a16z: AI Shopping Agents Could End the Era of Online Ads

• AI agents are predicted to replace traditional online advertising by shifting the internet's economic model from human distraction to autonomous efficiency.
• The global online advertising market, estimated to reach $291 billion by 2025, faces a fundamental threat as Large Language Models (LLMs) do not respond to visual advertisements.
• Experts suggest that by 2026, the current advertising-based internet model will decline in favor of open agentic commerce powered by new blockchain protocols.

The Shift from Distraction to Automation

According to Sam Ragsdale, co-founder of Merit Systems and contributor to a16z Crypto, the business model that has defined the internet from 1997 to 2024 is nearing its end. This model relied on "distraction," where platforms monetized the partial attention of human users through advertisements. Ragsdale argues that as AI agents begin to handle shopping and service procurement, this model becomes obsolete because LLMs and autonomous agents cannot be distracted by traditional ads.

The Evolution of Online Commerce

The transition is already visible through major AI platforms. Last year, ChatGPT and Gemini introduced "Instant Checkout" features for US users, allowing direct purchases within conversations. However, Ragsdale characterizes these as "walled gardens" due to the strict approval processes merchants must undergo. He suggests a more transformative future involving hundreds of millions of consumers using agents that operate on open protocols. This shift could allow platforms to capture 5% to 10% of transaction values while improving conversion rates for merchants.

The Rise of Open Protocols

The future of commerce is expected to move away from restricted environments toward "entrepreneurial" agents. These agents will use open protocols to discover products independently rather than being limited to pre-approved vendor lists. Key technologies driving this change include the x402 protocol developed by Coinbase and the Machine Payments Protocol (MPP) from Tempo and Stripe.

Market Impact and Irony

There is a notable irony in the current technological evolution: the advertising industry, which funded the creation of the free and open internet, provided the 10-trillion-token dataset used to train the very LLMs that may now cause the industry's downfall. With the online advertising market currently dominated by giants like Google and projected to be worth $291 billion in 2025, the rise of agentic commerce represents a massive shift in how value is captured and distributed across the digital landscape.