Meta’s Launching A Subscription Service

Meta’s Launching A Subscription Service

10 months ago2 mins

Meta announced over the weekend that it’s joining the social media subscription-service club.

What does this mean?

Advertising revenue is Meta’s bread and butter, but Apple’s new privacy policy threw a wrench in the works back in 2021 by limiting how closely companies could track users’ data. That hit Meta’s Facebook and Instagram platforms hard: they’d got used to selling super-targeted ads based on users’ activity, and Meta estimated the shake-up would slash its annual ad takings by $10 billion last year. And with today’s global economic slowdown making waves and shrinking firms’ advertising budgets, Meta’s had to put on its thinking cap. The brainwave: offer users perks like account verification, enhanced fraud protection, and greater visibility for a set fee.

Meta ad revenue
Source: Statista

Why should I care?

Zooming in: Meta’s edge.

Meta’s playing a game of catch-up on this one, with rivals Snap and Twitter having already deployed the whole “turn-your-users-into-subscribers” stratagem. But with Twitter's offering pretty slow to take off, it’s far from clear that users are actually willing to pay for perks like these. Mind you, Meta does have a trick or two up its sleeve. First, subscribers will have to verify their identity with a government ID, side-stepping the worries about fraudulent “verified” accounts that plagued Twitter last year. And second, the firm has an edge when it comes to user numbers, so if even a few of its content creators sign up, the rest could end up following suit out of fear of – gasp – social media irrelevancy.

For markets: Valuation potential.

This venture could be a dream come true for Meta’s investors: subscriptions can secure a very reliable stream of cash, giving businesses the kind of predictability that often leads to higher valuations. And with Meta still down 15% from a year ago – despite the cost cuts and share buyback announcements that recently boosted shares – that shot in the arm could be just what the doctor ordered.

Meta stock
Source: Google Finance


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