What is the point of advertising?

At a recent member event for our Internet 2025 living issue, a perspective about advertising opened up a new line of questions that we can’t ignore. The business side of advertising is stuck in conventional conversations about channels and inventory, as if the whole internet is not about to dramatically change. As one guest put it: What is the point of advertising in a world full of AI agents?

Outside the cold rain was falling sideways in a blustery New York City. Inside, tucked away in a back room at The Standard High Line, the hot discourse was flowing in all directions. Our members and guests were lunching with The New Yorker’s Kyle Chayka to unpack his new book Filterworld.

Kyle’s book is a critique of the cultural implications of algorithmic recommendation engines. As he puts it, the feeds auto-populate a perpetual flow of easy content recommendations which is flattening, or homogenizing, the taste of consumers as much as the culture that is being produced. From his point of view, this is one of the hidden costs of these free platforms.

Since its release in January, Kyle has been promoting this book on all of the popular tech podcasts. From our point of view, this book, topic, and perspective was a no-brainer; everyone has a strong opinion about their algorithms. In this event, our people came in pre-loaded with their own provocations.

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Algorithms and advertising

The underlying problem with the algorithmic feeds is the ad model. The feeds are designed to lure enough consumer attention to deliver ads that pay for access to that attention. This creates an incentive to reduce friction – make it easy and enjoyable for people to stay on the platform and consume.

Here is that system in practice: “There are some indulgences that I give myself and Instagram is one of them now. I limit myself to about an hour max of just escapism.”

Targeting and tracking

From Kyle’s point of view, the cost of this model will bend the curve of cultural production towards blandness. From the point of view of industry leaders at the table, the model of display advertising is on an unsustainable course for media as well as the platforms themselves. We heard two problems come up at lunch.

The first is targeting: the granularity of the audience segments makes it impossible to reach broad segments at scale. Don’t take our word for it, look at this quote from a platform executive in charge of influencer marketing: “I’ve seen so many briefs that say target audience, Gen Z. It doesn't exist. It’s impossible to reach one single group, especially with the diversification of platforms, content, communities, and all these things. I think that's one of the challenges that I don't think we’ve figured out yet.”

The first problem leads to the second problem, which in our mind, is a bigger conversation. The best way to summarize it is to quote an agency executive at the table: “The time I spend with clients is still very much focused on channel and inventory.” The point of this observation is that media clients are still focused only on the diminishing returns of a model that won’t work.

Heads in the sand.

Change the channel?

This is where we need to convene more discourse. The solutions to this problem are theoretical and varied. We heard one initial concept floated at the table:

“If you reduce your dependency on actual advertising, but start thinking about other ways to actually make money from the communities you create, do you then work with a direct marketer with an ability not just say ‘here’s advertising,’ but can also facilitate experiences and facilitate commerce? Those models begin to be interesting.”

As we heard earlier, this is a different business conversation than the conventional one about channels and inventory. “Channel and inventory don’t apply to networks and community. So you’re talking about different ways of budgeting, organizing, and financing.”

What’s next?

We have to sort this out together. Stay tuned for follow up posts, conversations, and events dedicated to this question. We didn’t even unpack the other elements that came up at the table. Here is a quick one: if AI agents are going to provide online services for users, what is the actual role of advertising? Do we envision ads being made for AI agents? It seems to underscore the value of community and experiences, and the depreciated value of display ads even more. Stay tuned here for more follow-ups.

Are you interested in being part of the discourse, and contributing to this and future Living Issues? Is there a perspective you think we might be missing? Tell us what you think.