Meta will charge 2X average ad revenue for EU subscriptions

Meta will charge the equivalent of $127.40 for an annual subscription to its services in the EU starting in November 2023. That’s essentially double what Meta makes in ad revenue per user in Europe, which is a total of not quite $64 over the past 4 quarters.

Meta announced today that due to changes in EU regulations, it will be offering an ad-free subscription to Facebook and Instagram. The core reason: EU legislators have rejected Meta’s use of “contractual necessity” as a legal basis in Europe for processing user data for personalized advertising and have pushed Meta towards a subscription option which would then offer EU citizens a data-processing-free means of accessing Meta’s global-scale social platforms.

The subscription will be optional, Meta said today in an announcement post. The option is simple:

1. Either pay for the service
2. Or, consent to targeted, relevant ads

How many subscribers would it take to replace Meta revenue in the EU?

Thanks to Meta’s detailed quarterly and annual reports, it’s easy to understand both how much Meta makes from advertising right now, and how many Europeans would have to subscribe to Meta’s services to replace that ad revenue.

• Meta has averaged 408 million monthly average users over the past 4 quarters
• Each user returned an average of $15.99 per quarter
• Meta made $63.97 per MAU from advertising

Note that total revenue per user is slightly higher than ad revenue per user, simply due to the fact that Meta offers some products for purchase.

But Meta’s subscription plan would theoretically bring in far more revenue, per average user, than ads.

Subscribers on the web will be charged $10.60/month for an annual total of almost $130 (so far there is no mention of an annual discount, though that could come). In-app subscribers will pay more, but I’m using the web numbers as Meta is following Twitter’s lead in charging more for in-app purchases to cover Apple’s and Google’s cuts.

That $130 is almost twice what Meta makes from targeted advertising per average user.

At these rates, Meta would need 208,572,327 European users to buy a subscription to replace all ad revenue.

Of course, as we’ve seen from Twitter (OK, X), very few people will subscribe. On X, about 640,000 people pay for premium, formerly Twitter Blue. If we take Twitter Ads Manager’s estimate of 372.9 million addressable users, that’s far less than 1% of users. To be precise, it’s under .2% of users. And there’s very little to indicate that Meta’s users would be substantially different enough to impact the economics on Facebook and Instagram.

This is not about a shift in Meta’s business model

208 million Europeans are not going to start paying the Euro equivalent of $130/year to access Facebook, when you can get it simply by consenting to ads. 

Rather, this is simply about dotting I’s and crossing T’s so that Meta can point to the subscription model and tell European regulators that citizens can totally and completely opt out of data processing for personalized advertising if they choose to pay for the service.

That’s good news for advertisers, who don’t want to lose a valuable way of connecting with consumers, players, customers, and users.

It’s also good news for Europeans, who will continue to have a valuable service that connects them with friends, loved ones, communities, and celebrities, and who can continue to do it for free now that Meta has (almost certainly) cleared a legally plausible rationale for continuing to process user data for personalized advertising.