The Slow Death of Advertising
Why "Free With Ads" Is a Strategic Mistake
OpenAI recently announced that it is introducing advertising to its search results. They promise that ads won’t influence results and that no user data will be shared with advertisers. If we take them at their word, what they’ve created is pure noise injection into a product people use precisely because it cuts through the noise.
We’ve seen this movie before. It doesn’t end well.
The Google Playbook
When Google launched in the late 1990s, its clean interface was a revelation. Competitors like AltaVista and Yahoo had become cluttered portals, stuffed with banner ads, pop-ups, and promotional content. Google offered something radical: a simple search box and relevant results. Users flocked to it precisely because it respected their attention.
Then came the advertising. Slowly at first. Text ads, clearly labelled, separated from organic results. Google insisted advertising would never compromise the quality of its results. The company’s founders even wrote in their original academic paper that “advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of consumers.” Google would later adopt the motto “Don’t be evil.”
They were right about the bias. They just didn’t realize they were describing their own future.
Today, Google search results are dominated by paid placements. The first screen of results for many commercial queries contains nothing but advertisements. Organic search engine optimization has become nearly impossible for small players unless they’re willing to pay for placement. Users have learned to scroll past the first several results automatically, knowing they’re looking at whoever paid the most rather than whoever answers their question best.
The degradation happened gradually, which made it easy to rationalize each step. A few more ads here. A slightly less clear distinction between paid and organic there. Each change was small. The cumulative effect transformed a tool built on relevance into a tool optimized for revenue extraction.
In 2018, Google quietly removed “Don’t be evil” from the preface of its code of conduct.
OpenAI is stepping onto the same path. The destination is predictable.
The Economics of Attention Extraction
Think about what advertising actually does. At its core, it’s “rent seeking”. Someone pays to interrupt your attention, inserting their message between you and what you’re trying to accomplish. The advertiser gets access to your eyeballs, the platform collects the toll, and you get... distraction.
This isn’t value creation. Value creation means making something more useful, more efficient, more effective. Advertising does the opposite. It makes the experience worse in exchange for revenue extraction. The only reason platforms can charge for advertising is because they’ve assembled an audience. They’re not creating value. They’re monetizing access.
Some argue that advertising-supported products democratize access, making services available to people who couldn’t otherwise afford them. This framing obscures what’s really happening. Users aren’t getting something for free. They’re paying with attention, with degraded experience, and with the cognitive load of constantly filtering noise. As platforms chase diminishing returns with increasingly aggressive tactics, this cost compounds. The “democratization” argument treats attention as worthless. It isn’t.
The Incentive Problem
When you build a business on advertising revenue, you create a fundamental misalignment between your stated mission and your actual incentives. Your users become the product. Advertisers become the real customers. Every product decision must balance what serves users against what maximizes advertising revenue.
This tension corrupts everything it touches. Social media platforms optimize for engagement through provocation rather than well-being because engaged users see more ads. News organizations chase clicks over quality because page views drive revenue. Search engines must constantly resist the temptation to let advertising influence results because their entire business depends on keeping advertisers happy.
Google’s evolution proves that this resistance eventually fails. No company sets out to degrade its product. But when advertising revenue grows large enough, it becomes the gravitational centre of the business. Everything else bends toward it.
OpenAI claims its advertising won’t influence results. Maybe that’s true today. But incentives shape behaviour over time. When a significant portion of your revenue comes from advertisers, it becomes harder to make decisions that might reduce advertising effectiveness. Google’s founders knew this. They warned against it. Then they did it anyway.
The Arms Race You Can’t Win
Here’s another problem with advertising-based business models: your most valuable users have already opted out, and showing them ads actively drives them away.
I run ad-blockers, DNS filters, and privacy extensions that mute the vast majority of advertising across every platform I use. I’m not unusual. Globally, ad-blocker usage continues to climb, with some estimates suggesting over 40% of internet users now use some form of ad-blocking technology. Among tech-savvy users, the percentage is far higher.
This creates a troubling dynamic. The users who block ads tend to be more technically sophisticated, more educated, and often more affluent. They’re precisely the audience advertisers most want to reach, and precisely the users most likely to pay for a premium product. Yet they’ve built walls specifically designed to keep advertising out.
