Let’s dig into the following:
- Why subscriptions?
- Subscription details
- Potential advertising impact
This could be a pivotal moment…
It would be easy to make assumptions regarding Meta’s motivations behind offering an ad-free subscription option. Most assumptions would be wrong.
Do not look at this as Meta seeing potential for a new revenue stream. That’s not what this is at all. At most, you could see it as replacing potential lost ad revenue in a region (the European Union) with the strictest privacy laws.
But, even that may be a stretch. I contend that Meta doesn’t intend to make any money from this, at least for now. They’d likely be perfectly fine if not a single subscription is sold.
The very first sentence of Meta’s announcement should give you an idea of where this is coming from:
To comply with evolving European regulations, we are introducing a new subscription option in the EU, EEA and Switzerland.
The reason for this subscription option is to “comply with evolving European regulations.” This is all about choice, and Meta believes that offering this choice allows Meta to comply with GDPR:
The option for people to purchase a subscription for no ads balances the requirements of European regulators while giving users choice and allowing Meta to continue serving all people in the EU, EEA and Switzerland. In its ruling, the CJEU expressly recognised that a subscription model, like the one we are announcing, is a valid form of consent for an ads funded service.
The subscription model provides a “valid form of consent.” If you do not want Meta to use your data for the purpose of personalized ads, you will sign up for the ad-free subscription. When you do, Meta will not use your data for that purpose. By choosing the free ad-driven option, you are consenting to the use of your data.
Meta was otherwise on a collision course with a scenario in the European Union where ads would be untargeted, and likely ineffective. While the paid subscription could help replace some lost revenue, the main goal is surely to continue running personalized ads in the region.
Beginning in November, users in The European Union, EEA, and Switzerland will have the option of signing up for a paid, ad-free subscription on Facebook and Instagram. The cost will depend upon where it’s purchased.
- On web: €9.99/month
- On iOS or Android: €12.99/month
The increased cost for iOS and Android are to cover fees charged by Apple and Google. The subscription will initially apply to all of the Facebook and Instagram accounts linked in your Accounts Center.
Beginning March 1, 2024, an additional cost (€6/month on the web and €8/month on iOS and Android) will apply for each additional account. Admittedly, this language is unclear to me. Are “additional” accounts anything beyond your primary account (whether linked prior to March 1 or not)? Or does this apply to any new account that is linked after March 1?
Obviously, this interpretation will impact expected costs.
Immediate Advertising Impact
The Million Dollar Question for advertisers: How will this impact advertising?
It’s a loaded question. It depends on a long list of factors and scenarios. But these two are most important…
1. Will regulators accept this option? Meta is confident that offering this option will satisfy consent. Has that already been cleared by regulators?
If accepted, advertising largely goes back to the way it was in the region (barring significant subscription sign-ups). This is the best case scenario for Meta and advertisers — and it may be the most likely.
If not, Meta goes back to the drawing board. It could mean poorly targeted ads for all users in the region. That, obviously, would be bad for advertisers (and Meta).
2. Will users sign up for it? Unless Meta ads incentives, I doubt that this will be a popular option. Would you spend more than $100 per year to remove ads from something you’ve accepted with ads for the past 15 years?
Advertisers will hope this is window dressing only. The users most likely to pay more than $10 per month just to remove ads are likely the same people they’d like to Reach measures the number of Accounts Center Accounts (formerly users) that saw your ads at least once. You can have one account reached with multiple impressions. More — they are willing to spend money. If adoption is high, that would impact advertisers.
Long-Term Advertising Impact
Meta surely knows that by introducing the subscription model in the European Union, the rest of the world will likely follow. It’s not that Meta wants to offer this option. But it may be the way to respond to stricter data usage and privacy laws.
And that’s precisely the trend we are on. We’ve seen it in the United States and other countries. We’re not going to suddenly see regulators care less about this topic. We’re on this path to stricter privacy, and we should all accept and embrace it.
I’d be shocked if we don’t see this same option provided to the US and Canada (if not worldwide) within the year. It’s the natural progression.
But again, that’s not necessarily bad. It could be a minor concession or compromise with the least potential impact on advertisers.
Also, let’s be clear what this isn’t: It’s not Meta eliminating advertising. I’ve seen some advertisers misread this announcement as being just that. Advertising is, by far, Meta’s biggest revenue generator. Meta isn’t eliminating advertising, by choice, any time soon.
I recorded a video about this, too. Watch it below…
What do you think about this announcement?
Let me know in the comments below!