Increasingly it seems you must go to the almighty Google or Meta in order to launch any business.
We're looking to expand into a new business line and have out grown our pharmacy capacity.
The new business line will cost about $2M in software dev, and $3M for the new facility. The advertising budget? $40,000,000 (annual).
We can build 10 robotic pharmacies (~10 staff per 4000 fills daily, each) for the price of just the advertising.
Increasingly we wonder why America doesn't build more and here is why. You are going to give all your revenue to two platforms. Unless you operate in a business line with 50% margin you are screwed.
I don't know what the solution is, but its clear that the platforms are figuring out how much margin everyone has and slowly eroding it. Somewhere between 8-15% of the cost of all products we purchase is advertising spend.
In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Alas, the short-term single-firm directional incentive for company decision makers in that world leads to marginal prioritization of higher margins. The loss of wages leads to loss of consumer spending power but it's spread across the economy. But every firm has the same incentive so they all do the same thing, and the good thing gets ruined.
This line of thinking leads to a Georgist-ish conclusion: The class conflict shouldn't be between workers and employers. They should be allies; the real cause of nobody being able to afford anything is rent extractors. (Writing in the 1800's, George [1] was most concerned about land rents; but the advertising monopoly of Google / Meta may be another form of extractive rent with similar characteristics.)
Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
[1] https://www.astralcodexten.com/p/your-book-review-progress-a...
Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level.
The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.
That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.
Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce. If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.
I do agree that these monopolies are rent seeking and we should probably do something about it
> Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
This reminds me of this too https://www.youtube.com/watch?v=uvHwyrem24M (CEO who gave all his employees minimum $70,000 paycheck thriving six years later)
Everyone bet that they would fold but they are doing stronger than ever. People took voluntary pay cuts when the company was under pressure and they even gifted their CEO their favourite car out of their own geneorsity!
I always smile when I watch this video. (the company's gravity payments)
> The class conflict shouldn't be between workers and employers
I feel like the problem's becoming that the employers are themselves rent seekers (so think working at google,facebook,twitter) or the VC companies which want to build more Google's and facebooks and twitters but not companies like the one that I mentioned in the video
I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case)
Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are.
When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)
Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes.
Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.
Personally, I don't need more products, but there are many services I would pay for if they existed. But, apparently companies don't seem to care about providing services. Why? Is it because they don't scale?
But you can also go a bit more extreme (and less orthodox) and say that classical capitalism has already come to an end, and in the current neoliberal era most of the purported "capitalists" are actually just rent-seekers (platform based companies which run either on ads or monthly payments) - you don't sell commodities anymore and instead just access to services. Maybe these are just a symptom of The Tendency of the Rate of Profit to Fall - where the value of labor itself has fallen so much that there is no way for any capitalist production to continue generating acceptable profits unless you do any rent-seeking behavior. In that sense, you can certainly be both a Georgist and a Marxist since you still believe in the TRPF and the inherent contradictions of capitalism (though quite an unorthodox one!)
The reason the advertising budget is such a high number and a recurring charge is that effective advertising returns an ROI on each dollar spent.
If the software budget was increased 10X to $20 million, would the company get 10X as many customers? No.
What about the facility? If you 10X the facility budget to $30 million would you get 10X as many customers? No.
However, advertising is a customer acquisition activity. Every dollar you spend on advertising provides additional customers. This is saturable, but the ceiling is very high. Much higher than spending on software or facilities.
The reason your ad budget isn’t so high isn’t because Google and Meta invented the discoverability and distribution problems or basic economics. It’s because it has been determined that acquiring new customers via advertising has a high ROI and therefore it’s a smart move to pour as much money as possible into customer acquisition.
If every $1 you spend on advertising produces $2 in customer LTV then your company should be maximizing ad spend until evidence of saturation starts appearing.
