How Meta, TikTok ad-free tiers could impact advertiser budgets

How Meta, TikTok ad-free tiers could impact advertiser budgets

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The digital ad market in 2023 is showing signs of recovery with tech earnings midway through the year pointing to a return-to-positive and marketers displaying a sense of bullishness around their social media spending. However, as industry titans Meta and TikTok begin to explore the possibility of ad-free subscription tiers, another wave of uncertainty could be around the corner.

In response to tightened EU data privacy regulations, Meta recently proposed to regulators a new ad-free monthly paid subscription option for European users of its Facebook and Instagram platforms, The Wall Street Journal reported. Meanwhile, TikTok is exploring its own similar offering, per separate reports, and is currently testing the offering outside the U.S. The move could bring new considerations to marketers in charge of doling out social media dollars, though that likelihood is to be determined by the consumer, said Amy Rumpler, senior vice president of search and social media services at Basis Technologies.

“I personally think that the impacts will probably not be as high as people are fearing, but certainly there will be some amount of impact based on the number of people that actually end up opting into this,” Rumpler said. 

While details surrounding Meta’s plans are somewhat limited, the social media giant is reportedly looking to charge European users roughly €10 each month, or about $10.50, for ad-free browsing for Instagram or Facebook on a desktop along with an additional €6 per linked account, WSJ reported. On a mobile device, that charge would increase to €13 a month to account for commission charges by Apple and Google around in-app purchases. For TikTok, the monthly charge is reportedly going to be $4.99 — a drop in the bucket compared to Meta’s plan.

The impetus, at least in Meta’s case, for introducing an ad-free option is pressure from the EU around its new Digital Services Act, which will allow European users to opt out of all personalization stemming from the use of their data, including ads. However, less data insights could damage the algorithm-driven user experience, which helps explain why Meta is attempting to offer its ad-free option as a workaround. Though, when weighing the odds of consumer adoption for those ad-free tiers, the price tag on privacy is likely to be a main factor, Rumpler said.

“I think a lot of users are perfectly willing to give up their data and their privacy in exchange for the ability to consume whatever content they want on these apps for free, and I think for other users, they care about it a lot more and then they might be willing to pay $5 or $10 or $13, whatever the final price ends up being in order to make sure that their data is not being utilized,” Rumpler said.

It’s worth noting that others, including YouTube and Snap, have both adopted subscription models, though the latter, Snapchat+, is still in the process of rolling out the ad-free element of its offering. X, formerly known as Twitter, is also considering adding an ad-free element to its verified program. While that could help indicate the potential for ad-free tiers on Meta or TikTok to succeed, one challenge for the giants could lie in the fact that consumers often say one thing and do another, said Jed Meyer, senior vice president and media solutions leader at Kantar, and what works for each platform could vary. In Meta and TikTok’s case, each has the breadth to test and learn. 

“I think the neat thing about digital is it gives them the agility in their business model to try different things, test them and see if they work with consumers. They work with consumers, and then see if they work for advertisers, and they keep iterating,” Meyer said.

Blending into the experience

While price and interest in privacy are two main factors that could determine whether consumers opt for an ad-free Meta or TikTok experience, one aspect that Rumpler believes could curb sign-ups is that ads on social media often feel native to the environment, like on a platform like TikTok, for example, with its short-form video format commanding a unique strategy from advertisers. 

“Since TikTok was released in the United States, all they’ve done is work hard to make the ad experience unobtrusive to the users that are consuming content on their platform,” Rumpler said. “So I think a lot of people are perfectly fine with ads living in that environment, and would probably prefer a free social account and some ads interrupting their short video content consumption compared to how they feel when they’re watching Hulu or some other type of streaming environment.”

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