The Internet Economy
&gt; The hope is that this will not only create compelling user experiences, but also unlock access to the tens of billions of ad dollars that are currently spent on TV.<p>This is simply not gonna happen. I used to think that as well -- until I did a stint working with one of the biggest sellers of TV ad inventory.<p>It&#x27;s a completely different game. TV ads are bought and sold in enormous, packaged deals. There&#x27;s very, very little transparency in the TV advertising game. Everyone on both sides knows Nielsen ratings are total crap with very little bearing on reality, but they trust each other even less, so Nielsen it is. All anyone knows is that TV is great for brand advertising, and you can get a rough estimate of how many eyeballs saw your ad on a given night. With brand advertising, all you care about is the number of brand impressions you make on your target consumer in a given month to keep the brand value fresh in their mind (i.e. &quot;Ford trucks are Built Ford Tough&quot;).<p>TV ads are sold based on personal relationships between reps  at advertisers and publishers. That&#x27;s it. The ad rates you can get for ads sold through traditional TV sales channels are 30-40% higher than digital ads on a per-impression basis. The reason for that? The buyers are more senior, have larger budgets, and less accountability.<p>That TV ad money is literally just disappearing as audiences scatter to various media platforms -- these older, more senior ad executives don&#x27;t understand digital so it&#x27;s left to the younger guys who have a much larger culture of accountability and measuring by the metrics. The Internet has created so many opportunities for advertising and so much transparency around pricing for those ads that nobody can justify TV-like rates for digital ad impressions.<p>Think of the things that advertise on TV: they&#x27;re nearly all high-value goods or services that need to establish a brand reputation. They can (and do) do that online for a lot less per impression, and they don&#x27;t need to run an equivalent dollar amount of impressions because the online publishing space has created so much inventory they can&#x27;t even sell it all (creating so-called &quot;remnant&quot; inventory filled programmatically by algorithms at rock-bottom CPMs). But only the &quot;premium&quot; publishers (i.e. anyone with a non-advertising revenue stream like New York Times) can afford to limit their inventory in such a way as to demand higher CPMs: everyone else is in a race to the bottom just to survive.<p>But it&#x27;s gotten to a point where ad rates are so low that for premium publishers able to succeed with a subscription model, they may not even be a material amount of money. See: Netflix, Amazon Prime Video, etc. In 5 or 10 years, we may get to a point where all &quot;premium&quot; video services are delivered through a subscription model without advertising. That TV money has to go elsewhere, but it&#x27;s likely to be spent on non-digital forms of advertising (e.g. outdoor&#x2F;billboards, corporate sponsorships, product placement, etc.)<p>tldr: Online will never see the type of ad money that TV generated because the balance of power has shifted from the publishers to the advertisers. The next generation of ad buyers will be much more savvy, and the digital publishers have created far too much ad inventory. There&#x27;s a tragedy of the commons situation with publishers that will continue to drive down CPMs while inventory increases, because if they don&#x27;t then they will die. Because of low ad rates, it&#x27;s not really worth it for premium video publishers to compromise their user experience by subjecting their paying customers to advertising -- thus driving the ad money from the big brands out of premium video content and on to other, non-digital forms of brand advertising.