“I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today.”

— Mark Zuckerberg

That’s the quote from the Q1 2025 Meta earnings call. You could write that quote off as naive or just bombastic, but at least Zuck is connecting AI to something that’s actually measurable: GDP. And it is true that big technological changes sometimes alter the mix of GDP.

It got me thinking: given that Zuckerberg is talking about something that is measurable on a macro scale, how exactly might one validate or invalidate what he’s suggesting?

If you read to the end of this post, you’ll find that there are indeed some threads to pull on. But first we’ll start with a history lesson.

The Economic History of Advertising

Historically (say, back to the 1920s), advertising has accounted for around 2% of US GDP. It’s notably consistent, given that AI isn’t the first wave of change to sweep through the advertising and media world during the last hundred years.

The 1920s saw the explosion of radio, the first real-time broadcast media in all of human history (seriously, think about that). The 1920s and 30s saw the emergence of “talkies”—movies with sound. The 1950s saw the explosion of television. The 1970s and 80s saw the explosion of desktop computing. The 1990s and 2000s saw the explosion of digital advertising and mobile devices.

It’s been a busy century!

But advertising dates back further than the 1920s. Advertising as we tend to know it emerged in the 1800s.

But why did it emerge? Why does advertising even exist? These questions are more than just navel-gazing if we are to predict how AI might fundamentally alter advertising’s role in the economy (as measured by its share of GDP).

Why Advertising Exists

In the 1800s, the Industrial Revolution brought sweeping change to the US economy.

With industrialization, two things happened:

1. Supply exploded: factories could now produce cheaper goods far in excess of a pre-industrialized “natural” state of demand. Instead of a local cobbler hand-making a few shoes for his fellow townspeople, there was now a shoe factory that could inexpensively produce hundreds of shoes a day.

2. Demand exploded: an industrialized economy generates surpluses beyond subsistence needs. More and more everyday people find themselves with surplus time and money. For the first time in history, “discretionary income” becomes a thing.

Factories are also expensive to build. Industrialized firms were under pressure to earn back investment capital and sell inventories of finished goods that piled up fast.

Enter advertising: a means for industrialized producers of goods and services to “artificially” generate demand, pitch their wares to more potential buyers at once, and accelerate sales (and minimize inventory turnover times).

The way I see it, advertising is an inevitable byproduct of these four factors:

1. An industrialized economy

2. Free-market capitalism

3. Free speech

4. Mass media

Advertising can be viewed as one of several mechanisms by which excess goods and services can be allocated among people and businesses that have excess money to spend and can exercise choice in how they spend it.

Advertising is an economic “matching” mechanism. But it’s not the only one.

How the Economy Helps Supply Meet Demand

The US economy is incredibly effective at matching supply (sellers) with demand (buyers). It has several mechanisms that aid in this process.

And when I say “supply” and “demand” in this context, I am generally thinking of finished goods and services, not raw materials.

I wanted to think of all the related mechanisms that could be measured or estimated as shares of GDP. Here the six tangible mechanisms I came up with:

1. Advertising—making demand aware of supply

2. Credit and finance—bridging the gap between the desire for goods and services and the immediate availability of funds

3. Distribution and retail—giving demand somewhere to go and buy supply; ensuring supply is feasibly and conveniently reachable by demand (which could also happen via delivery)

4. Trade—the ability for supply to move freely across regions, borders, and institutions in order to meet demand

5. Mass media, communication, and information dissemination—forms of communication or published material whereby demand can readily gather information on supply or consummate transactions (this would be measurable via industries like entertainment and publishing)

6. Sales and customer service—helping demand assimilate information, consider options, and make a purchase

(If you’re wondering why I left out Markets, it’s because markets and exchanges such as stock exchanges function as “matching” mechanisms for capital or raw materials, not finished goods. When you’re hungry you buy bacon from a supermarket, not pork belly futures from an exchange in Chicago.)

Why Is Advertising So Stable As A Percent of GDP?

If there are actually six different ways to help supply and demand come together, then why has advertising been so stable for last 100 years? Why does it hover around 2% of GDP?

If Mark Zuckerberg thinks Meta’s AI-based ad platforms will boost that number to 3% or 4% or beyond, it makes sense to understand why it’s been so stable up til now.

There are a lot of reasons, but these are the three that are most irreducible:

1. There is a human limit on how much advertising can be absorbed or even noticed (consciously or otherwise). We don’t know exactly what this limit is, but it certainly does exist, and it puts a constraint on advertising.

2. At a company level, there are diminishing returns beyond certain levels of ad spend where there is simply no more latent demand left to unlock, or defending against competition becomes more expensive (on a net, all-in basis) than doing nothing. (This would also equate to “buyer burnout” where buyers simply cannot and will not buy everything that’s advertised to them, rendering most ads useless past a certain point)

3. Mass media has a finite “carrying capacity” for ad messages. Firstly, there are only so many hours of media consumption in a day, placing some upper limit on just how much media can viably exist. Secondly, that media can only contain so many ad messages before it becomes unsatisfying to people who then turn away from overly ad-saturated media.

These three together represent the buyers, the sellers, and mass media communication throughput. All three components have inherent limits which together constrain advertising to around 2% of GDP.

