How much would social media users pay to avoid ads?

This article on social media ads is part of our Vogue Business membership package. To enjoy unlimited access to our weekly Technology Edit, which contains Member-only reporting and analysis and our NFT Tracker, sign up for membership here. Would you pay $14 for an ad-free Instagram feed? How about a For You TikTok scroll sans paid advertisements for $4.99? Both Meta and TikTok are reportedly exploring paid ‘no-ad’ subscription options, aka SNA: “subscription no-ads” for European users, in an attempt to comply with the EU’s GDPR regulation. It’s a bid to avoid losing access to users’ data, experts say. In the process, the two platforms could upend brands’ advertising strategies. Per GDPR regulation, companies must acquire users’ consent before using their personal data to tailor ads specifically to them. Meta is reportedly in talks with the EU to make sure the proposed SNA strategy is compliant with the EU’s court ruling. If EU regulators approve of the move, it could be in place by the end of November — this is the date until which Meta has to comply. At the beginning of the month, The Wall Street Journal reported that Meta had filed its SNA proposal to regulators. The same week, Android Authority reported that TikTok was also testing a paid, ad-free version of the app. TikTok confirmed this to TechCrunch. Both companies are heavily reliant on ad revenue. Meta reported that for the second quarter of 2023, ad revenue across its family of apps (Facebook, Instagram and Whatsapp) increased 12 per cent, to $31.5 billion. TikTok ad revenues, meanwhile, are projected to be $6.19 billion, according to Insider Intelligence. Ad-free subscriptions are an approach that other social media platforms have been experimenting with. Tumblr offers ad-free browsing for $4.99 a month. YouTube trialled the idea back in 2014 with YouTube Red, though this proved unsuccessful, reaching under 10 million subscribers. Its relaunch as YouTube premium saw more success, thanks to the combination of ad-free viewing with YouTube Music. It’s the additional perks beyond ad-free that are necessary for success, says Permele Doyle, founder and president of influencer marketing agency Billion Dollar Boy. However, experts flag that while SNA models have the potential to bring some extra revenue to the bottom line, it’s unlikely to make a big difference to revenue. “I don’t think it’s anything to do with driving revenue or diversification of income streams,” says social media consultant Matt Navarra. “They’re trying to navigate the rules as best they can to get the best possible outcome.” “We’ve known for some time that many of the major social media platforms have been testing SNA models,” Doyle says. “But, these plans have been accelerated after the EU has backed them into a corner and forced their hand with tighter regulation on paid ads.” Should brands be worried? It’ll only be a real concern if enough users take the platforms up on their paid offerings — and subscription plans extend beyond Europe — Navarra says. “Maybe in three, five, seven years time, this will become the norm,” he speculates. Doyle also doesn’t expect a high uptake from the get go. “Ultimately, platforms must convince consumers to part with their hard earned cash for a product they have been conditioned to have access to for free,” she says. Vic Drabicky, founder and CEO of agency January Digital, agrees, and says it’s not until usage hits the 5 per cent opt-in mark that brands ought to rethink their ad spend and revenues tied to social advertising. That said, those most likely to opt for the ad-free option are likely to be the same demographic brands are targeting, Navarra flags. “If they’re opting out, they’re harder to reach and target with ad campaigns. That would be frustrating for advertisers.” It could also mark the end of the ‘Instagram brand’ once and for all. “Instagram, in its infancy, was a hub of brands that grew with the platform. If people opt not to receive ads, there won’t be room for so much new brand discovery,” says Amy Sturgis, founder of PR agency ASC and knitwear brand Cinta. It’s not the first time brands have weathered change on social media platforms. Given this, they’re adept at altering their strategies according to platforms’ whims, for better or worse. “The industry is so dynamic with new platforms and features regularly launching that many brands already have the structures and processes in place to respond to change,” Doyle says. It’s with this ethos that Laura Smith, founder of swimwear brand Snrklbr Swimwear, is anticipating the launch of SNAs. “It may affect our ability to meet new customers, but we have lived through enough changes to the algorithm not to be too concerned — we will have to adapt,” she says, noting that the brand will wait and see the impact on its ad performance before altering its strategy. Would users pay up? Vogue Business polled LinkedIn users to gauge