Google's revenue is over 280B annualized from last quarter's numbers. Let's just assume that every person on earth is using Google at an equal rate. That's $35 worth of revenue per user per year. There is no way that you can come close to that without doing ads; the median global income is less than 4000 international dollars per year. So naturally, there is a strong pressure for companies to pivot to ads once they run out of other ideas to grow the business.
* one does not need $200-300B ARR to run a search engine; and merely making a ton of money does not mean that the way that one has been making that money will continue forever
* using Kagi, one realizes how much the web has been perverted, in my opinion, by the obsession with the ad model; there are many nice, novel things that Kagi could introduce which would reduce ad revenue for a company like Google, but would be useful and novel for Kagi without loss in revenue (on the contrary — could help); ie google is incentivized to keep people on the site through various irritating means; a search engine that isn’t distracting and gives me what I want — I would be more than glad to pay for (and already do pay Kagi $10/month)
Other thoughts:
* Supposing $10/month (honestly I would consider $20) with 100M paying users; that is $1B MRR which is not bad at all and is more than plenty for a meaningfully sized team with meaningful salaries.
* Just like how lowered energy prices during and after the Industrial Revolution made manufacturing at scale feasible, the incredible amount of high quality OSS and infrastructure these days is making it increasingly feasible to do things Google did 20 years ago — something unthinkable for even the best engineers of that era. Not to mention the relative ease of collecting capital with payment services (let alone VCs, etc.) today — even with a looming recession factored in.
Looking at the global median income and coloring it with the mean revenue per user paints an incorrect picture. Advertisers are not paying even $35/yr for the attention of people making the global median wage.
US attention is the most valuable because it is the richest large nation and the largest rich nation.
European attention comes a distant second. Together they have 40% of the global GDP, but likely something like 60-70% of the consumption of non-essential goods in nominal terms. Accordingly, average advertiser cost per clock differs ~10x between the cheapest and most expensive groups of countries.
what I find strange is that selling ads makes more money than selling service. Because at the end the people watching the ads are buying the stuff advertised so those who adverstise have more money for advertising….
So for it to be rentable people have to buy way more than the ad revenue google makes. If spending for google ads is 1% of bussines budget and budget has to be at least Revenue……..with 280 billion revenue for google it would be 280.000.000.000.000 that we as humans have to spend for stuff that was advertised on google so someone pays google for ads so they can run google search etc ….
35 dollar is maybe ok… …. Maybe better than spending 3500$ on … I dont know … stuff is good also ..
Advertising is kind of a backdoor price discrimination in that way. If you can afford to spend $10,000,000, people will advertise wealth management services to you. If you can afford to spend $1, McDonalds will advertise their dollar menu to you.
If you show an ad for a car that costs $100k to 1000 users and a single user buys it (0.1%) you still sold a car for $100k. Let's say it costs $90k to make it. You could pay $5 per ad displayed and still made a profit. My point is, the people who actually buy the products are actually paying for the other people who can't afford it. So, the model doesn't rely on everyone buying a keyring from a car dealership, but on most people not buying anything, and a couple buying a car.
In a sense, that model is better at distributing income, because everyone gets a service and the people who can afford pay for everything. If everything was behind paywalls, people who can afford would have all the nice services and people who can't, will have nothing.
What's interesting is that "targeted ads" is a bit of a misnomer. It's more of an ads ranking, where the user is shown the ads they are most likely to buy. However, from the point of view of the car dealership, when they think targeted ads, they would like their ads to be shown only to people who will likely buy the car. No company would want their ads shown to someone with no disposable income, yet, they will be shown some ad.
> ... once they run out of other ideas to grow the business.
Yep, but the main problem here is the perverse pressure to grow indefinitely.
And that comes from it being acceptable for public companies to pay no dividends and instead rely on share price increases to deliver a return on investment.
Something that slows down this growth spiral would fix things partially. Require profitable companies to pay a % of the profit as dividends to their shareholders?
