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Comment by seshagiric | Hacker News Reader

I work in online search and recently expanded. In my opinion there are two major threats to Google and Facebook (I.e., ads related threats):

1. Platform power: Apple was a key supplier to Facebook in the sense that they provide platform driving a significant % of their Ads revenue. With Apple tightening privacy they have become an indirect but significant threat to Facebook. Google is relatively safe.

2. Threat of substitutes: as seen in Amazon, Ecom platforms are much closer to the customer. Us timer is about to make a purchase. I think over time Advertisers will eventually shift to platforms like amazon, Etsy etc so that can reach the customer right when they are about to make a purchase. Some what same appeal with snap and TikTok.

Overall online ad industry will continue to flourish but will see big changes in who are the big players.

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1. Google isn't relatively safe. They are paying rent to Apple just for default. And while the cost per user has been flat over the years, ( growth coming from total active iPhone / Apple user ). Apple may raise that cost, taking another slice form Google.

2. This has already happened. Amazon's Ads is making more profits than Amazon E-Comm itself.

It is nice we finally have some decent discussion on Ads. Rather than the usual HN rant about how all ads are evil. Or Internet should be free of Ads.

On the medium term I see another problem for search ads - the raise of AI powered question answering engines. They are accessible through voice on mobile, but probably have much less opportunity for ad revenue. The research grade models are amazing, but deployed models like Google Assistant very far behind. I bet Google is dragging its feet with the deployment of QA technology because the shift is not in their interest. Site publishers won't like it either because they lose a part of the search traffic.

In the meantime a new crop of semantic search + question answering engines appear (like DeepSet.ai's Haystack). It's time to ditch link based results. They are primitive and actually don't work well today.

"Hey Siri show me the best restaurant in town!" "Sure but by the way did you know about this new car insurance?"

Siri will just lead with a paid local ad the for an impossible to define term as “best”.

Apple desperately wants to grow their ad business and has found a great wedge under the guise of privacy to kick push away competition.

The voice assistants already do self—advertisement by suggesting other things you can do when you ask for simple things like the time or the weather. At best this is to help people understand what’s possible, and at worst it’s to juice engagement metrics.

the day the ad industry dies, we will all be better off

What replaces it? People aren't going to host content for free. I hate ads too, but we have to be pragmatic about monetization; platforms like YouTube literally cannot exist without advertising to subsidize the insane architectural cost.

The solution is proper oversight. We've gone too long without regulating advertisements, app stores and video platforms, and we've witnessed the consequences. It's time that we put the interests of the people before FAANG shareholders and HN pundits.

> platforms like YouTube literally cannot exist without advertising

Why? If you consider Netflix without the cost of content creation, then less than 1 USD per month per user would cover the infrastructure cost just fine. Maybe cents suffice.

Youtube is just one big profit center for Alphabet.

YT's content isn't free. The majority of the income (55/45 split) from ads and Premium goes to the content creators. To compare, in 2021 Netflix had content acquisition costs of 60% of their revenue.

And then on the flipside, YT has a much harder infrastucture problem than Netflix. There's probably like 1000x as much content (both new and existing), and much more diversity in what is being watched. That means 1000x more storage and transcoding, and far lower cache hit rates.

(I've got no idea of whether/how profitable YT is. Just saying that if you're trying to reason about it via analogy to Netflix, you've got the directionality wrong on both of the issues.)

> I've got no idea of whether/how profitable YT is.

YouTube: 20 billion USD profit in 2021 on 28 billion revenue

Netflix: 12 billion USD profit in 2021 on 30 billion revenue

There's a reason why people call YT a money printer. And I just heard they are trialling showing five(!) ads before each video now.

YT is becoming unusable. Watch 2 ads before it starts. Then another ad every 60 seconds. Oh and one at the end for good measure.

You forgot the "thank our sponsors" moment that >50% videos then make you sit through, even if you are on YT premium, or using a regular ad blocker.

> YouTube: 20 billion USD profit in 2021 on 28 billion revenue

Alphabet does not break out YT's profits in their financial reports, just the revenue. So that $20 billion is just a total fabrication. Shame on you.

It's also not at all a credible number, because YouTube's split of the ad revenue is known to be 45%. It's literally impossible for them to have 70% margins like you claim.

> Shame on you.

Weirdly antagonist response.

> because YouTube's split of the ad revenue is known to be 45% What's the split on demonetized videos? What's the split on "ad supported" videos where engagement is too low for actual payout? How does this affect overall split?

Transcoding and storage are far bigger costs than download, and people are uploading videos to YT all the time

Decentralized architecture, open source. No one single entity owns the platform. "Payment" is in the form of sharing your hosted content (bandwidth, energy, time). Fully democratized.

With blackjack and hookers, too!

But what if you can't afford having huge server, to contribute to the network?

And how to incentivise people in redistributing content?

For example in perfect decentralized p2p world, people on mobile clients would be leaching content from fat clients. You either have to rent server, to host for your own phone, or go to some company to do it for you.

That's complicated :-(

People are already paying companies to access the Internet. If the infrastructure (and the incentives) actually existed, I doubt the average person would have to worry much more about it than their phone bill.

Of course copyright laws make this "perfect p2p world" illegal, so there was never even a chance for it to materialize.

> What replaces it? People aren't going to host content for free.

Perhaps. But I for one would like to try this just to see what that Internet would look like. I think it would be a refreshing change from the Internet we currently have.

Well, we had it, back in the late 90's. You wanted to put a video on the internet for people to see? You put it on your site, and paid the appropriate fee for the space and the bandwidth.

So people wanted to get paid for the content, if nothing more than to cover the hosting costs, and LEPT at the chance to put their crap in some walled garden that handled the monetization. If we had it to do all over again, we'd wind up right back at the same spot.

The only thing that will fix this situation is to force YouTube to charge for subscriptions at a price point that gets rid of the advertising, like Netflix. And then YT can share THAT money with creators. And this goes for every other "free" service where the product is YOU, like Facebook and Twitter.

I still can't wrap my head around how advertising is so valuable that the entire US economy seems to be based on it now. I just can't fathom there's apparently this strong of a correlation between annoying ad campaigns and consumer spending, but it MUST exist, ipso facto.

Honestly? I don't care. The economy will figure it out, somehow, like we always did whenever some business model or another went obsolete. At the end of the day, no ads produce wealth; people do.

And no, I don't want "government-approved ads", either - that's a surefire way to corrupt our political system even further.

> People aren't going to host content for free.

Those wanting their stuff seen can pay money to host it or just host it on their computers/rasberry Pis

Not with the shit internet service we currently have. The bandwidth cost is the gatekeeper propping up youtube etc. If I try to serve anything with consumer internet service my pipe will clog or I will get shoved over to business class internet service. The "business class" internet service will soon choke also.

Next step? Rent a data center and start buying contract lines and millions in hardware.

You're gonna have to wait a very long time. Hoping for ads to disappear is like hoping money suddenly goes away because it is "the root of all evil".

Maybe it becomes less invasive or a vector for malware, but I sadly don't see it dying any time soon.

It will be replaced with something very similar, they just won't call it 'ads'.

Just like how streaming killed cable, not for the good of the consumer, but so they could simply take on the same profitable business practices.

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