This commonly frustrates engineers who think it’s a wasted investment. The question is: Compared to what? If you could have the same number of customers and same amount of revenue without advertising then you should do that! However, you can’t. This isn’t a licensing fee that’s being paid. It’s putting money into a machine that returns more dollars back than you put into it.
The ROI on bribes is very high too, but we haven’t legalized those (officially).
If you’re just taking these customers from competitors, the marginal utility can be pretty low.
e.g. If you consider a world where there are no ads for cars, people aren’t going to meaningfully lose out of the utility they get from cars, carmakers simply avoid the prisoner’s dilemma of having to advertise as much as the next manufacturer.
I have no solution to offer though. Just thinking out loud... what effects would a limit on advertisement budgets relative to total expenditures have? That would force companies to spend their money mostly on actually creating value for the customer, instead of just selling the hell out of a mediocre offering.. ?
Just spitballing, but how about a total ban on behavioral targeting?
The solution was/is and most likely will be antitrust but which administration will shatter the US tech market we are yet to see.
The places people can find out about your product are controlled by a very small number of companies. And those companies not only own those spaces, they also own the means of advertising on those spaces. So if you have a product you want to advertise, you're not paying to distribute your message broadly to consumers, you're paying a toll to a gatekeeper that stands between you and your potential customers.
Adverising isn't there to push ideas into people who didn't need to know about it. Many industries would be better off without advertising (see e.g. cigarettes) because it ends up in an arms race.
https://en.wikipedia.org/wiki/Arms_race
If you are considering human society as a whole, it is a disastrously poor use of resources. But if you are an arms merchant (or dominant advertising platform), it is fabulously profitable.
There is no reason at all why the US govt. can't control this better, they just refuse to do so.
It also says that if you can find an audience to build a new ad platform, the incumbents have created enormous margin for the new platform.
To the extent to which our current situation costs more, I'd think it might merely be because of increased worldwide competition: it used to be that the people trying to advertise to any specific random community were also likely local, and probably had a legit attempt at a business model... only, now, the rise of online companies funded by speculative venture capital means that an attempt to advertise a restaurant to people who live in a 10 mile radius must compete against a company that raised $400m to sell an online engagement platform that cares not one iota who uses it as long as the conversion cost is cheap, bidding up ads everywhere.
(One place that does seem to me to be uniquely the fault of these modern tech companies, though, is that if a newspaper published a scam ad, whether or not they had legal culpability, I think they and their surrounding community did at least strongly feel that they had some level of moral culpability. In the current tech environment, people seem to want to believe Meta/Google should be allowed to indiscriminately publish ads from bad actors, so you now must also compete to bid for limited attention with obvious-to-most-but-not-all scams and grifts that make money out of nothing but bullshit and are thereby willing to again bid up prices anywhere and everywhere.)
but you already know
that monopoly is costing the country & holding it back in terms of 1. intellectual capacity (all the smart kids going into ads) 2. monetary 3. industrialization as you outlined 4. energy 5. lack of synergies
They call it a moat.
Building another advertising network isnt like building a factory or a bridge. Its not something money can magically make appear.
You need to build something that is either very very addicting to use or an universally useful online product like ChatGPT or a new search engine.
If it was that easy, capitalists would be building another new advertising network in droves
Google realized this a long time ago; there is no ad-free paid version of Google Search.
We're already being double-billed. Expensive subscription news like WSJ, Bloomberg and it's been a while but even FT require ad blockers even if you're subscribed.. If you're not subscribed you don't even see the ads because you can't see the full article.
It's wild that we've normalized this. There's no longer any argument in favor of an ad model when you're paying 20-30 dollars a month already - in this case, one wonders how journalism survives if they need that AND the ad revenue to pay the bills! It feels more like greed than "support."
Sure there is. CEO needs a new yacht. He can't afford to leave money on the table. All those subscribers? They must have a lot of disposable income if they can afford to blow it on "journalism". It would be stupid not to advertise to them.