The damage goes beyond lost impressions. When OpenAI introduces advertising to its free tier, it sends a signal to these users: we see you as a resource to be harvested rather than a customer to be earned. That signal pushes potential paying customers toward competitors who respect their attention. You’re not just failing to monetize them with ads. You’re actively repelling the users most likely to convert to paid subscriptions.
What remains is an increasingly adversarial arms race. Platforms develop more aggressive ad delivery. Users deploy more sophisticated blocking. Platforms try to detect blockers and restrict access. Users find workarounds. Each escalation degrades the experience and builds resentment rather than loyalty.
Building a business on advertising means building on a foundation that your most valuable users are actively undermining. Every year, the tools to block advertising get better, more accessible, and more widely adopted. You’re betting your revenue on a delivery mechanism that an increasing share of your audience refuses to accept.
The Free Tier Fallacy
Many companies justify advertising by arguing that it supports a free tier, which drives user growth, which eventually converts to paying customers. This sounds reasonable. It’s also often wrong.
Free users acquired through an advertising-supported experience are different from users who experience your product at its best. They’ve learned that your product includes distractions. They’ve experienced a degraded version of what you offer. When you ask them to pay, you’re asking them to upgrade from mediocre to good, rather than from good to great.
Compare this to the freemium model done better. Spotify’s free tier includes ads, but it also has limitations that make the paid experience genuinely better: shuffle-only playback, lower audio quality, and no offline listening. The ads aren’t the primary difference between free and paid. The product capabilities are. This gives users a taste of value rather than a dose of friction.
When ad removal is the only meaningful difference between your free and paid tiers, you’ve essentially admitted that advertising is the problem. You’re charging users to escape an experience you deliberately made worse. That’s not a value proposition. That’s a ransom note.
The smart approach is to make the free tier a showcase of your core value proposition, limited by quantity rather than quality. Give users fewer queries, less storage, or restricted features. But make every interaction excellent. Let them experience what paying customers experience, just less of it. This creates a desire for more of something good rather than relief from something annoying.
What Advertising Really Signals
OpenAI built its reputation on providing useful, focused responses. Adding advertising means deliberately degrading that service. Sure, they need a business model that works. But choosing advertising reveals something important about their priorities.
The strategic error runs deeper than lost revenue. When you treat non-paying users as resources to extract value from rather than customers to convert, you optimize for short-term revenue at the cost of long-term brand and loyalty. Every ad impression is a small withdrawal from your trust account. Over time, those withdrawals compound.
There’s nothing wrong with charging for value. Subscription models work because they align incentives. You pay, the company delivers value, everyone wins. Advertising breaks that alignment. The customer becomes the product. The advertiser becomes the customer. The original user gets a noisier, less useful experience.
When a company chooses advertising over direct monetization, pay attention. It tells you who they think their real customer is.
A Better Path Forward
The most sustainable technology businesses are built on straightforward value exchange. You create something useful. People pay for it. You use that revenue to make it more useful. They continue paying. This virtuous cycle aligns everyone’s interests and creates compounding value over time.
Advertising-based models look attractive because they offer faster growth. You can acquire users without asking them to pay. You can scale without friction. But this growth often proves illusory. Users acquired cheaply tend to be less engaged and less loyal. Revenue per user tends to be lower. The constant pressure to serve advertisers pulls the product away from serving users.
Meanwhile, the technical infrastructure to avoid advertising entirely gets better every year. Browser extensions, network-level filtering, privacy-focused alternatives to mainstream services. The advertising model depends on capturing attention, and users are getting better at protecting theirs.
For startups considering their business model, the lesson is clear. If you’ve built something genuinely valuable, find a way to charge for it. Use free tiers strategically to demonstrate value, not to maximize reach through degradation. Resist the temptation of advertising revenue, no matter how appealing it seems in the short term.
Google once promised that advertising would never compromise search quality. OpenAI is making the same promise today. History suggests we know how this ends.
The companies that endure are the ones that never forget who their real customer is. It’s the person using the product, not the person paying to interrupt them.
Davender’s passion is to guide innovative entrepreneurs in developing the clarity, commitment, confidence and courage to enter, engage and lead their markets in a world that refuses to hold still, by thinking strategically and acting tactically.
Find out more at https://coachdavender.substack.com/about
and https://linkedin.com/in/coachdavender.