Meta’s decision to launch an ad-free tier for Instagram and Facebook users in much of Europe has been positioned as a move to comply with regulations like the Digital Services Act.
However, with Facebook and Instagram users in the EU being charged up to 12.99 euros ($14) a month for the ad-free experience (which also opts them out of all data-driven personalization) it’s hard to ignore the potential revenue opportunities of the move.
Ad-free models are becoming more popular across the app economy and beyond, in particular following the introduction of ads by streaming services to generate additional revenue and meet the needs of privacy-hungry, ad-fatigued users who prize uninterrupted content.
Netflix last November introduced its cheaper Basic with Ads package alongside a more expensive ad-free tier, despite having insisted that it would not host advertising, and recently announced that these ad-tolerant subscribers had grown 70% in the third quarter. Amazon Prime and Disney+ have made similar moves.
However, while Meta’s decision won’t change anything for most users, Instagram and Facebook users in the EU who desire to go ad-free might feel the hit to their wallets. There are certain to be those who posit an ad-free service will better protect their privacy, as well as some who just prefer a “premium service.” Regardless of motive for consumers, the new option will raise some important questions for advertisers on Meta’s top platforms.
Depending on the consumer appetite in the EU, it’s hard to imagine this won’t be coming to the U.S. soon.
A smart move for Meta?
Social media is no stranger to ad-free revenue models. Frontrunner YouTube launched its ad-free premium package in 2014 and has recently doubled down on ad-blockers for non-premium users. Last month X (formerly Twitter) revealed that it is trialing an ad-free upgrade to its existing reduced-ad premium service Twitter Blue. Snapchat+, Snap’s premium subscription, was also launched last summer in a bid to boost income but leaves ads intact and instead offers other perks.
Meta’s subscription tier creates a tactical compromise between people agreeing to data-driven ads or “quiet quitting” Meta by reducing their time spent on Facebook and Instagram. Not only will it help with compliance with the Digital Markets Act, it will also open up a potentially lucrative new side of the business. There’s no easier way to lessen the strain on the advertising business than to create a strong revenue stream from subscriptions—although any social media platform pursuing a new subscription business now has new challenges, such as customer acquisition, retention and lifetime value to take into account.
