The Advertising Pyramid Scheme

The advertising economy is starting to resemble a collection of interconnected multi-level marketing schemes. Some kind of intermediary firm sits atop each pyramid brokering the serving of ads to eyeballs. Under that are ad agencies, and tech firms that work on sales and bid management. The bottom are ad buyers, perhaps too few to sustain all these pyramids. Advertising subsidizes many things people want or at least use. Free over-the-air TV, radio, and most social media; in fact, most news media is free or available at a lower cost to consumers due to ads. Advertisers buy ads almost entirely because they want to sell stuff. To paraphrase Peter Drucker, innovation and marketing are the only two things that create value in a business; everything else is a cost. Drucker didn’t seem to consider a world where companies can buy political power to force a monopolistic product onto people, but I digress. When done correctly, ads drive sales, paying for themselves while subsidizing much of modern life. Most people hate ads, but in practice, they hate paying for things more. Look at video streaming, where nearly 20% of new signups for Netflix in early 2023 opted for the ad-supported tier, which came at a cost savings of $3 compared to the basic ad-free plan. Streaming companies can earn more from an ad supported account than most consumers are willing to pay for the service. Creating a bazar world were everyone wants in on the ads. Offering ad inventory, big data targeting, or AI…The Advertising Pyramid Scheme