Paying $5 a Month to See Ads Unchanged?... Meta’s $12 Billion Experiment [Weekend Money]

Monthly Subscription Service Priced at $2.99–$3.99 Unveiled
Additional Features Offered Instead of Removing Ads
Annual Revenue Could Rise by About $12 Billion Even with Just 3% Subscriber Conversion

Meta, the world's largest social networking service operator, is introducing monthly subscription services for Instagram, Facebook, and WhatsApp. Although switching from free to paid social networking services (SNS) brings to mind past failures such as Korea’s “Freechal,” analysts point out that, given Meta’s vast user base, even a small proportion of paid conversions could generate significant revenue.

According to major foreign media outlets on May 30, Meta recently launched three paid subscription services: Instagram Plus, Facebook Plus, and WhatsApp Plus. The monthly subscription fee ranges from $2.99 to $3.99 (4,474 to 5,971 won).

Notably, these services do not remove advertisements. Previously, Meta had introduced a subscription service in Europe where users paid to avoid ads. The new Plus subscriptions, however, maintain advertising and instead offer added features such as profile personalization and extended story duration.

This structure has clear advantages for Meta. Securing paid subscribers by removing ads would reduce existing advertising revenue. In contrast, charging for additional features allows Meta to maintain its advertising sales while increasing average revenue per user (ARPU). In effect, Meta, a company previously focused on advertising, is shifting to a model that grows both advertising and subscriptions simultaneously.

After Meta announced the launch of its paid subscription services, its stock price closed up 3.7% in regular trading. Since this is not an AI-based subscription service that fully integrates Meta’s artificial intelligence (AI), its short-term financial impact is expected to be limited.

A similar paid SNS subscription model is Snap’s “Snapchat+.” Like the Meta Plus services, Snapchat+ does not remove ads but provides customization and convenience features for stories. As of February this year, Snapchat+ had 25 million paying subscribers, representing about 2.6% of its total monthly active users (MAU) of 960 million.

This is where Meta’s calculations began. Instagram, WhatsApp, and Facebook each have around 3 billion MAU. Samsung Securities estimates that if Meta’s paid subscription penetration reaches 3%, related revenue would amount to $12 billion. This would represent 4.7% of Meta’s projected revenue consensus for this year, which stands at $253 billion. Based on the midpoint of Meta’s total cost guidance of $165.5 billion, the operating margin is expected to improve by about 3 percentage points.

There is also potential for further growth in earnings, as Meta could introduce higher-tier subscription options. Snapchat+ offers four subscription tiers, with advanced AI features at higher levels. If AI functions expand in the future, there is ample room for the average subscription fee to rise. In fact, Meta is reportedly developing an AI agent that will be integrated with Instagram’s shopping features.

Separately from platform subscriptions, Meta is also testing two paid subscription services for the Meta AI app. The performance of Meta’s subscription business will largely depend on the quality of its AI models and the degree of platform integration.

Furthermore, Meta has another alternative: selling its proprietary AI infrastructure as an external cloud service. Even if its own AI business doesn’t grow as quickly as expected, this would provide a crucial buffer against investment costs. Kim Joonghan, a researcher at Samsung Securities, commented, “Recently, Meta’s 12-month forward price-to-earnings ratio (PER) stands at 17.5, well below the average of 21. As plans for monetization become more concrete near the bottom of its valuation range, investment appeal is gradually taking shape.”

This content was produced with the assistance of AI translation services.