As the world jumps between the two boats of cookies and data privacy, Meta’s latest development on its Pay or Consent model seems to have created ripples across the river. Representing a significant shift in the way digital platforms use and manage consumer data and interactions, Meta seems to have hung a sword over the head of their users with only two exits – either pay with your pocket or pay with your privacy. As the model has begun to take shape, it prompts critical questions about its suitability for diverse markets, including India, and its potential implications for data privacy and business operations. “Well, it’s already run into trouble with the European Commission which says that the binary choice between paying for an ads-free experience or compromising with personal data which Meta offers to the users may be in contravention of its Digital Markets Act,” Sanjay Trehan, digital and new media advisor, told BrandWagon Online.
About the character
In 2023, the revenue generated by Meta Platforms amounted to roughly $134 billion, revealed a report by Statista. In the rapidly growing digital world, Meta Platforms seemingly stands as a colossal entity that influences the trajectory of social media, virtual reality and beyond. With over one billion monthly active users across each of its core platforms such as Facebook, Instagram, and WhatsApp, according to Statista, Meta has cemented its position as a leading force in global social media and communication.
“We announced that people in the EU could choose to continue to use Facebook and Instagram with ads, or they could choose to pay a monthly fee for a subscription service with no ads on Facebook and Instagram. If a person chooses to subscribe, they won’t see ads and we will not process their information for personalised advertising,” Meta commented at the time of the launch. The Pay or Consent model is rooted in the idea of giving users more control over their digital experiences. By offering a choice between paying for an ad-free experience or consenting to data collection, Meta aims to create a more user-centric approach to data and advertising.Users who value privacy and are willing to pay for an ad-free experience can do so, while those who prefer personalised advertising in exchange for their data can opt-out.
Sound of da police
In the European Union, stringent data protection regulations such as the General Data Protection Regulation (GDPR) govern how companies handle user data. The Consumer Protection Cooperation (CPC) has raised several concerns regarding Meta’s latest model while claiming that the tech giant is attempting to confuse consumers by embedding multiple hyperlinks in its terms and conditions, ultimately pushing them to understand complex information on their own. Additionally, Meta reportedly restricts access to user accounts until a choice is made between the two model options. This approach pressures users to make a quick decision without adequate time to fully assess the implications. “Privacy is a big issue and personal data is sacrosanct. Even with consent, invasive, predatory and surveillance-like advertising need to be avoided. Consumer choice and protection must be at the heart of any such initiatives.”Trehan added.
This recent warning from the EU is not an isolated incident. Earlier this month, the regulatory authority accused Meta of breaching new regulatory rules. Although Meta disputes these claims, a finding of non-compliance could result in significant fines. This is not the first time Meta has faced regulatory challenges in the EU; for instance, the launch of Threads, Meta’s alternative to X (formerly Twitter), was delayed due to EU inspections. Additionally, Meta has indicated that its new AI models might also experience delays due to the EU’s stringent regulatory framework.
Will it create new revenue streams?
It is believed that the Pay or Consent model definitely has the potential to create new revenue streams for Meta. In an effort to diversify its monetisation strategies, Meta can tap into a new segment of users who are willing to invest in a premium experience. This could provide a steady source of revenue beyond traditional advertising. “Meta could consider strategies such as offering premium ad placements to the remaining ad-supported users or enhancing the value of the ad-free experience to encourage more users to subscribe.” Abhijat Shukla, vice president, data science, WebEngage, said. Advertisers might see a smaller audience for targeted ads, which could lower ad rates and reduce overall advertising revenue. However, users who remain on the ad-supported version may provide higher-quality data, potentially allowing for more effective and valuable ad targeting.
Furthermore, in addition to the subscription revenue, Meta’s revenue might also be driven up through the people who opt out of the subscription model. Users who choose to consent to data collection for personalised advertising enable Meta to refine its targeting capabilities, making ad campaigns more effective. This improved targeting can drive up the value of ad placements, as advertisers are likely to pay more for highly targeted and relevant ads. The increased engagement and higher performance of these ads translate into higher revenue for Meta, creating a win-win situation for both the company and its advertisers.
Upon reaching out, Meta clarified that the model is restricted to European countries and they do not have plans to launch it worldwide.
Impact on the side kicks: Advertisers and partners
The Pay or Consent model can benefit Meta in a lot of ways. However, the impacts on advertisers and users of this model are far fetched. “The introduction of such a model could lead to a reduction in audience reach for advertisers, particularly if a significant number of users choose the ad-free tier, thereby decreasing the pool of users exposed to ads,” Gopa Menon, former digital head, South Asia, Mindshare, commented. This shift necessitates a recalibration of ad targeting strategies, as advertisers will need to address distinct user segments: those who pay for an ad-free experience and those who remain on the free, ad-supported tier. However,ads that do appear on the free tier might benefit from increased engagement, as the audience in this segment may be more receptive to relevant advertising. Additionally, the varying adoption rates of the paid tier could potentially enhance advertisers’ negotiating power with Meta, giving them leverage in discussions about ad pricing and targeting options, depending on the dynamics of user preferences and platform performance.
The implementation of this model is likely to have significant repercussions for its partners. As more users opt for the privacy-focused paid tier, partners who depend on Meta’s user data for their own products or services may encounter limitations in data access, potentially impacting their operations. However, this shift could also present opportunities for new collaborations, particularly with partners offering services or products that enhance user privacy or the ad-free experience. The dynamics between Meta and its partners might evolve based on the success of the model and its value to different stakeholders. “To navigate these changes effectively, Meta will need to proactively manage its relationships, working closely with advertisers to develop innovative ad formats, targeting options, and measurement tools that align with the new model. Additionally, Meta must collaborate with partners to address data-sharing concerns and create mutually beneficial solutions that maintain value for all parties involved.” Menon added.
Meta leads, will others follow?
The implementation of Meta’s Pay or Consent model has the potential to significantly influence the digital market. It could set new standards for privacy and consent, drive innovation in ad technology, and reshape the economics of digital advertising by potentially altering the revenue streams and cost structures of digital businesses. Competitors may follow suit, leading to a more privacy-conscious industry. This evolution could ultimately result in a digital landscape that better balances user privacy with the economic needs of digital businesses. However, for all of this to happen, Meta still needs to clear itself from the regulatory loop that’s hung around its neck regarding this model. From igniting the fire of data privacy conscious users to giving the users a ‘do or die’ option to use their platforms, Meta is seemingly walking on a tightrope. While it offers potential benefits in terms of user choice, privacy, and revenue diversification, its success depends on careful execution, market acceptance, and effective mitigation of potential challenges. “Only time will tell how this model will reshape the landscape of social media and digital advertising,” Menon added.