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Comment by saxonww | Hacker News Reader

What is the up-front price impact of these ad services? Or, what would a representative 'smart tv' cost if the vendor only needed to accommodate apps and upscaling/pq stuff, and did not need ACR on the TV and the backend infrastructure to support it?

I think we're told the advertising stuff is really beneficial because it makes the products available at a lower price point, to more people. Is this really true?

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My hunch is that price and picture quality make up at least 90% of the purchase criteria for most people, so as a manufacturer you'd better be optimizing primarily for those. Has anybody here ever chosen "smarts" at the expense of either?

That's not what I was asking, but I think I didn't word my question very well.

I think Smart TVs cost more to produce than they could, because they include hardware for automated content recognition and other ad/data-related functions. I was asking what would happen to TV prices if manufacturers did not include this hardware.

And I think I can answer my own question. A few years ago Vizio claimed to earn roughly twice as much from ad sales and data collection versus device sales to consumers [0]. So I guess that even if Vizio could build an otherwise-equivalent TV more cheaply than they do now, if they did not do ad sales and data collection then those TVs would have to cost over 3x more than what they sell for now to maintain margins. Which is not going to happen.

[0]: https://www.theverge.com/2021/11/10/22773073/vizio-acr-adver...

Your math on that is bad. You can't use the profit ratios, you have to look at the revenue. Making a TV costs more than selling ads on one does.

From the earnings report referenced in your linked article (https://investors.vizio.com/news/news-details/2021/VIZIO-HOL...):

Overall revenue: 588.3 M$

Overall profit: 82.9 M$

Overall margin: 14.1%

Ad Revenue: 85.9 M$

Ad Profits: 57.3 M$

Ad margin: 66.7%

and making a simplifying assumption that all non-ad revenue is from making and selling TVs:

TV alone revenue: 502.4 M$

TV alone profit: 25.6 M$

TV alone margin: 5.1%

So, yeah, the margins on ads are much much higher than on making the TV itself.

However, if we were to look at the counterfactual for just making the TV and selling it at the same overall margin without ads (14.1%), the TV would only need to cost (14.1% - 5.1%) = 9% more. Not anywhere close to 3x.

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