Following news that Meta has launched ad-free subscription tiers in the EU for Facebook and Instagram, Ed East, Global CEO and founder of leading global influencer agency, Billion Dollar Boy shares his initial reaction to the news and his thoughts on how it will disrupt the brands and creators operating in the advertising industry and the creator economy.
Initial reaction
“Charging customers a fee for a service which has always been free could risk a consumer backlash. In such a competitive landscape, if it’s not handled well with a reasonable price point and significant enough incentives for consumers to pay, then they will feel empowered to vote with their feet,” said East.
“The danger is also in creating a divide in the users. Meta will need to convince those who are getting the paid-for version that they are receiving a substantially better product. But in doing so, the platforms risk de-prioritising the ‘free’ version, failing to make significant improvements and disenchanting the user base.
“Already Meta is vulnerable to this. Earlier this year it announced the expansion of Instagram subscriptions worldwide, allowing creators to offer followers paid access to exclusive content, and a virtual reality (VR) subscription service.
“Meta must be wary of subscription-fatigue. Consumers who pay for some of Meta’s other subscription products and services may justifiably feel aggrieved at being asked to open up their wallets yet again.
“History tells us that mass sign-ups to the subscription service is unlikely. Before its acquisition by Microsoft, only 17% of LinkedIn’s revenue came from its paid-for Premium service, even though it has a more legitimate claim to a subscription model as a professional network.
“And, in 2014, YouTube Red, a premium service designed to reduce lost revenue from ad-blocking, was also unsuccessful, reaching less than 10 million subscribers.
“It shows that the subscription model only stands a slim chance of succeeding unless a range of additional and exclusive services are included. Simply offering an ad-free version of the platform is not enough to convince users to take the plunge.
“That’s why we’ve seen platforms test subscription-no-ad (SNA) models with a variety of features included. It’s clearly a period experimentation, suggesting that they have yet to work out what they should or shouldn’t charge for.”
How it will disrupt the advertising industry and creator economy
“Brands are also unlikely to welcome news of SNA models for social media platforms. Crucially, it means smaller audiences for brands’ promotional ad placements reducing reach and hindering awareness focused campaigns in particular,” East continued.
“If the SNA model does disrupt the advertising industry, it will largely be positive for the creator economy. It might, however, slow down the progress we’ve seen in multi-channel creator campaigns in recent years. For example, advertisers will be unable to target creator-led paid social ads to their followers if they no longer receive ads.
“The focus of brand spend may therefore return to traditional creator advertising or multi-channel creator campaigns exclusive of paid social amplification, such as OOH and TV ads featuring creators.
“We may also see creators and brands explore alternative revenue streams such as gifting and more creator-made brand assets and creators launching brands, such as Prime and Beastburger.
“Overall, I don’t expect to see large audiences sign up to SNA social media models. But for now, it’s too early to say. With this in mind, we would advise brands to simply stay vigilant, monitor user adoption closely and be ready to react,” he concluded.
