The Merchant’s Dilemma: Two Taxes, Different Flavors

The Core Insight

“Branded search was a tax we all paid. This is now even closer to payment.” — Sean Frank, CEO of Ridge

Merchants face an impossible choice: pay Google for visibility (ads) or pay OpenAI — as explored in the intelligence factory race between AI labs — for conversion (transaction fees). Both extract value from the merchant—just at different points in the funnel.

The question isn’t which tax is better. It’s whether AI commerce creates enough incremental value to justify the cost. The math changes based on your margins, AOV, and return rate.

How Each Platform Extracts Value

Google’s Tax: Pay for Visibility

• Pay whether or not user buys
• Predictable ad spend budgets
• Spend more = more visibility
• 0% transaction fee

Who wins: High-margin, high-AOV products (can absorb CPC as marketing cost)

OpenAI’s Tax: Pay for Conversion

• Pay only when user buys
• Variable cost tied to revenue
• Organic ranking (no pay-to-play)
• Refunded if item returned

Who wins: Low-margin, high-volume sellers (can’t afford upfront ad spend)

When Each Model Wins: A Simple Example

Scenario: $100 Product, 3% Conversion Rate

But It’s More Complicated

This is part of a comprehensive analysis. Read the full analysis on The Business Engineer.