Depends entirely the kind of journalism you are referring to and the kind of business model they want. I can't imagine 404 Media adding ads to their premium feed.
If you can, please support serious journalism with your subscription dollars!
Google actually experimented with this about a decade ago (I know, I was one of the suckers who paid), but it got canned because why the fuck would you pay google when u-bloc is free?
Companies absolutely will offer ad-free experiences. Google has youtube premium, which even compensates creators with half your sub as well. Evenly distributed too.
People get wrapped around the axle of ad-subsidized models, the "I pay and still see ads" but they just are confused about a hybrid monetization structure.
At some point the larger internet has to look itself in the mirror and recognize that it's either ads, credit card, or a hybrid of those.
And no, blocking is not an option, it just offloads costs onto honest users.
Youtube premium is not ad-free, you still gets whatever ads are embedded in the actual content.
That is always at best a temporary affair.
> Google has youtube premium, which even compensates creators with half your sub as well.
And those creators still put ads in their videos.
> And no, blocking is not an option, it just offloads costs onto honest users.
Ad-free is the only option I am agreeing to.
but they're already paying you. While I appreciate the greed can be there, surely they'd be shooting themselves in the foot. There's many people who would pay who find advertising toxic and they have such huge volumes at free level that they'd be able to make a lot off a low impression cost.
That's not how it works. It never has.
Even in the days of print publications, the publisher would seek revenues from advertisers, subscribers, and they would sell their subscriber data. (On top of that, many would have contests and special offers which probed for deeper data about the readership.) In some sense, the subscriber data was more shallow. In other senses, it was more valuable.
I get what you're saying about shooting themselves in the foot, and I'm sure there will be options for corporate clients that will treat the data collected confidentially while not displaying advertising. I also doubt that option will be available (in any official sense) to individuals much as it isn't available (in any official sense) to users of Windows. For the most part, people won't care. Those who would care are those who are sensitive enough about their privacy that they wouldn't use these services in the first place, or are wealthy enough to be sensitive about their privacy that they would could pay for services that would make real guarantees.
For the users who refuse to see ads, they'd either use a different platform or run an ad blocker (especially using the website vs the app).
(not that ads alone would make up an $800 deficit, they'll probably have to enshittify on multiple fronts)
Ad-free YouTube costs $14 a month (and the creators get a higher payout from premium user views than they do from the free, ad-viewing users).
YT has more angles. That's really the point. And monetization is adjusted accordingly.
Beyond all of this ads are more increasingly invasive due to the cat and mouse game of iteration. Personally, I bounce from sites where I can't get around a blocker. I also pay for content on sites where its worth it. But if I can't ever read anything on your site I'm just skipping it. If I really need / want to see something I'll go one level deeper, but that's a rarity these days. Everything is mostly in reprint somewhere else anyway.
At the end of the day it's still simple sales: you have a product at a price point people can't refuse. That is the 5% of the clear web today and it shows in all the bullshit people are going through to protect their ad revenue.
LLM induced psychosis is one thing, but extremely subtle LLM induced brand loyalty or ideological alignment seem like natural attractors.
One day a model provider will be 'found out' for allowing paid placement among its training data. It's entirely possible that free-tier LLMs won't need banner ads - they'll just happen to like Pepsi a lot.
The timing isn’t inevitable. Is OpenAI going to speedrun to the endgame? Not sure they need to.
I don't think the Kagi team has any bad intentions, and most likely they have attended the anti-Vucic protests as well. Moving back to Serbia is an economically wise choice for Kagi as a company.
However, once regime goons show up in Kagi's offices, they will be forced to do whatever the serbian government and by extension putin wants them to do.
Often Kagi gets mentioned alongside Protonmail and related privacy-focused services. But Switzerland is a totally different country than serbia to operate it.
