Mark Zuckerberg has long maintained that Facebook will always remain a free service, but as E.U. regulations evolve, potentially further restricting the company’s capacity to gather user data for ad targeting, maybe now is the time for Meta to re-evaluate that foundational concept.
According to a new report from The New York Times, that is indeed now in play, with Meta reportedly weighing the potential of offering paid versions of both Facebook and Instagram, which would enable E.U. users to avoid ads, and personal data usage, entirely in both apps.
As per NYT:
“Those who pay for Facebook and Instagram subscriptions would not see ads in the apps, said the people, who spoke on the condition of anonymity because the plans are confidential. That may help Meta fend off privacy concerns and other scrutiny from E.U. regulators by giving users an alternative to the company’s ad-based services, which rely on analyzing people’s data, the people said.”
That relates to the E.U.’s evolving Digital Services Act (D.S.A.), which comes into effect soon, and aims to provide more explicit controls for users as to how their personal data is used. Within that, users will be able to opt-out of personalized feeds, which are based on their in-app activity, and algorithmic interpretation of their preferences. There will also be more direct controls over what types of information users submit to be used for ad targeting, and if enough people choose to withhold their data, that could have a significant impact on Meta’s ad business in the region.
It also builds on Apple’s iOS 14 app tracking update, which enables users to opt out of sharing their personal data with any app that they use. That’s already cost Meta billions in lost ad revenue, and with another blow to its data coming in, maybe now is the time for the company to look to other revenue options.
To be clear, under the reported proposal, Facebook and Instagram would remain free, but users would be able to pay for a subscription to remove ads, if they so chose.
The cost of such an option would likely need to be priced at least $US6 per month, based on Meta’s most recent earnings report, which shows that Facebook generates $US17.88 per quarter from each E.U. user.
Meta could vary that to $8 per month to account for fluctuations, though there would also need to be considerations as to the impact of subsequent reductions in overall ad exposure, and how you mathematically align that with these figures. Which could see the price go even higher to account for potential losses. But as a baseline, this is around the cost that Meta could potentially lose by offering an ad-free version.
And given that Meta’s already selling verification on Facebook and Instagram for $US11.99 per month, which has apparently been reasonably well received, maybe it is now more open to the concept of charging for subscriptions, which is an option that it has always kept open, even though, as noted, Zuckerberg has maintained that the app will forever be free, at least in some version.
Back in 2018, amid investigations around the Cambridge Analytica scandal, Zuckerberg appeared before the U.S. Senate, and was asked directly whether Facebook might consider charging for access to avoid concerns around personal data collection.
Zuckerberg’s response:
“There will always be a version of Facebook that is free.”
A “version”, which seems to suggest that the company was keeping the door open for another version of the app as well.
Then Meta COO Sheryl Sandberg further explained that:
“We have different forms of opt-out. We don’t have an opt-out at the highest level. That would be a paid product.”
So the concept of a paid opt-out for ads has been there for years, but it’s not something that Meta seems to have actively considered. Till now, though Meta’s remaining tight-lipped on the concept.
It makes sense. Meta has already faced big fines for violating previous E.U. data regulations, underlining E.U. regulators’ inflexibility in enforcing such, and as noted, its ad business has also suffered some significant blows as a result of previous updates to data collection processes.
Maybe, now is the time, and Meta will actually consider offering an ad-free version, further expanding its paid subscription offerings.
Which would make Elon Musk very happy, considering his stance that all social platforms will eventually need to move to paid offerings.
It still seems like most people will opt to stick with the ad-free versions, while platforms will need to offer free access to maximize traction in developing markets.
But maybe, the tide is shifting, and more paid options will soon become the way, in more apps.
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