>People pay a "consumption tax" to fund every part of the products they buy.

Yeah, only those other parts:

a) are not relevant to the topic discussed. If I discuss where ad money go, I don't have a reason to show where money for packaging go.

b) are essential to the production of the item (besides the fact that there are millions of products that are sold without ANY advertising at all -- e.g. all no-brand-name items) [edit: fixed "not essential"]

>Some investors lose their shirt. Some companies go bust. My question is: so what?

So, when it comes to online advertising, it's the basis for tons of tech-related activity (the reason d'etre of most typical web startups for example, most online media, etc.), and if it goes bust there will be a lot of blood.

The impact to HN's crowd and the web as we know it in general is not even comparable to what happens if some market like "PVC supplies" for products goes bust.

Your message is a little disjointed. Are "other parts" marketing or not-marketing? Take your pick.

Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.

Instead, it tries to paint a market as some sort of a conspiracy that purposely creates complexity to steal money from consumers. It's essentially FUD.

You seem to suffer from the very common bias of "build it and they will come."

It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production. Would you say that people pay a "consumption tax" on freight transport when they buy any physical product?

You say "most" web startups are based on advertising. That would require proof. I recall seeing someone breaking down the list of the current "unicorns" by revenue model. A minority is financed by advertising.

>Your message is a little disjointed. Are "other parts" marketing or not-marketing? Take your pick.

Oh, I see what you mean. I meant to write: "are essential to the production of the item" (scrap "not").

>Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.

It would only need figures to do that in detail, whereas the article wants to give an overview of where money goes, not go into numbers.

>It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production.

Well, even if I got the wording wrong, I obviously consider "distribution" an essential cost too. It might not be part of production per se, but it's necessary for getting the item to the buyer. Advertisement, much less so.

There are tons of products that are sold without any advertising, but very few sold without distribution (e.g. some products you get directly from their makers' facilities), and it's totally inconvenient for larger items or items manufactured abroad.

>You seem to suffer from the very common bias of "build it and they will come."

Well, if we're to discuss my preferences on the matter, that (non advertising) is how most commerce worked for milenia, and how it's working even now for millions of non-advertised products.

Sure, for people to know and buy specifically an X brand, it takes advertisement.

But that's neither essential to society's functioning, nor beneficial (e.g. allows crappy products to advertise more than good ones, and be preferred over them, and also makes people over-buy with ads as constant reminders for consumption).

As a consumer why should I care whether brand X sells -- except if I'm its owner?

People can still buy whatever they want and need, without advertising. And in that world the best products can get word of mouth and organic growth unobscured by paid advertisement. As for further "discovery" there are always articles and posts about upcoming products, reviews, etc.

> It might not be part of production per se, but it's necessary for getting the item to the buyer. Advertisement, much less so.

Is that so? How do you figure? How do you get an item to a buyer that will never be a buyer because he never heard of your product?

> As a consumer why should I care whether brand X sells -- except if I'm its owner?

Well, thank you for unearthing what I believe is the crux of the question so concisely.

Let me put a twist on your question: As an employee, why should you care if the company you work for sells?

Society is not made of people who are 100% consumers.

People need to sell stuff to make a living. Advertising is a way to sell stuff.

I don't like to pigeonhole people, but I've heard the arguments you're making a million times. Almost invariably, they came from people who'd never had to sell anything themselves to make a living.

Go ahead an try to sell people "crappy products" with advertising. See if they buy. What you'll discover is that people don't buy crappy products. They buy "good enough" products. Sorry people's standards aren't up to yours.

We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.

I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.

>Is that so? How do you figure? How do you get an item to a buyer that will never be a buyer because he never heard of your product?

That's a problem of the seller. Including the seller of bad goods (who has the opportunity to promote them over good stuff via a bigger advertising budget). Not a problem of the buyer or society at large.

Besides, as I said, billions of products are sold every day with zero advertising (all the generic brand items we buy).

>Society is not made of people who are 100% consumers. People need to sell stuff to make a living. Advertising is a way to sell stuff.

Selling stuff without advertising is also a way to sell stuff. We managed to do with 1/20 the advertising just few decades ago, and almost 0 targeted advertisement compared to today.

Besides buying stuff you don't really need just because you're conditioned by 24/7 advertising is not that good for consumers anyway. That's how people end up in debt.

>Go ahead an try to sell people "crappy products" with advertising. See if they buy.

You mean like the $100 billion "bottled water" industry?

http://money.cnn.com/2007/07/27/news/companies/pepsi_coke/ http://www.forbes.com/sites/nadiaarumugam/2012/10/19/nestle-...

Or selling "brandname clothes" to 10-20x markup all around the world similar to quality (and often made in the same factories by the same people) to much cheaper alternatives?

In fact you could take away "crappy products" and replace it with "equal quality products" and my argument would still hold: you can artificially promote the brand who spends more on advertising over the brand who is equally good, and might even be cheaper.

>We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.

Something being "subjective" is not the same as "entirely arbitrary and "anything goes", unless we've lost all sense of purpose and reasoning.

Taste is subjective too, but a home cooked meal with fresh ingredients is better for you than McDonalds and Hot Pockets, and that's a scientifically verifiable fact.

>I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.

Only if by "essential" we only take into account the survival aspect. If we take into account our emotional well being, then arts and entertainment, and occasionally comfort, are essential too to one degree or another.

On the other hand, an always updated smartphone, the latest adidas, a sports car, etc, are not "essential" by any measure. And it's a good idea to reduce them, because their endless production is also environmentally harmful.

While "a few winners and a whole fuckin' lot of losers" applies anywhere, the difference, the article says, is that in this case the losers have a lot more potentially malicious power over consumers, and you never want to be standing next to a desperate dying animal.

It makes sense for an industry to grow if the consumer base is growing. E.g. maybe all these home-cleaning startups make sense because a whole lot more people are now getting their homes professionally cleaned than were a few years ago.

But how can advertising "consumption" increase in the same way? Either people buy more stuff (unlikely, because people already spend all of their money on stuff), or advertisers spend a bigger proportion of their revenue on advertising (which also seems unlikely, because their business models haven't changed). It seems more likely that most successful advertising companies are making their money by cannibalizing the rest of the industry. In which case, why is the industry growing?

I'm not sure I understand exactly what you're asking.

How is which industry growing? If you mean how is ad tech growing, it's growing because digital advertising as a share of total advertising is growing. It's mainly eating up advertising budgets that used to go to newspapers.

You can check out this article linked somewhere else in the thread for more data: http://www.bloomberg.com/bw/articles/2014-03-03/advertisings...

The difference of course being that the transportation market isn't being economically upheld by venture capitalists in hopes of one day cashing in on increased transportation revenue.

First, numbers would be required to see exactly how the market is "economically upheld" by VCs.

Second, I'm not sure if you're being sarcastic, but your example seems poorly chosen. Uber and Lyft live off of venture capital. Even absent Uber/Lyft, the transportation market was/still is one of the most cartelised around.

Third, you could certainly find satisfactory counter-examples where the money "ends up" (money keeps flowing, btw, that's why simplistic diagrams aren't very interesting) in the hands of a larger pool of companies. But if the point of the article is to tell us that social networks is a highly concentrated industry, that's hardly an upvote-worthy revelation.

Judging by the language used in the article, it is apparent that the author has a beef with advertising.

I'm glad he can have a lifestyle business sustained by earned advertising he gets with mentions on Hacker News, but it seems a little disingenuous to pretend that can work for all businesses.

Uber?