It is sort of crazy. Consider two products A and B. They are identical, except that A is more expensive and has advertising. B is cheaper, but has no advertising. Which one wins? A because nobody knows that B even exists.

However, everybody is worse off. Consumers got advertising displayed to them that they didn't want to see and they got to pay more for the privilege. The manufacturer of B lost totally. Even the manufacturer of A is worse off because without the advertising, he could have split the difference with the consumer and gotten a larger profit.

The only winner is the advertising company who is making something nobody wants.

That is totally inefficient. Can it be fixed somehow?

Consider if there were no advertising; the result would likely be that A and B would both lose because nobody would know they exist.

So it's not completely inefficient. How much would you pay to not have to look around who knows where for things that you want?

"Consider if there were no advertising; the result would likely be that A and B would both lose because nobody would know they exist."

This may have been true in the past, but this is 2010... I constantly find out about products (and other things, and people, etc) that I didn't know existed, through other means than advertisements. Without paying for it, in fact; people put reviews about ANYTHING online nowadays.

search engines provide some of the answer, but search engines have an upper bound to their effectiveness. If a search engine were more effective than an ad, people won't click on search engine ads, and the search engine wouldn't make any money.

I think what we really need is another business model for search engines.

Would you be willing to pay to remove the ads from a website? Pay for each show you watch without ads? Pay more for an ad free newspaper? If not, you shouldn't be complaining about ads (even though they are pretty obnoxious). The ads support the content that you consume. Or do you have a better way to compensate the people that create this content?

I knew somebody would bring this up. :-)

What many people don't realize is that in the current situation, instead of paying (more) for the show/newspaper/etc, we pay for advertisements instead. When a business spends $$$ to promote their product, that money didn't fall out of the air; it's part of the price of the product they sell (much like some part of it is production cost, etc). So whenever somebody buys product X, they're also paying (a tiny fraction) for that product's advertisement.

So no, I would not be willing to pay to remove the ads from a website, since I am already paying to put them on there in the first place.

Personally, I would much rather that the price of all products would be a bit lower (i.e. minus any advertisement costs), and pay more for content that I actually want to see/watch/read, without obnoxious advertisements and commercials.

Admittedly, the current situation isn't anything like this, so if it were to happen, maybe I would actually regret it, or maybe it would have unforeseen drawbacks. (As it is, many people seem to be unwilling to pay for content...) It does seem like a fairer system though, that doesn't force consumers to read/watch things they don't want to.

Advertising would annoy me so much less if I perceived products as less expensive when they featured advertising. For example I feel incredibly ripped off that films have increasingly long rolls of trailers, ads, and commercials that run before them but continue to increase in price.

That's why I want to create an opt-in advertising revenue based pizza place. When you place an order you are offered the choice between paying full price and getting discounts based on how much advertising material comes with your pizza. I figure you could get a stack of coupons, Chinese food menus, brochures, car insurance fliers, and magazines that would roughly equal the cost of a pizza. Free pizza.