Why is Meta planning to charge $14 per month from its customers?
Building on recent reports, Meta has explored offering an ad-free subscription tier for Facebook and Instagram.
The Wall Street Journal has now detailed the proposed pricing for these new options. It is based on a proposal that Meta has submitted to E.U. officials last month.
The E.U.’s evolving data privacy regulations are the impetus for its ad-free options. These regulations are putting more strain on the capacity of the company to use personalization based on user activity.
With that no longer being an option for several E.U. users due to the new Digital Services Act (D.S.A.), Meta has considered allowing ad-free subscriptions in the E.U. as an alternative.
It would then enable it to provide an optimal user experience; users would not be hit with irrelevant ads while generating equivalent revenue per user.
In other words, Meta is concerned that if it has to show users untargeted ads, it will lead to a lesser user experience. It will impact the overall usage, too.
As such, a subscription-based, ad-free version could be a better alternative, even if it would be a drastic shift.
What does the Wall Street Journal say about the plan?
According to W.S.J., Meta’s preliminary plan projects an ad-free Facebook cost of around $US14 per month, or $US17 per month, to cover both Facebook and Instagram.
It seems like a lot, but then again, some users would no doubt pay up, and Meta could use that as a building block to create more streamlined and ad-free versions of its apps.
The main difficulty in pricing such a service is ensuring that Meta maximizes its revenue potential while capping its revenue intake through a monthly cost.
For example, based on its most recent performance update, Meta currently generates $US17.88 per quarter from each E.U. user, based on ad exposure on Facebook alone.
It equates to at least $US6 per month that Meta would need to replace per user if they opt out of seeing ads on Facebook alone.
Meta also needs to weigh how a monthly charge would impact future earnings potential from ads based on how many users sign up for its ad-free option and how long it keeps its pricing steady.
Yet, even with this in mind, $US14 per month does seem steep. But Meta is looking to start high and see what response it gets, or it could be factoring in all of these elements, leading to a higher-than-current price.
Either way, it is a big ask. $US200 per year for an ad-free Facebook and I.G.? Would you pay for it?
Again, as other social media subscription packages have shown us, some people will pay up, maybe due to the D.S.A. shift.
Meta can use that as an impulsion to promote this as a more beneficial offering, freeing people from distracting promotions and paid political campaigns for a monthly fee.
Meta would likely need to sweeten the deal by merging it into its Meta Verified package or incorporating additional elements.
Is Meta planning to bring more subscription packages?
It is interesting to see more subscription packages coming into play for social apps, which X owner Elon Musk predicted. The prediction of Elon Musk was more based on A.I. bots and increasingly sophisticated bot creation processes.
It will eventually make it impossible for platforms to weed out the fakes unless they start charging real users.
It is not exactly what is happening in this case, but this prediction could have some validity, with a range of factors now prompting expanded subscription offerings.
It is not likely that Meta will ever move to a wholly subscription-based model, especially while it is trying to maximize take-up of its next-level metaverse.
It will only gain traction through broader adoption. It keeps access free, then, is the best path forward.
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