Comment by clevep | Hacker News Reader

Comment by clevep | Hacker News Reader

This article misses by far the number one benefit of advertising: it makes products and services cheaper.

That notion obviously applies to the plethora of "free" (free in quotes because I am not trying to dodge the fact that you are always paying something) websites which everyone frequents, but goes beyond that as well.

There's a comment on here complaining about how Hulu shows ads despite the fact that they are paying for the service. Well, you can pay more and not see those ads, but you have made a conscious decision to pay less for the service, so you get to pay some of your attention instead.

Back to the article -- it claims that "a hypothetical doubling of advertising expenditure would result in a 3% drop in life satisfaction." What I would like to see is some analysis of how much life satisfaction is earned back if all relevant products become proportionately cheaper. Then we would be in position to figure out what the sweet spot for society is using a price:advertising ratio as a slider.

That would be very interesting and result in a more productive conversation.

this talking point just doesn't die, and that's not how economics or profit maximising agencies work. It also fails to explain why, over time, advertising encroached on almost all platforms unless actively resisted and why it's so difficult to find a genuinely ad free service.

in short, these platforms work to maximise profit. ads serve to form another income stream, and as long as they don't push sufficient numbers of customers away, it's always in the short term interest of the provider to expand advertising income until the marginal gain equals the marginal loss in marginal revenue from the consumer base.

In most mediums and content/ subject matters, this is at a non-zero level of advertising, especially if everyone else is already advertising.

while advertising does really result in free services (if you do not account for negatives of advertising or assume all increases in consumption generate positive utility), it is not generally the case for most consumers that advertising results in cheaper products, or that you could pay 5% more and be rid of ads.

Hah, perhaps I was not clear enough in my original comment because I agree with everything you wrote after the first paragraph.

I strongly agree with this sentence: "in short, these platforms work to maximise profit. ads serve to form another income stream, and as long as they don't push sufficient numbers of customers away, it's always in the short term interest of the provider to expand advertising income until the marginal gain equals the marginal loss in marginal revenue from the consumer base."

That is 100% accurate. However, that doesn't mean that ads do not affect the price of goods and services.

Businesses are always looking to find the sweet spot to maximize profits by pulling on different levers. These levers could represent price increases, advertising, lowering production costs, etc. Businesses will always be looking for the most efficient lever to pull. And I guarantee you that if you somehow figure out how to take the advertising lever away, they will pull a different lever. This could result in a higher price, a lower quality product, or something else, but ultimately something has to give.

This explains why advertising is likely to encroach on all platforms, because as users become more accustomed to it there is a higher likelihood that it is the most efficient lever to pull.

And of course I agree that it is generally not the case that you could pay 5% more to be rid of ads. The Hulu example was just a good illustration of how to think about the relative value of advertising to Hulu / the consumer.

That is, the services don't become cheaper in total, but their cost structure changes. A part of voluntary paying is replaced by a part of involuntary seeing, and the feeling that you are letting go some valuables is blunted.

> What I would like to see is some analysis of how much life satisfaction is earned back if all relevant products become proportionately cheaper.

There’s a reason services refuse to offer paid plans: people would realize how much the functionality of these services are destroyed in service of showing ads—you can see a tiny fraction of this reaction with the hulu anecdote. It’s also at the core of our “screen addiction”: imagine the savings in mental health care alone if ads disappeared....

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