The direct-to-consumer model that relied on heavy ad spend is broken. Apple's iOS 14 update made ad targeting ineffective by removing access to third-party data, while Shopify flooded the market with competitors, making customer acquisition costs unsustainable.

Ben Thompson argues AI apps should adopt a Meta-style advertising model based on deep user understanding, rather than Google-style contextual ads tied to prompts. This avoids conflicts of interest and surfaces products users didn't know they needed, creating more value for both users and advertisers.

The complex ad tech landscape can be boiled down to three viable business models. A company must either 1) own a first-party surface with coveted users (Google), 2) become the best at delivering a specific, measurable result (Applovin), or 3) be the exclusive demand aggregator for large advertisers (The Trade Desk).

As platforms like Google consume media traffic, brands can no longer rely on placing ads next to content. They must become the content destination themselves. The strategy is to build a direct relationship, often via an app, winning "the battle of the storefront on your phone" and reducing dependency on paid channels.

Despite TikTok's reach, Facebook's ad platform remains superior for many DTC brands. Its ad product is more refined, its older demographic has higher buying propensity, and its historical efficiency means that even mediocre ad creative can be profitable, unlike newer platforms.

In the past, Facebook ads were so underpriced that even mediocre creative could generate a positive ROAS through sheer volume. As platform costs have risen, that financial arbitrage opportunity has disappeared, forcing marketers to rely on high-quality creative as the primary driver of performance.

Meta's core moat is its ability to solve the classic advertiser's dilemma: knowing which half of their ad spend works. By providing granular data on impressions, conversions, and ROI, it created what Pat Dorsey called the perfect advertising platform.

By mandating its own WebKit engine and banning more capable alternatives on iOS, Apple prevents web applications from competing effectively with native apps, pushing developers toward its lucrative App Store ecosystem.

OpenAI's platform strategy, which centralizes app distribution through ChatGPT, mirrors Apple's iOS model. This creates a 'walled garden' that could follow Cory Doctorow's 'inshittification' pattern: initially benefiting users, then locking them in, and finally exploiting them once they cannot easily leave the ecosystem.