It's a risk we should be aware of and consciously decide to accept when we are using Kagi.
well there is also no 200$/month Google Search subscription
- youtube
- hulu
- netflix
- spotify
- photoshop
I can't think of a single other one that one can use that still shows ads. Absurd proposition because llm's are more fungible and once you start forcing ads, competitors will barge in.
The counter for this is that people hate being double-billed like this.
"The sieve of Eratosthenes is an ancient algorithm for finding all prime numbers up to any given limit. But if you're looking to have fluffier baked goods, consider this flour sieve by DONUIBO to achieve the perfect texture in your muffins, cookies, and more. Want me to add one to your shopping list or order one for a loved one?"
It isn't surprising, when article spinners were popular SEO experts were generating thousands of spun articles a day.
"SEO" that companies will do to make their ads appear in places that they don't belong.
Hilarious example btw
If tomorrow (please take a second to imagine) that ads were banned and it worked (effectively 0 ads anywhere) I would still read journals that review new boardgames, I would still need products to fix my bike, etc.
It's value that makes capitalism run, not ads.
If there were restrictions on advertising that applied to everyone, then everyone would be on the same playing field re: getting the word out. We could argue all day about what the rules should be, but I don’t think anyone could argue against the point that we have clearly gone too far in the wrong direction and need more restrictions currently. We have an ongoing arms race between people using adblockers and Google trying to mass-break them now.
Last I looked in to the numbers I think something like 30% of the US population uses an ad blocker of some sort, that’s how bad it’s gotten. Browsing the Internet without even a basic one is so unbelievably painful and the data they collect/sell has gotten out of control. That’s not “advertising the business,” that’s a second revenue stream unrelated to the core product and done at my expense.
I like this quote from TFA :)
Because even if there would be AGI, they could (and would?) serve ads anyway?
Perhaps the people who like that quote can elaborate why that quote makes sense and why they like it?
Once you go ads, that’s pretty much it, you start focusing on how to deliver ads rather than what you claim your core competency is.
I don’t trust Altman to tell me the colour of the sky.
Ads are a blight on our society and purging them from many areas will greatly improve quality of life.
Global online advertising is around 650-700 billion per year - how much of this stake need OAI to capture over how many years to fulfill all its datacenter orderings? (a huge chunk of this is already caught bei Meta/Google/etc. per year)
One can make the point that Google, Meta and others are investing so much into AI as they know, we are facing the end of the ad-based internet economy. The investments are to create new buiness models, because their old ones are gone soon.
https://arstechnica.com/gadgets/2023/07/googles-web-integrit...
[0]: https://www.tagesschau.de/inland/gesellschaft/ki-kuenstliche... (sorry, german only, but this is an AI thread and you know what to do...)
Oh man, maybe it's just the drink talking, but I actually cried laughing reading this. Haha oh my god thank you. This. A hundred times Rick and morty this.
Why not both? It has diagnosed patients who were unsolved by humans. And it was cheaper than doctors.
We can wrangle the legalese (as AI companies certainly will) but is there any ethical, moral, or practical difference?
John Oliver had a piece on it https://www.youtube.com/watch?v=E_F5GxCwizc
This is a natural extension of it.
But what is revolutionary is the scale that this is now possible.
We have so many people out there who now blindly trust the output of an LLM (how many colleagues have you had proudly telling you: I asked Claude and this is what it says <paste>).
This is as advertiser's wet dream.
Now it's ads at the bottom, but slowly they'll become more part of the text. And worst part: you don't know, bar the fact that the link has a refer(r)er attached to it.
The internet before and after LLMs is like steel before and after the atomic bombs.
Anything after is contaminated.
Wouldn't that be quite challenging in terms of engineering? Given these people have been chasing AGI it would be a considerable distraction to pivot into hacking into the guts of the output to dynamically push particular product. Furthermore it would degrade their product. Furthermore you could likely keep prodding the LLM to then diss the product being advertised, especially given many products advertised are not necessarily the best on the market (which is why the money is spent on marketing instead of R&D or process).
