiated content. So what you mean to say is that targeted advertising is the same as mass advertising, that there's no benefit, perceived or otherwise, of targeting users. Well, I'm afraid you're very wrong. Both buyers and sellers of advertising love targeted advertising. For buyers, it makes the most efficient use of their budget allocation, and for sellers, it allows them to to take maximum advantage of user self-segmentation. The analogy of indiscriminate bombing being superseded by precision munitions is an apt one. There's no going back at this point. Regulations will only distort the market further. The platforms will make the fines the cost of doing business, and pass them onto the buyers. The buyers, in turn, will pass that cost along to consumers in the form of higher prices. Every company will continue to pay for advertising because they can't afford not to. And so it will continue. All the fines will do is concentrate more wealth into the platforms and the government. And that's exactly what's happening in the EU with advent of GDPR.

treyd 2y ago

In advertising it can often be true in a sense though. A very illustrative example of this when regulations tightening advertising for cigarettes were introduced, cigarette companies started reporting more profits because they all collectively stopped advertising at the same time and got to pocket the money they would have spent on it. The pool of cigarette smokers isn't/wasn't growing that much, so all the advertising was really doing was trying to take consumers away from their competitors and the net effect was 0. To be fair, then they started investing in vape companies and things might have changed. I don't think that's a good thing, although vapes are probably less harmful than cigarettes.