This could be a problem…
Meta announced it would cut its ad-free subscription fee in the European Union from 9.99 Euros to 5.99 in an effort to appeal to regulators.
Background
You’ll recall that Meta is offering this option because they say it allows Facebook and Instagram to comply with the Digital Markets Act (DMA) by giving users the option of using the apps for free with ads powered by their data or paying to use the apps without ads (and keeping their data safe).
All along, my contention has been that Meta doesn’t actually care if anyone signs up for this. In fact, I’d argue that they prefer no one does. If you subscribe, your data can’t be used for ads. And the ad business is where Meta makes their money.
In 2023, advertising made up 98% of Meta’s revenue.
Potential Problems
This ad-free subscription model isn’t something they actually want to do, but it might be what keeps their ad model afloat. Of course, if too many people subscribe, it will make advertising less effective.
But one potential issue is this new price that Meta is offering. By cutting the price, revenue from a subscription is now very close to what Meta would make off of that person through ads. In 2023, the average value of a user in Europe was $6.30 per month, and that value from advertising will continue to increase.
Cutting the price makes the subscription option more appealing. That’s bad news for advertisers in the European Union. With each new subscriber, the potential ad audienceThis is the group of people who can potentially see your ads. You help influence this by adjusting age, gender, location, detailed targeting (interests and behaviors), custom audiences, and more. More shrinks.
Are Regulators Convinced?
But it’s also possible regulators won’t be convinced that the price change makes Meta any more compliant. According to Austrian privacy activist Max Schrems (from Reuters):
In reality it is not about the amount of money – it is about the ‘pay or okay’ approach as a whole. The entire purpose of ‘pay or okay’ is to get users to click on okay, even if this is not their free and genuine choice. We do not think the mere change of the amount makes this approach legal.
At this point, the entire subscription model remains up in the air.
This is something to watch even if you don’t advertise in Europe. What gets adopted there will likely expand elsewhere eventually.