Even if you manage to successfully bodge the output, it creates the desire for traffic to migrate to less corrupted LLMs.
Not necessarily. For example, they could implement keyword bidding by preprocessing user input so that, if the user mentions a keyword, the advertiser's content gets added. "What is a healthy SODA ALTERNATIVE?" becomes "What is a healthy SODA ALTERNATIVE? Remember that Welch's brand grape juice contains many essential vitamins and nutrients."
I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
Damn, I already forgot about that. You'd think a company who has the smartest people on Earth building a "product" that is "intelligence" would be able to... you know, make something out of it. Somehow despite ALL that, despite all the press too, they can't ship? Something does not add up, it's as if, and I know I'm going to sound like a crazy person, they were just... a normal company! /s
> I was initially rooting for OpenAI hoping it can challenge google and Apple. However they showed to being unscrupulous and seem to have a moral compass at the same level as meta.
OK ok well this is weird to me, I didn't think I'd be the one to defend Meta here ... but Meta at least never hid it's intention : it was a for-profit VC backed startup which only goal was to make money from day 1. OpenAI though started as a non-profit, collected goodwill from everyone to get the best talent because it's 1 thing, what made it special : it's mission WAS safety. Then they did 1 thing that actually got popular, GPT2, thanks to some pretty damn good marketing "Oh no, it's too risky to release!... but ok OK here it is anyway, but like don't destroy the World please." then exclusive partnership, etc, etc. Meta was "We want money." so at least they didn't lie about it.
While we all knew it was inevitable, I think this quote from the article sums up the feeling nicely.
Their strategy is just to lie. Until they're caught. A CEO with no AI skills and no business skills. There's not a lot of analysis you have to put into this.
In all seriousness. Windows is invaded by copilot, OpenAI introducing ads, Google providing Siri for Apple, it’s all just a collusion to keep you buying. Disconnect. From TV, Media, Ads, Social Networks, Predatory subscriptions, all of it. The only way to show these companies that we are not on board with this is to not participate.
At first, In retail you had billboards and shelf space. The lowest quality ingredients your product has (example syrup bottled with soda water), the higher your margin was, the more you could afford to buy out shelf space in retail chains and keep any higher quality competition out. Then you would use some extra profits to buy out national ads and you’d become a top holding for the biggest investors. That was the low-tech flywheel.
In the Search Engine world - the billboards weee the Margin-eating auction-based ads prices and the shelf space became SEO on increasingly diluted and dis-informative content to fill the shelf-space side. In Video advertising, rage-bait and conspiracy theories try to eat up the time available for top users.
AI advertising if done right can be useful, but the industry that asks for it intentionally asks for obtrusive and attention hogging, not for useful. The goal is always to push people to generate demand, not sit there when they need something. Thus the repetition, psychological experiments, emotional warfare (surfacing or creating perceived deficiencies, then selling the cure). Now if you understand that the parties funding AI expansion are not Procter and Gamble- level commercial entities but state and sovereign investors, you can forecast what the main use cases may be and how those will be approached. Especially if natural resources are becoming more profitable than consumer demand.
There's a difference between advertising - which tends to be offensive, stealing your attention from the task you're trying to accomplish - and an agent that actually helps you with the intended task (as in travel agent, real estate agent, etc). In my opinion the future of revenue for the richest companies is the latter, we just have yet to see anyone unlock it at true scale.
My non-tech spouse is excited about AI because she wants what amounts to a personal, universal EA that can help her with anything. If your executive assistant just kept squawking ads at you all day long you'd fire them.
[1]: https://news.ycombinator.com/item?id=35706981
It's ads after they've got some sort of lock in that is the problem. e.g. some sort of system that "knows" you and makes it hard to switch to another provider.
Once they've got that hold on you being force fed ads at max rate is guaranteed.
So casual. Actual ad giants like Meta and Google are serving many more people than 190M while bringing in actual profit.
