The Future of AI Will Be Ad-Supported

Where is AI going next?

Two words: Madison Avenue.

There’s a funny thing about this avenue – which I know very well, as I actually live here.

No one trusts marketers

Everyone wants to block ads.

And yet everyone comes crawling here whenever their other monetization plans fail.

Sometimes, it’s opportunistic. Microsoft earned $12 billion in ad revenue last year out of $212 billion. Now, if you earn $100K one year, you’ll probably feel good earning another $5K-$6K on top of that, but maybe not if you have to learn an entirely new career to get that bump.

Sometimes, companies need to hedge bets. I asked Perplexity what Netflix’s ad revenue was last year compared to total revenue, and it said, “Netflix’s ad revenue last year was not material compared to its total revenue.” Ouch. But give it time.

Facebook and Google were the epitome of new-millennium Silicon Valley companies (yes, I know Google was founded last millennium – just chill, please). And since then, I hear they’re in the ad business?

This brings us to the AI era. Web 2492482.91381 – it doesn’t matter, since no one can tell when web 2.0 ended, and few want to relive the dawn of web3.

You’ve got businesses emerging with very low headcount but very high expenses. These include:

• Computational resources – you need a lot of bandwidth to train and run these models

• Energy – it’s hard to think about sustainability when powering up all these servers

• Data acquisition – either pay now to license data from publishers, or pay later in court

Will there be enough enterprise subscription dollars to cover all that, especially when Google, Microsoft, and Amazon are all in amazing positions to bundle AI offerings with the rest of their B2B businesses?

That’s a tough hill.

Oh, and for consumers, a lot of AI apps are replacing search engines and visiting free news sites. $20 a month may not seem like a lot if it’s saving a worker who earns $20 an hour just one hour every month. But that’s still another hill. Basic access to the major AI platforms is free. And like we’re seeing now with the streaming wars, there are limits to what most people will pay for.

While streaming services once felt like the death knell for TV advertisers but now are ramping up ad inventory and rolling out ad-supported plans, we’ll see that happening in AI too.

Microsoft Copilot offers a great example of this. I’d share links to my research, but you’re going to have to try this out yourself because of a funny conundrum:

I have the paid version of Copilot, and when I’m logged in, I can share searches, but I’m not seeing any ads at all, no matter how commercial my searches.

But when I’m not logged in, I can’t share my Copilot exchanges. And when I’m not logged in, when I ask questions like, “What’s the best car insurance,” there’s an ad unit that appears below.

Granted, I tried asking the least commercial search I could think of at the moment: “What does a moose like to eat?” There were no ads. Kind of disappointing.*

(If you wonder who the heck should advertise against that query, let me enter into evidence the delightful children’s book by Oliver Jeffers, “This Moose Belongs to Me.” I can have my digital twin read it to you sometime.)

As we read about Doomsday scenarios for many businesses with predictions like Gartner saying search engine volume will drop 25% in just two years, I’m a big fan of preparing for the worst-case scenario.

In a world where you can’t use search ads or SEO, how would you build an audience and attract customers?

In a world where no one searches, what would you do?

In a world where everyone gets everything they need from a ChatGPT-like engine, what would you do?

In a world where an AI Everything Engine can predict what people need before they even ask for it, what the heck are you gonna do then, bub?

Scary stuff. But yeah, get on that. Disruption is real.

But maybe the sky isn’t falling just yet, and maybe it won’t at all.

New York City, despite what you might read, is booming with life. There are some vacancies on my stretch of Madison Avenue though, and I have a feeling I’ll be getting some new neighbors soon.

If you’re moving in, stop by. I often have freshly baked cookies here, and you can show me your brand spanking new ad units.

David

*PS: A more commercial version of the search, “Where can I get a pet moose?”, did not deliver any ads. Copilot called this “an intriguing idea” and then said, “In many places, keeping a moose as a pet is strictly prohibited.” I wonder if the Moose Pet Libertarian Bloc will vote for Biden or Trump.

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WHAT TO WATCH & READ:
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Recent content shared by Serial Marketers and friends:

• AI Prompt Engineering Is Dead by Dina Genkina

• Marketers Are Tracking a New Metric: Share of Model by Jack Smyth

• 3 reasons not to block GPTBot from crawling your site by Nikki Lam

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EVENTS
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UPCOMING SERIAL MARKETERS EVENTS:
(times EST unless otherwise specified)

• Weekly on Wednesdays at 12pm: AI Insiders — join this event series from AI Marketers Guild to discuss new developments and trends with AI

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ADOBE SUMMIT
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JOBS
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Keep checking out the #jobs channel in Serial Marketers for more. Also, check out the AI Marketers Guild job board. For other job resources for marketing jobs, see a long and regularly updated list here.

ARCH
Senior Sales Director
New York City, NY
“Arch is a Series A financial technology company that automates the management of private investments, improving access, understanding, and the human experience of investing across asset classes. We are hiring a high performing Senior Sales Director to drive sales execution across enterprise and strategic accounts. We’re a product first company with significant commercial traction and we continually reinvest in our product. As Arch’s Senior Sales Director you will play a pivotal role in meeting, understanding, and serving core accounts, to accelerate our market presence and revenue growth.”
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COUNTERPART
Marketing Lead
Remote
“Counterpart is a management liability insurance platform for the 21st century workplace. We offer products and services to help companies align the risks and incentives of creating great organizations. As an early member of the team, you will create relevant, impactful content that helps small businesses and the brokers that support them be the best version of themselves. You will work closely with the business development, insurance, data and products teams to deliver industry leading content for the different stakeholders involved in the purchase and sale of our novel insurance products and services.”
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TRULLION
Sales Engineer
New York City, NY
“We are looking for a passionate individual who excels in translating technical features into real-world benefits, showcasing our cutting-edge products to prospective and existing customers. Our Sales Engineers build on their accounting backgrounds to build trust with prospective customers (also accountants) during our sales cycle. Elevate your career in an environment that thrives on innovation and embraces the challenges of a dynamic sales landscape.”
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TRULLION
Content Marketing Strategist
New York City, NY
“You bring expertise in crafting, implementing, and leading a buyer-focused strategy that engages enterprise buyers and elevates our brand in the minds of other key audiences (including media, employees, recruits, and investors). In addition to content creation, you demonstrate expertise with social media, earned and paid media strategies. “
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