Could an Ad-Free, Subscription Version of Facebook Be a Viable Option?

Rumors that Facebook is pondering an ad-free subscription option have been around almost as long as Facebook itself, but with the weeks of privacy-related heat the social network has recently faced, perhaps this latest round of speculation should be taken seriously. Sources last week told Bloomberg's Sarah Frier that Facebook has been partaking in market research over the past few weeks to determine whether more people would join the social network if an ad-free subscription option was available to them. Those sources told Frier there is no guarantee that Facebook will proceed with the initiative, adding that internal company research from past years indicated that users perceived the subscription option as greed on Facebook’s part and as going back on its promise to always be free. Steve Knapp, executive director of media at agency Colle McVoy, told Adweek that he is a proponent of an ad-free subscription model for the social network. “We’ve all seen polls that predict that people won’t pay for Facebook, yet we’re completely fine paying for Netflix, HBO, Hulu or Spotify to have an ad-free experience," he said. "A premium offering may not be adopted by the masses, but it would give those most at risk for leaving Facebook peace of mind that their News Feed won’t be infiltrated with malicious sponsored content. More important, this model would provide Facebook with some revenue to offset those who choose to receive no paid advertising.” OK, so let's assume some people might pay for Facebook, but what value subscribers get in return is still a huge question. Look at Hulu or the CBS Interactive application as examples, said Mark Douglas, CEO of ad tech shop SteelHouse: They both have commercials, and you pay roughly $7 per month to subscribe to each. It costs another $2 to get them ad-free. "Relatively few people pay the extra $2, and that saves you roughly 20 minutes per hour of your time," he said. "Removing Facebook ads doesn’t even save you time.” CEO Mark Zuckerberg has repeatedly gone on record saying that Facebook will always be free, most recently during his testimony before Congress last month. However, Chief Operating Officer Sheryl Sandberg said in response to an analyst’s question during the company’s first-quarter earnings call last week, “We certainly thought about lots of other forms of monetization, including subscriptions, and we'll always continue to consider everything.” Zuckerberg did not really follow suit, saying during the same earnings call: “We think that ads is a great business model that is aligned with our mission. We want to build a service that can help connect everyone around the world, so we want to offer that service for free and have it be affordable, and that's completely aligned with what we're trying to do. Even when we do other things—like we're running tests of payments, we have Marketplace, which is growing and doing well—there may be other ways that we could think about making money from those, but in general, our strategy is to offer those services at cost and make it so that businesses can bid what it is worth to them to run ads in the system.” Facebook reported $11.966 billion in revenue in the first quarter of 2018, of which nearly all ($11.795 billion) came from advertising. Can potential subscription revenue help the company keep pace? Probably not. [kickout id="1"] Caroline McCarthy, vice president at engagement ad platform true[X], brought up an interesting query about whether ad-supported and ad-free Facebook users would have their News Feeds populated by separate algorithms. She wrote in a Twitter thread, “There's been a lot of optimism recently about ad-free subscriptions, but if you care about political and cultural divides, you should be worried about how this has the potential to further them by effectively offering different media models for the haves and the have-nots.” McCarthy added, “People who work in media and advertising in coastal cities likely have a skewed opinion of how many people are willing to pay to make ads go away, because they live in affluent areas where paying for HBO has been the norm for decades. It's not like that everywhere.”