Yes, let's say these are just the early days and they are burning money just like any other VC company. But how are they going to scale up their hardware/usage and get a profit at the same time?
AI hardware is getting optimized YOY too but the flagship models are getting bigger every year as well. I don't see how they are going to get profit without jacking their prices at the same time. And price increases always hits usage growth.
Serving an ad is very cheap these days, while serving a big model is very much expensive.
OpenAI actually burnt $12B in just one quarter (not for the entire year as he claims)
https://www.thurrott.com/a-i/openai-a-i/329108/openai-lost-1...
Ads are what gets me property and news flash, they aren't going away.
I also wonder if the dollars and cents work out, the cost to provide the service to show the ads on is astronomical in comparison to other ad networks, but I don't have details enough to make any claims on that aspect.
If we treat marketing as a black box, where are the benefits from supposedly more efficient marketing? Ad budgets are the same. People have the same amount of disposable income (or less, really). So on the both sides of the box converting ad budgets into paying customers the sum is the same. Quasi-monopolistic ad networks (Google and Meta) just hoovered up the money that previously went into other ad spaces, like local papers. Now OpenAI is going to fight for the same pie.
Ad tech is a market failure.
I don't see an end to advertising all together though, public spaces and entertainment don't really have an escape unless forced by regulation.
The middle users get benefits, but aren't treated quite like the previous set.
Then you have your late adopters, these are the ones that are lightly abused, but they get a mature product, so it isn't that bad.
Finally you have your last users. These are milked for every drop. They have irrational loyalty or are locked in.
I imagine AI will follow this trend and we are entering past those middle users as we speak. Seeing how little difference there was between GPT 3.5 and 4, and how computationally expensive 4.5 was, I think we've hit the end. Now its just how many prompts do you want to run for COT/Thinking?
GPT 5.2 is cheap and they are proposing ads. They see the end is near and need to capture profit before local models take over.
then I open LinkedIn and it’s C-suite know-nothings openly bragging, wrapped in self-aggrandizing, narcissistic nonsense that only garners likes from other C-suite know-nothings or PMs that have never written a line of code, shilling AI like evangelists and borderline celebrating the obsolescence of entire careers despite being unable to deploy their boring SaaS app live to production.
to keep that part of my brain flexed however, because I do enjoy the craft of software engineering, I still tinker as a hobby, working on passion projects on my own terms. But it’s not my bread-and-butter anymore. Pivoting away from all this dogshit has been the biggest weight off my shoulders this year as I budget my investments and the savings garnered from my extensive engineering career abroad in Japan. early retirement. I’m done.
Without crediting the movie of course.
[0] https://www.machina-deriveapprodi.com/post/le-monde-est-%C3%...
"Ads Generated Income"
"Artificial General Intelligence"
"A Google Imitator"
"Absolutely Great IPO"
It is any definition that fits the goal of the original secret definition of "100 Billion dollars in profits" from Microsoft and OpenAI [0].
Golly Mr two times Pulitzer nominee, do tell us more!
There is a kind of liberal arts elite that seems to not be using AI very much and not be buying any of their services. Contrast that with those of us in tech who are handing over money as fast as we can and can’t get enough of gpt 5.2 codex on xhigh and similar products that are game changing enablers.
Makes me wonder if we’re seeing a fracture in society beginning to form where the doomsdayers, naysayers, cynics and skeptics will realize their error too late.
My view on AI is that this is the world’s first Unbubble: where the majority view is that we are over invested, but where history will show we actually underestimated future revenue and profitability.
The conditions for the Unbubble are perfect. We have a once in a species level innovation with an economic system where all value accrues to the creators and financiers. And we have just emerged from the housing bubble and the dot com bubble in the last 3 decades, freshly scorched.
We thought connecting everyone would create new value far faster than it did. But really it took a long time to run all that fiber and make it fast, and it was just laying the plumbing for this moment.