Anything more than 2% (roughly, depending on the year) would essentially be a waste of capital, as it wouldn’t spark any incremental macro demand. Anything less would be wasteful elsewhere in the economy, as macro demand would fail to reach its full potential.

Could AI Shift the Balance?

Before we continue, let’s remember that share of GDP is a zero-sum game. Any increase in advertising’s share of GDP must come at the expense of something else.

This is a common fallacy that the “performance advertising” crowd falls into. There is an assumption that intrinsic improvements to ad effectiveness (e.g., hyper-targeted, zero-waste ads) will have some extrinsic effect too. This is far from true. Advertising has been getting steadily more efficient and innovative for the last 100 years and yet these gains haven’t caused any extrinsic effects where other parts of the economy have shrunk in favor of a bigger ad industry. This is why I pointed out three inherent macro limitations on advertising. More efficiency or “effectiveness” doesn’t change these limitations.

We start to see how Zuckerberg may be naive in his thinking, but let’s press on.

If AI is going to shift the balance and grow the ad industry on a relative basis, where will it take GDP from? That is the question we must answer to see if there is any substance to Zuckerberg’s statement.

This is why I laid out the six macroeconomic, GDP-measurable mechanisms that help “match” supply and demand for finished goods and services:

1. Advertising

2. Credit and finance

3. Distribution and retail

4. Trade

5. Mass media, communication, and information dissemination

6. Sales and customer service

We can, of course, disregard the first one.

So which of the other five might lose share of GDP in a world where Mark Zuckerberg is right? Which ones might shrink on a relative basis due to AI? (and keep in mind that my personal hope is that AI helps grow the economy on an absolute basis, so a component might shrink on a relative basis but still manage to grow on an absolute basis)

Credit and finance — NOPE

I’m not seeing a connection. Yes, AI will impact all five components and make things generally “better” but I can’t begin to think of why AI would cause Advertising to grow at the expense of Credit and Finance.

Distribution and retail — NOPE

Much of distribution and retail happen in the physical world, so it’s difficult for me to imagine that AI (which exists digitally and has no physical presence…yet) would cause Advertising to grow at the expense of Distribution and Retail. This really wouldn’t make much sense, as the economy would be directing capital to driving more demand (via Advertising) to fewer places and ways to buy stuff (Distribution and Retail).

Trade — NOPE

As with Distribution and Retail, Trade is very tied to the physical world, and so it’s very difficult to imagine some new trade-off where AI-based Advertising wins share of GDP from Trade.

Mass media, communication, and information dissemination — MAYBE?

This one where there is maybe a connection. There is an argument to be made that the cost of content production by the entertainment industry and publishers is set to plummet because of AI-based efficiencies. Meanwhile, the amount of available human attention will remain essentially fixed. Could the “savings” from content production be absorbed by Advertising? Why exactly would that be? I actually couldn’t say.

One thing to research (maybe such research exists) is the historical share of GDP from entertainment, publishing, and telecommunications over the last 100 years (or whatever’s available). AI isn’t the first technology to revolutionize content production.

Sales and customer service — MAYBE?

This is another one where there is maybe a connection. There are many front-line sales and customer service jobs that will plausibly be automated over the next few years (5? 10? 20?) due to AI. I say “plausibly” because this is far from certain and frankly I hope all us keyboard jockeys still have jobs in 2030.

Given the “last mile” role that these jobs play in converting latent demand into sales transactions, there is a close connection to the role of Advertising.

However, these job roles usually encounter demand that is very close to transacting, unlike advertising which seeks to generate new demand sometimes out of nothing (I present as evidence the invention of bottled water in the 1990s).

Where Zuck Might Turn Out To Be Right (By Cheating A Bit)

Out of our original six, we’ve set aside three components as being generally unrelated for purposes of Zuckerberg’s statement. So let’s assume that in an AI future, there is some logical (if ill-defined) connection between these three remaining components:

1. Advertising

2. Mass media, communication, and information dissemination

3. Sales and customer service

AI means that Meta can essentially take all three under its own roof and incorporate them into its ad platform. Meta can use AI to create the entertainment content that the ads run alongside. Meta can sell ad space and make the ads themselves using AI. And Meta can provide last-mile “agentic” tools to advertisers for sales and customer support.

Meta could bucket all three together as “advertising,” and that group may appear to grow its share of GDP. This, of course, will be because Meta is now aggregating things that used to be discrete, and so the growth in share of GDP is essentially an illusion.

Maybe this is what Zuckerberg meant anyway..

This kind of “vertical integration” has already been the playbook of Amazon and Google to some extent; to package direct-response ads and brand ads in contrived, often counter-intuitive ways. The shift to digital unlocked tremendous new economies of scale and opportunities for vertical integration and it’s reasonable to expect that AI will only magnify this.

Too Early To Say

At this point, things are unconclusive. After pondering this for several days, I can’t think of a clear causal relationship whereby AI causes Advertising to grow at the expense of other components of the economy. The best I could come up with was a cynical scenario where multiple things get conveniently reclassified as “advertising,” but the cynical scenarios are always the ones people miss when pondering the possibilities of miraculous new technologies, so I’ll probably turn out to have been right.