Will AI cut your marketing budget? The Jevons paradox says plan for more
James Watt's steam engine needed far less coal than the engines before it. Britain's coal use went up anyway.
In 1865, the economist William Stanley Jevons explained why in The Coal Question. Cheaper power did not mean the same work for less coal. It meant work nobody could afford before: more mills, more railways, more engines.
Better engines, more coal. Economists still call it the Jevons paradox.
AI is about to do this to your marketing budget
The board slide says AI will cut marketing costs. That is "better engines, less coal" in a nicer font.
When a creative costs almost nothing to make, you do not make the same ten ads cheaper. You test a hundred. When a landing page takes an hour, every audience gets its own. The cost per test falls. The number of tests explodes. And every test needs real media spend to read it.
Smaller teams, bigger bill for learning
Marketing teams will not stay the size they are today. I still think that. But smaller teams producing far more output means the cost moves. Less goes to people and production. More goes to the media you need to find out which of those hundred ideas actually works.
A team that banks the AI saving as a cost cut ends up with a hundred creatives and the budget to test ten of them.
How to budget for the rebound
- Separate production cost from learning cost. AI cuts the first. It raises the second.
- Move the production saving into testing, not into the cost-cut line. Every new creative needs enough spend to reach a readable result.
- Set a minimum sample per test before launch, so you do not spread budget across so many variants that none of them is readable. Under 30 to 50 conversions, a result is noise.
- Kill faster. More tests only help if losers are cut on a rule, not on feel. See writing the pause rule before launch.
- Track cost per learning, not only cost per creative: how much did it cost to reach one decision you trust?
Bottom line
Cheaper engines. More coal. Plan for the coal.
Sources: Jevons paradox, The Coal Question.
FAQ
Will AI reduce marketing costs?
It will reduce the cost of producing creative and content. It is likely to raise the total spent on testing, because cheaper production leads to many more variants, and each one needs media spend to evaluate.
What is the Jevons paradox?
It is the observation that when something becomes more efficient to use, total use often rises instead of falling. Jevons described it in 1865, when more efficient steam engines led Britain to burn more coal.
How should I budget for AI-generated creative?
Treat the production saving as a testing budget. Plan how many variants you can test with a readable sample each, and fund the media for those tests.
How many ad variants should I test at once?
Only as many as your budget can bring to a readable result. If each variant cannot reach roughly 30 to 50 conversions, test fewer variants with more spend each.