The End Of Advertising, Or A New Beginning?

Meanwhile, in New Zealand… an unauthorized, AI-generated version of a news anchor stars in an ad for a gambling app, alongside unauthorized, AI-generated versions of MrBeast and others.

Lawyers are desperately trying to get the ad removed from the Internet, but it’s “a bit like playing whack-a-mole,” says a spokesperson for the news anchor. “We are seeing a proliferation of this type of scam material online and we are dealing with this content on a weekly basis.

It’s always been a war between the system and those who want to game it. Google has been fighting black-hat techniques since it was born. But generative AI has just upended the battlefield. Bad actors now have access to unlimited ammunition, and there’s only so long the shields can hold out.

Back in 2016, when Russians bought Facebook ads to influence the election, people were shocked not only that they could do it, but that they had paid in rubles. As Ben Thompson pointed out in a 2017 post,  “how else would the propaganda group have paid? Facebook’s self-service ad portal lets you buy ads in 55 different currencies, including the Russian Ruble.”



Thompson has long been making the case for Aggregation Theory -- the idea that, while the control of distribution used to be a competitive advantage, the internet has made distribution free, along with transaction costs. As a result, the big winners aren’t the ones who control distribution, it’s the ones who control supply.

We go to Amazon because everything is on Amazon. We go to Airbnb because that’s where the rentals are. We go to Google because all the search results are there. We go wherever supply is aggregated, so supply is forced to go there because we’re there.

This model has worked for the past 20 years or so. With transaction costs near zero, Google and Facebook can sell ads to anyone, anywhere, and even microtransactions are profitable. But in order for their businesses to work, they have to make it super easy to buy from them. If a human is in the loop in any way, costs go up. If costs go up, the model breaks down.

So what’s next? Keep it easy to transact, flood the zone with AI-generated crap, and lose legitimate advertisers who no longer want to be associated with the garbage heap the internet will have become? Or make it harder to transact, thus making it that much harder for legitimate actors to have their voices heard.?

In that same article from six years ago, Thompson reminded us that the biggest beneficiaries of zero transaction costs are not traditional advertisers, who “have the resources to advertise anywhere and everywhere, and indeed, often find that the fine-tooth targeting on super-aggregators isn’t worth the effort required. The folks that do benefit… are those that wouldn’t have a voice otherwise: startups and niche offerings, both in terms of business and politics. Google and Facebook have opened the field to far more entrants, and while that means there are more folks with bad intentions, there are also a whole lot more folks with ideas that were shut out by the significant transaction costs inherent in pre-Internet platforms.”

Generative AI might just break the internet, and not in a good way. I can’t wait to find out what comes next.

1 comment about "The End Of Advertising, Or A New Beginning?".
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  1. Ed Papazian from Media Dynamics Inc, August 25, 2023 at 1:06 p.m.

    Kaila, twenty years ago they were saying that the DVRs meant the end of TV advertising---as everybody would zap every commercial in every program they decided to watch. Didn't happen. I suspect that the same will be true of AI in the scenario you have dscribed. But for a time things could get very messy for certain types of advertisers.

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