| >It seems like you're saying a fixed percentage of a person's spending is going to the websites they visit, but why would that be the case? Very roughly yes. Some percentage of a typical company's revenues is spent on ads, and revenues from each customer are obviously proportional to that customer's spending. It's the same thing (leaving aside sales taxes). Companies try to maximise the effectiveness of their advertising campaigns. The effectiveness depends on how many people actually go ahead and buy the product relative to how much the ads cost. If running ads on Youtube is less effective, then ads prices on Youtube would have to fall and Youtube would earn less. Let's say only extremely poor people were using Youtube. None of them would ever buy a high-end smartphone. How much would high-end smartphone makers pay to Youtube for the honor of running ads there? The answer is zero. Now let's say there are two groups of Youtube users. One group never buys a high-end smartphone. The other group buys one every year. Now it makes sense for smartphone makers to fund Youtube through their ads, but only the group actually buying smartphones pays for it. So the rich group effectively subsidises the poor group's Youtube usage. I have chosen an extreme and unrealistic example to explain the principle. In reality, there will be a mix of products. The cheapest ones will be bought by almost everybody in roughly the same quantities, and some luxury goods are never advertised on Youtube at all. But the relationship between per person spending and that person's contribution to ad funding for the sites they visit still roughly holds. This is what I think. I'm not an economist though. There are certainly many open questions as to how strong this redistribution effect is and what the effect of ad targeting is. But the claim that there is no such redistribution effect at all seems extremely implausible to me. |