interest, asking: “Would you pay not to see ads on Instagram?” User responses were mixed. Of 2,587 respondents, just 10.4 per cent said yes, 70.5 per cent said no and 19.1 per cent said it would depend on the cost. One commentator seemed swayed towards the paid option: “I’m sick of ads, period. Non-stop advertising is one of the worst things to happen to the internet.” Another noted that they paid not to see ads on Tumblr, and that it made site use “a much cleaner and more enjoyable experience”. Although TikTok is reportedly opting for a lower price point, Navarra doesn’t expect that this will sway the majority of users. “Five dollars seems more realistic as a payment pricing than Meta’s $14, but will teens and Gen Z want to pay that for an ad-free experience versus other things they could spend their money on?” he asks. “I’m not sure. The jury is out — that’s why they’re experimenting.” Doyle echoes this sentiment, flagging that, without extra perks on top of no-ads, users are unlikely to fork up their cash — not to mention, ads may be a nuisance but they’re still easy to scroll past on social media platforms. “The platforms will also need to be wary of subscription fatigue among consumers — especially in a cost of living crisis, in which disposable income is already tight,” she warns. “There are already signs of consumer unrest with the number of streaming platforms, with Netflix experiencing slow growth in users and even its [first] decline in a decade last year.” Multichannel marketing A loss of paid eyeballs may not be an immediate concern, but for brands, it’s a reminder of the importance of multichannel marketing. “We work hard to make sure we’re not reliant on any one tool to reach new customers,” says Jenna Meek, Refy Beauty co-founder and CEO, who isn’t overly concerned about the potential SNA offering. “It wouldn’t change too much,” she says, noting that paid ads across the Meta ecosystem are only one part of the brand’s mix. “The healthiest brands are those that have a well-balanced spend across the entire funnel, across a wider variety of mediums, and have a more sophisticated view of marketing measurement in place,” January Digital’s Drabicky says. Cinta’s Sturgis has already been making moves to other channels, not in anticipation of SNA, but in order to prioritise first-party data collection, by connecting with consumers via channels such as email and Whatsapp as cost per click has risen. The Mayfair Group (which is a client of Sturgis’s ASC) leans into this type of marketing over paid ads. COO and co-owner Devonne McFarland says Instagram ads, for instance, only make up about 20 per cent of the brand’s consumer acquisition and retention strategy. The brand relies more heavily on community-building initiatives such as student loyalty programme Mayfair U, and its free virtual therapy Mayfair Mental Health Sessions which will kick off in 2024. “These community driven programmes not only organically build an audience, but help keep it,” McFarland says. Content is king If brands lose access to paid in-feed ads, there’ll be all the more inclination to invest more in paid influencer content, Doyle says. “It could have a knock-on effect for marketing agencies specialising in paid social ads and also for the social media landscape as a whole. Advertising budgets are likely to be redistributed away from paid social media and to more organic marketing channels such as influencer marketing.” The creator economy is expected to grow globally from its current $250 billion industry to $480 billion by 2027, according to Goldman Sachs. “That figure is likely to rise and the rate of growth accelerate,” Doyle says. Brands agree that, should SNA models kick into gear, they’d likely lean more heavily into influencer and creator marketing — once they see how it plays out. As well as looking to influencers, the move could also encourage brands to double-down on their own content creation. “This [move] would drive businesses to utilise the platform to create engaging content versus ads, and really focus on being community-driven which would be super interesting to see,” Refy’s Meek says. Mayfair Group’s McFarland agrees: “This potential shift will require brands to go back to purposeful content users choose to follow, which ultimately leads to higher brand longevity.” January Digital’s Drabicky adds: “The brands that quickly test both options [organic and influencer content] and find the appropriate balance will be light years ahead of those solely relying on or testing into influencers or organic content.” As this change takes hold more universally, the role and importance of each social media platform will change, Drabicky says. “That future role of social media is still TBD, but the idea of a paid, ad-free experience will play an enormous role in shaping the future for advertisers should it ever catch on.” To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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