Subscription models on social media platforms will not have a substantial impact on advertising, according to industry professionals.
The platforms have started following streaming services' move to ad-free subscription models.
X (formerly twitter) last week rolled out opt-in, paid subscription that offers an ad-free user experience. Meta and TikTok have also been reported to look at a similar structure.
But we’ve been here before, a few times, so social media advertisers aren’t worried yet.
When satellite and cable TV subscriptions arrived in the 1980-90s, there was belief it would reduce ads - that clearly didn’t come true, David Kennedy-Cosgrove, managing partner at WiredCo, told AdNews.
And when Spotify and YouTube introduced ad free subscriptions in the late-2000s, people once again predicted the end of ads - this again didn’t come true, with 60% of Spotify‘s base being freemium users who happily receive ads.
“The human thing is, people don’t really mind ads that much, the poor ads just wash over them without interference, the good ones work,” Kennedy-Cosgrove said.
“The business thing is, all companies want more revenue, and if they can get two bites of the $ cherry via subs and ads, then of course they will.
"But there’s very few giant media businesses (if any) who survive solely on subscription revenue alone.”
However, advertisers actually doubt if Meta or TikTok will go ahead with the roll out.
James McInnes, head of digital at Jack Nimble, believes the sudden rise of subscription tiers is a result of pressure from EU regulators.
“The platforms will probably test it in some markets and have it float around but imagine that’s about it,” McInnes told AdNews.
“If you compare how much revenue social platforms make off advertising per user vs what they’d make from subscriptions with no ads it’s hard to imagine them taking it too seriously.
“X did a pretty solid job of being a case study of why not burn advertising and how hard it is to get users to pay.”
Sam Kelly, managing director at Hello Social, said even if they do push ahead he would caution the platforms from being too heavy-handed in this space.
“The price the platforms charge for an ad-free version needs to offset the amount they’ll lose in direct ad exposure,” Kelly says.
“And they then need to maintain balance in each, to maximise ad reach, and entice ad partners, while ensuring they don’t lose money in the process.
“I don’t see how they can make the numbers work.
“For example, Meta reported in Q2 that its average EU revenue per user is $US17.88, though for US users, its ARPU is $US53.53. That’s a significant variance and it’ll be hard for Meta to price their ad-free offering at a level that replaces that ad exposure intake and is equitable across regions. It doesn’t make sense.”
On the positive side, the model could make influencers even more valuable.
“I could see influencers playing an even greater role in addressing this potentially gated audience,” Kelly said.
“We’ve been the fastest-growing sector with the highest velocity of disruption over the last 10 years and this is just another evolution.”
But would users even sign up?
If the social platforms made watching ads totally unbearable - such as a 5 minute, non skippable block with no relevance to users - McInnes thinks users would take the subscription more seriously.
“But I always find it pretty hard to imagine paying for social media just to get rid of ads. For lots of people they’re annoying but if the ads are crap you just flick past them instantly,” McInnes said.
“If the ads are good you’ll actually choose to watch them - and wild concept - if they’re REALLY good you’ll tag your friends or DM to them and have some banter about it.
“I think the closest I ever got to paying for social media was Friends with Benefits a few years back which was pretty interesting at the time!”
At the end of the day, a group of users will pay a subscription for perceived benefits, but history indicates it won’t be the masses, Kennedy-Cosgrove said.
“Because most people just don’t care enough to take action against something that exists fuss free in every area of their lives, even more so when money is in short supply,” he said.
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