Even if it seems like everyone is saying this, it's just statistically not true / in the aggregate, at least in the context of direct online ads. Otherwise the direct ad industry would be totally dead (ad performance is measured to death by companies).
Conversion (getting someone to purchase) at scale with ads is not so simple as person sees ad, clicks, and buys. There are many steps along the funnel and sometimes ads can be used in concert with other channels (influencer content, sponsored news articles, etc). Within direct ads you typically have multiple steps depending on how cold or warm (e.g. have they seen or interacted with your content previously) the lead is when viewing the ad and you tailor the ad content accordingly to try to keep pushing the person down the funnel.
Generally if you know your customer persona well and have good so-called product-market-fit, then (1) you will be able to build a funnel that works at scale. So then (2) the question is does the cost to convert a customer / CAC fit within the profit margin, which is much more difficult to unpack.
However, it's worth keeping in mind that digital ad costs are essentially invented by the ad platform. There is a market-type of force. If digital ads become less effective and the CAC goes too high across an industry/sector, the platform may be forced to reduce the cost to deliver ads if the channel just doesn't make enough financial sense for enough businesses.
All this is to say, the system does/can work. Tends to work better for large established companies or startups with lots of funding. In general, not a suggested approach as a first channel for a small startup/small business. Building up effective funnels is incredibly expensive and takes a lot of time in my depressing personal experience.
Would you say that it indeed means that if ads are banned, the money to support news, tv, youtube, ... will still be there?
I would think that in fact, there would be even more money for news, tv, youtube, ... as the ad company will not take their cut of the money.
Edit:
Now that I'm thinking about it, ad may also work in directing expenses that would have been done anyway. For example, if I have 10 companies A, B, C, D, ... all selling the same kind of product, then it is possible that 1000 persons that want that kind of product will all spend 100£, shared between the 10 companies. So, company A will receive 10000£. But if company A does some advertisement for a cost of 5000£, maybe people will still spend the same amount, but for their brand in majority, so the 1000 persons will still spend the same 100£, but company A will receive 20000£ because some people will buy A instead of B, C, D, ...
I'd say advertising is in good portion what creates the "want" instead of a "need". If we were to rebalance the amount of purchases driven by needs instead of wants, we'd overall reduce the total amount of purchases. Each of them would also not have the extra cost of advertising included in their price.
We’d also benefit from not having unnecessary “wants” generated within us, which so often comes at the cost of our self esteem. So many ads prey on your fear of being too ugly, too lonely, too poor, and they amplify that fear then stick a car on screen masquerading as the solution to these manufactured problems.
Conversion (getting someone to purchase) at scale with ads is not so simple as person sees ad, clicks, and buys. There are many steps along the funnel and sometimes ads can be used in concert with other channels (influencer content, sponsored news articles, etc). Within direct ads you typically have multiple steps depending on how cold or warm (e.g. have they seen or interacted with your content previously) the lead is when viewing the ad and you tailor the ad content accordingly to try to keep pushing the person down the funnel.
Generally if you know your customer persona well and have good so-called product-market-fit, then (1) you will be able to build a funnel that works at scale. So then (2) the question is does the cost to convert a customer / CAC fit within the profit margin, which is much more difficult to unpack.
However, it's worth keeping in mind that digital ad costs are essentially invented by the ad platform. There is a market-type of force. If digital ads become less effective and the CAC goes too high across an industry/sector, the platform may be forced to reduce the cost to deliver ads if the channel just doesn't make enough financial sense for enough businesses.
All this is to say, the system does/can work. Tends to work better for large established companies or startups with lots of funding. In general, not a suggested approach as a first channel for a small startup/small business. Building up effective funnels is incredibly expensive and takes a lot of time in my depressing personal experience.