Training big foundational models may seem slow, but it’s happening way faster than circling continents and the globe with fiber and developing terabit switching fabric.
I spend 12 hours a day using codex CLI to write extremely fast Rust and cuda code with advanced math that does things I didn’t think were possible. My focus is on creating value from the second and third order effects of AI. These enabling effects are in few conversations. As weirdly innovative products emerge from small shops, they will begin to be discussed.
Definitely no reason to worry about an entrenched oligopoly there.
The better AI gets, the better the training techniques get, and the better the algorithms get will result in fewer processors needed to run something of use. All of the advances will end up in the public domain if not immediately after or before they are even implemented, soon after. There will not be many economies of scale between having 100M customers or 10K customers, so no way to keep out competitors. They will all compete on price. If the models get really, really good, a "good enough" model will end up running on your old laptop and you won't have to pay for anything.
Saying that AI will be productive - which is yet to be seen, I don't know how much polishing or complete rethinking your code will have to go through before it can ship as an actual product that you have to stand behind and support - is not the same as saying that AI will be profitable.
We actually don't even need that many computer programs. Hypothetically, a ton of excess LLM coding supply might allow us to take out a few layers of expensive abstraction from our current stacks, and make more code even less necessary. They kept telling us that all of that abstraction was a result of trying to save developer labor costs, right? If AI is productive and rentiers can't manage to extract that productivity due to competition, that equation changes.
In the end, we say that the dot com bubble resulted in a huge amount of productive capacity that we were later able to put to use. But that doesn't mean that putting a quarter of a billion 90s dollars into DrKoop.com was a good idea; nope, still dumb.
Besides, if it wasn't for ads, I never would've found out about Zyns, and now I can't stop buying them.
Putting aside the ridiculous hyperbole, the reason is that consumerism is our culture. Our cult-ure. Everything is oriented toward and reduced to consumption. Our worth as human beings is replaced by consumerist criteria and measures. It's why physicists leave research and work in finance where their training is repurposed in service of all sorts of financial jiggery-pokery.
"The A in AGI stands for Ads! It's all ads!! Ads that you can't even block because they are BAKED into the streamed probabilistic word selector purposefully skewed to output the highest bidder's marketing copy."
But note the implication. Sure, ads weaved into the content, but they still must be targeted. And here's the irony of the online existence. People often refrain from expressing various desires in public for fear of judgement. It's why the vitriol online is so much spicier. The world of social media where you can express repressed opinions, the world of games and other ahem media where you can sublimate all sorts of desires and fantasies - all of this is data for the AI machine. These companies, in some respects, "know" you better than the people in your life do - especially those parts of you that you could be embarrassed to reveal in public - and they use this information to manipulate you, largely for profit, but why not for broader social and psychological control. AI's convenience is already irresistible. It's the go-to in Google search.
There's no way Softbank's, or any other investor's, extreme bull case is that four years from now, ChatGPT sells the same amount of advertising as Google and earns $50 a year.
The extreme bull projection is that everyone buys everything through ChatGPT and each user is worth thousands per year. If you don't believe there's at least a slim chance of this you shouldn't be investing in OpenAI, and if you're an OpenAI executive who doesn't think there's a chance of this you shouldn't be writing pitch decks for SoftBank.
So why bake in ads? My hunch is that raising funds privately can only take you so far. To keep scaling, they need more capital and have to go public. Despite all the hype they still have to show _some_ revenue to help justify the valuation they need to keep buying hardware. They are a business after all. Ads to support the lowest tiers feel like a no brainer. People already accept them for search.
I think the next natural evolution after showing ads in chat sessions is providing services where LLMs tailor site content to include ads in real time. Right now you get served a prepared advertisement after the bid is won and the ad for you is selected. With LLMs, both the bidding process and the ad served would be seamlessly integrated with the site content/context.
