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Long-term revenue in advertising is causally tied to the return an advertiser gets today. The easiest way to raise that return is to shrink the denominator, meaning lower prices, though in modern auctions price is an output rather than an input. Delivering return now builds compounding growth through retention and larger budgets, much like net revenue retention at a SaaS company.
Teams at Snap and Discord, and at some companies advised on ads, used the phrase long-term greedy to hold that line. Thinking long term gets truly hard when a public company is missing numbers or a layoff looms, and a shared phrase gave cover for it. Giving value away today was never charity: advertisers who do well come back tomorrow with bigger budgets.
Why is price an output in ad auctions?
Advertisers submit bids, budgets, and targeting, and the auction decides who wins and what each winner pays. Google's AdWords moved to a generalized second-price auction in 2002, in which the winner pays just enough to beat the next bidder. Because the price depends on competing bids and on quality scores, no one sets it directly. Meta and other platforms use auctions of the same kind.
How can existing customers drive SaaS growth?
Net revenue retention above 100 percent means existing customers spend more over a year than they did before, even after counting those who left. A company in that position grows without selling to a single new customer. Investors watch the figure closely. Snowflake's 2020 IPO filing reported net revenue retention of 158 percent.
How do advertisers decide to raise budgets?
Performance advertisers typically spend more on a channel while its measured return beats their target and cut spending when it falls below. They track results with attribution tools and with incrementality tests. An incrementality test compares a group shown ads with a holdout group that is not shown any. The difference between the two groups is the return that the ads caused.
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