> The natural equilibrium for a perfect ad market is for the ad spend to be exactly equal to increase in revenue

Not quite, the equilibrium is when marginal ad spend results in no change to profit. The ad spend at equilibrium should result in increased profit compared to no ad spend.

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I've run Google PPC on-and-off for 20+ years. It's definitely way harder to make money with them now, and the complexity is now through the roof, which makes it way harder for a novice to optimize their campaign. I steer small businesses away because it's too easy to screw up and lose your shirt on PPC without professional help.

Agree, ran a business for years and I’ve seen the slow but steady decline of Google ads.

Ultimately I relied more on returning customer and mouth to mouth recommendations, kept lowering the Google ads budget.

And equally I know many people running non software businesses whose experience is the complete opposite of yours and Google ads has and continues to drive the majority of their revenue.

I expected them to start seeing a hit or significant decline by now, and even told them as such but in what I honestly find surprising, it’s not come to pass.

The question is, why has this post been massively upvoted?

It contains zero useful information. Just somebody struggling with AdWords and they don't know why. Not helpful.

I have to assume the vast majority of upvotes are based on the title alone, assuming it's about Search? A large proportion of top level comments are about Search too. Depressing.

Basically any online shop with decent volume / revenue is going to be spending 100s of thousands if not millions of dollars a month on Google ads. (Not just Google Ads, also Facebook ads etc.)

It used to be possible to get by with "organic" search traffic and some SEO... but google search looked completely different back then. Now when you look for something it's an AI box, products (google merchant) ad box, ad (promoted results) box, ... then there's a couple of (like two) results that are "organic" (whatever that means these days) and that's it. And we all know that when you want to hide something, you put it on the second page of google search results. So the space for doing online business "ad free" has been squeezed out over time.

And the K shaped economy is totally true in this ecomm space. These days say 15% of your revenue gets eaten by ads, but you also have say 50% higher revenue overall. At some point it becomes a margin game and the bigger players will start squeezing out the smaller ones because the biggers ones can operate on tighter margins (making up the difference with volume) which the smaller ones simply can't afford. The difference in operating costs of an eshop that sells 10000 items a month is not that different than that of an eshop selling 100000 items a month (i.e. not 10x, more like 2-3x). But selling 10x items gives you the volume you need to be able to lower your margins and put the difference into ads.

BTW all of this is handled by professional online marketing people with increasingly widespread use of AI so there's no room for the small players to make it big while not being optimized to the gills. This is why most small advertisers are seeing small or negative returns while Google and Meta are making tens if not hundreds of billions in ad revenue... The ads work, but the amounts you need to spend and the optimization level you need to have is in a completely different galaxy than it was 10 years ago.

Either Claude or OpenAI, going by all the ads I see.