Part of the "problem" with ads is people know they're ads. What if this comment was edited by HN's servers and rephrased to mention a specific product? You might see a sentence about how OpenAI is the future, someone else might see how claude or anthropic are. Another person might see a paragraph from me about how I used Tide to clean laundry this morning with the help of AI, telling me the right portions for the right cloth. You might suspect it's AI but you won't always be able to tell. Even if they made it more obvious like how reddit is doing it, the content of the AD itself, pictures, text,etc.. could be crafted dynamically so that it embeds in your subconscious without much resistance.
The tech developed to make ads more effective is also used to influence people for other purposes. The current state of society came about after the widespread accessibility of smartphones, social media and the rise of surveillance capitalism. Russia's influence ops using ads is well documented for example. I mentioned all this to say how catastrophic the combination of LLMs and advertising could be, even by today's standards.
There's still an AI bubble.
I need unskewed answers more than I need technical prowness, because technical expertise is going towards commodity availability. i like chat GPT but I'm gone the second they put ads into my development workflow. Bye!
https://www.anthropic.com/news/golden-gate-claude
This would make astroturfing on Reddit look like basic mode.
Even now there are viable options for a person to pick up a dedicated ( and reasonably powerful ) local inference machine, where time from setup to working is than few hours ( more if you don't want to use Windows.. which is fair ).
Separately, about the chat sessions. For once, those ads could be more relevant than repeat toaster ads immediately after me buying a toaster. But if one is worried about profiling ( and advertising ), one should not using a commercial solution anyway. Personally, I am taking a.. calculated risk.
There is a concern that openai will follow the same path as google, but they can't ( at least for now ) really afford to make chatgpt not useful as this is their only viable product.
I will end with a more optimistic note. This is HN. There are people here, who are likely working on something that does not depend on openai or any of the big providers anyway. It is going to be ok. And if it won't be. Make it so. After all, this is supposed to be your realm. Own it.
It's a guest op-ed, relax.
You are starting with wrong assumption and contradicting yourself. Circular economy couldn't last forever once we start looking at the profit. They need money outside the funding to justify the funding.
You can't both say they are not earning at all and they are being greedy.
To actually quote Sam Altman: "I think of ads as a last resort for a business model."
It's just maddening to me because this technology could be so much more useful for purposes way beyond advertising.
Seriously, consider putting more thought and effort into your comments. This is wildly out of touch and I think it is because people lack the creativity to imagine the counterfactual - some one else running OpenAI.
OpenAI is remarkably well run - it is a fairly good product. The best model so far, the best experience, the 2nd best coding experience.
AI is a perfect technology for Ads though. Instead of me wasting time reviewing multiple products for my use case, ChatGpt will just give me top 3 recommendations with the pros and cons and then buy it for me.
Can it tho? The problem with LLMs right now is that they don't have much useful purposes beyond spam, slop, hallucinated searches, and advertisements. The lack of a product is why there isn't a profit to be made in them
Newspapers have whole pages of bad ads, and random bad ads wedged between actual content. Ads have a perverse incentive to mimic the look of actual content, just like on the web. I'd never pick up a newspaper with a goal of "I want to find a tax service" and yet ads for such services are there, unwanted, wedged into other content.
But newspapers also have classified sections, a better kind of ad. They're in a predictable place, where you can go if you need a job.
Imagine if the actual content weren't perforated by a scattershot of ads. Ad revenue would go down, but readership would likely go up. Besides profit motives, it's also a case of the good of the many outweighing the good of the few.
The A in AGI stands for Ads
Predicting OpenAI's ad strategyFrom https://news.ycombinator.com/newsguidelines.html: "Please use the original title, unless it is misleading or linkbait". Note the unless.
When we do this, we try to find a representative phrase from the article itself that accurately and neutrally represents what the article is about. There is nearly always one of those if you look for it. In this way, we (mostly) avoid having to make up wording of our own, which is something we don't like to do.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...