From time to time, Marketecture invites guest authors to weigh in with their unique insights on the media, marketing, and ad tech spaces. Today’s guest author, Myles Younger, Chief Growth Officer of U of Digital, questions the growing consensus that consumer AI will inevitably follow the internet toward an advertising-supported business model.
The Assumption Behind an Ad-Supported AI Economy
Ben Thompson (of Stratechery fame) was on a podcast recently and said something about consumer AI that has gotten a bit of attention: "If you're going to be in the consumer market, you have to be doing advertising.”
I think the breadcrumbs go like this: Because consumers didn’t want to pay for internet content from the ‘90s through today, they won’t want to pay for AI. Therefore consumer AI will, like the internet, be ad-supported.
The real payoff is that we can then all smugly watch the likes of OpenAI and Anthropic awkwardly and very publicly figure out the ads business over the next few years. That’ll take ‘em down a peg or two. Come wallow in the sordid muck with all us ads people!
After seeing the 15th or 16th repost of Thompson’s soundbite, I got to thinking: Why are we all so sure he’s right? Don’t consumers pay for all kinds of stuff? I don’t know about you, but I find myself constantly paying for gas, groceries, mobile phone plans, socks, and someone to do my taxes. Everywhere I turn, some a**hole has their hand out, expecting me to pay for goods and services. It’s ridiculous!
Really, though, I think there is an underlying assumption that may be very, very flawed. Ben Thompson and many others are automatically equating consumer AI with publishing. They have concluded—whether knowingly or not—that AI is like magazines, TV, radio, newspapers, and the internet.
Even web search is a form of publishing. Search originated as a replacement (albeit a vastly superior one) for the kind of classified advertising that was once found in newspapers and Yellow Pages, those stalwarts of the pre-digital publishing world.
And if consumer AI is a form of publishing, then you can slap ads on it.
I could go on a tangent about how Gen X- and Millennial-coded that train of thought is. Of course AI is like the internet and search, because the internet and search were those generations’ formative things. And, well, everything ended up plastered with ads.
But what if AI isn’t a form of publishing? Just because it currently appears to us on the same screens as internet content doesn’t mean it’s fundamentally like internet content. Magazines and books are both printed on paper. Magazines are ad-supported; books aren’t.
Let’s talk about how AI isn’t a form of publishing.
Firstly, AI isn’t “content” any more than the grey, squishy matter of your brain is “content.” AI is an artificial intellect. Sure, it’s not alive or conscious, but it’s nothing like a static piece of physical media, a video, or an HTML file. AI can create content, but AI itself is not content.
Secondly, AI is a form of labor. It performs cognitive work and makes computers do stuff (probably robots soon, too). Just because the labor-saving uses of AI have mostly emerged in the business world as opposed to the consumer world doesn’t change the fact that AI is labor. And labor isn’t publishing. You don’t get a discount on your plumber because the plumber shows up covered in ads. That’s not a thing.
Thirdly, AI is useful. It has genuine and tangible utility. Entertainment content (such as most of the consumer internet) isn’t “useful.” That’s why a lot of it has to be given away for free and subsidized with ads. I had to look up the relevant economic concept, and the pleasure we derive from traditional entertainment content is called “hedonic utility.” Hedonic utility is extracted as we consume content, in the moment. The ads business calls this “attention,” and that attention can be partially monetized via ads.
Fourth (fourthly?), publishing has always relied on low marginal distribution costs. There have always been viable economic models around producing and distributing magazines, newspapers, radio programming, TV programming, apps, and web content (whether professionally produced or UGC). Low marginal costs translate to competitively priced ads with broad reach. AI, on the other hand, has almost no economies of scale. Because AI isn’t static, every single interaction is expensively generated anew. You could argue that AI isn’t even “software” in the classical sense.
If AI isn’t a form of publishing, then what is it?
As I said, it could be a form of labor. That labor could itself produce ad-supported content, or earn sales commissions, or be commercialized in any number of ways. But the labor itself will never be publishing and as such may not be viable as an exclusively ad-supported service.
AI might end up looking like a utility. To flesh this out with an example: I don’t think enough is said about the possibility of charging for AI in people’s mobile phone plans. Mobile devices might be the most useful consumer item invented in my lifetime. Not surprisingly, people pay a lot for phones and plans! If AI is a utility-like thing that people will need to start purchasing, then maybe lump it in with mobile plans? Just sayin’.
Lastly, AI might look like an appliance—”appliance” meaning something like a phone, ear buds, a laptop, or a dishwasher. Maybe AI will be a virtual appliance, like a cloud VM. Or maybe it will be a physical box packed with GPUs on a shelf in your living room. Maybe you’ll walk around festooned in AI pendants and smart glasses. In any case, appliances aren’t typically ad-supported in the way that publishing is. My phone and my laptop don’t force me to watch ads to unlock them.
(I will admit there are growing exceptions to that last one. Your phone comes pre-packed with apps that paid to be there, your smart TV was sold to you at-cost to get you watching pre-loaded FAST apps as efficiently as possible, and even your BMW forces you to watch Spider-Man ads now.)
I’ll wrap up by clarifying that, yes, a lot of applications of AI will be ad-supported and commercialized. I’m a believer in agentic commerce and AI shopping. There are many AI services and point solutions that will end up integrating ads. And going in the other direction, the ad-supported publishing and entertainment world will surely incorporate AI into more and more media and experiences. Don’t get me wrong: AI and advertising have a long road ahead.
This post was intended to question the deeper nature of AI and its emerging role in the consumer economy. Because if you don’t understand the economy, then you don’t understand when, how, and why advertising comes into play. I think it’s hasty to proclaim that people won’t ever pay for AI without examining what it is at this sort of fundamental level. Because as anathema as it might seem to jaded Gen X-ers and Millennials, not everything is content.
Myles Younger is Chief Growth Officer at U of Digital, the leading training and education partner for the digital ads industry. Myles leads partnerships and channel sales for the company. He has over 20 years' experience in adtech, marketing, and advertising and is based in Portland, Oregon.
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