The End of Advertising

Everybody hates ads. At least that’s what we all say out loud. But our revealed preferences tell a different story: we all actually love ads, because they fund most of the content we consume on the internet. Without ads, we’d have to pay for content with our hard earned dollars. But with ads, we pay with our attention, and we perceive the cost of the content as free. Ads have made the internet as we know it today possible.

Ads are also a really good business, because advertisers are willing to pay top dollar to access our attention. In the early days of the internet, this looked like simple banner ads brokered through manual deals on basic HTML websites. But over time, ads evolved into some of the greatest money printing machines ever invented, like Google and Meta. Even businesses we don’t often associate with ads, like Apple and Amazon, make a killing from them. And the little guys love them, too: many long tail publishers, websites, niche blogs, podcasters, and indie games are all funded by ads. Ads built the modern internet and funded our internet addiction, making billions of dollars and billions of us happy in the process. It's a perfectly tuned system that we all take for granted.

All good things must come to an end, and ads are no exception.

AI is increasingly challenging the business model of ads – the system that makes the open web feel free. For example: many of us are using Google search less frequently, along with the ad-supported websites that it leads us to. And in their place, we’re using answer engines like ChatGPT and Perplexity more. Each time we task these AIs with delivering us a single, definitive answer (in favor of wading through many potential answers via traditional search), the relationship between an advertiser and our attention is severed – and the ad never gets delivered.

Challenging the model even further, as AI models become more powerful and capable, they won’t just deliver us answers; they’ll also perform long, complex tasks on our behalf. They’ll do the busy work of research, making appointments, and even buying stuff for us. This will free us up to do other things, and as a result we’ll devote less of our attention to the content, and thus, the ads. At scale, this represents a massive change to the foundation of the open web. What happens to the perfectly tuned system when the funding dries up?

Premium content will become even more premium.

Tightly guarded walled gardens, especially built around premium content, will feel the least pain from this shift. Many will become even more valuable: as the overall amount of monetizable supply of ad supported content shrinks, the demand for higher quality content will rise. Ad dollars previously spent on commoditized content will be redirected to the best stuff on the internet. Plus, as we spend less time on busy work, we’ll spend more of our time entertaining ourselves, which means premium content will capture even more of our attention. And the best content will even find new ways to monetize: Reddit’s AI deal with Google serves as the perfect example of how valuable, niche content traditionally supported by advertising can be sold as training data for AI. And media formats that are more resilient to AI scraping, such as audio and video, will likely retain their advertising value longest. No matter how good an AI agent gets, you’re never going to ask it to watch your favorite Netflix show on your behalf.

But commoditized content, or anything that can be easily scraped by AI or replicated by competitors, will fare much, much worse. For this content to continue to exist, it’ll find new ways to be funded. For many of the sites we visit, this will increasingly be through user-funded subscriptions to offset the lost ad revenue. Those of us who can’t afford these will lose access to these services, widening the gulf between the haves and the have-nots. 

AI services will attempt to reinvent ads.

AI services will seek to capitalize on the end of traditional internet ads and invent new forms of advertising to capture the dollars that were previously delivered directly to publishers. Perplexity has recently revealed some early details of how ads will work on their platform, and OpenAI is rumored to be exploring this as well. While this is an obvious next step for the future of advertising, it’s unclear how directly the current ad spend will transfer over to this new model. And it’ll need to be structured such that publishers can participate in a way that incentives them to keep making content. Otherwise, they won’t be able to afford to exist.

Brand new models will also emerge to help publishers recoup lost ad revenues. As agentic traffic increasingly displaces human traffic, publishers will look to charge AI companies directly. Much of this will be through big, splashy content deals, such as OpenAI’s deals with News Corp and Axel Springer. But for smaller players that can’t afford to do deals themselves, they’ll work with third party services that will collect “tolls” on their behalf. Every time an AI hits their site to scrape content for their own service the AI will be blocked and forced to pay before the content is served. And as AI moves beyond content ingestion to agent-based task execution, APIs that help agents do their jobs will also be charged.

Content wants to be free.

For decades, the economic relationship between consumers of content and the providers of content has been hidden behind business models that were monetizing our attention. We didn’t put too much thought into it because we were getting what we wanted with minimal effort or cost. But as AI increasingly disrupts these models, the relationship between us and publishers will become much more transactional and direct. And we will feel it.

Over time, it’ll be a new internet, and the open web will be a memory. Great content will still find a way to reach us, just like it always has. But we’ll look back on the first few decades of the internet as the golden age of content, when everything felt free.

Thanks to Nir Zicherman, Sara Beykpour, Faraz Fatemi, Semil Shah, Lulu Cheng Meservey, Nikita Bier, and Kayvon Beykpour.