The EU‘s Digital Services Act (DSA) is set to come into effect starting 2024, requiring major online platforms like Instagram and Facebook to adhere to strict obligations around content moderation, transparency, data usage and potentially even charging users fees.
With over 2.9 billion monthly active users between them, these social networks have long relied on advertising revenue from corporate sponsors to keep their services free. However, with organic reach declining and pressure from regulators mounting, charging the very users who helped make these platforms so popular might become inevitable.
Why Would Instagram and Facebook Start Charging Fees?
There are several key business incentives for social platforms to introduce paid subscription models:
1. Offset declining ad revenue
During the pandemic, Meta Platforms reported its second year-over-year revenue decline, largely attributed to reductions in ad spending. As economic volatility persists, starting to charge users directly could help diversify income streams.
2. Reduce reliance on advertising
Finding ways to charge users directly also allows Facebook and Instagram to be less dependent on ads alone to fuel their multi-billion dollar companies. This could give them more control amidst regulatory and iOS privacy changes disrupting the digital ad industry.
3. Monetize their user bases
With over 2 billion daily active users on Facebook and 2 billion monthly active users on Instagram, even a small subscription fee could generate billions in guaranteed recurring revenue.
4. Introduce premium features users will pay for
From Instagram Subscriptions offering exclusive Stories to Facebook considering a version without ads, premium features could entice loyal users to pay. Twitter Blue’s introduction indicates there is demand for ‘enhanced’ social media.
5. Increase platform revenue responsibility
Mandates within the DSA may legally require large platforms to contribute more revenue themselves rather than solely relying on third-party ads served to their users.
The Growing Push to Monetize Social Media Users
Long gone are the days when social media companies focused solely on driving advertising by offering free services to build extensive user bases. Today it‘s clear that monetizing individual users directly is becoming just as critical.
Platforms now have entire suites of money-making features aimed at creators and businesses:
- Twitter Blue subscriptions
- Instagram Badges, Subscriptions, Native Affiliate
- Facebook paid online events, newsletters, custom Stickers
- YouTube Channel Memberships, SuperChats, Merch Shelves
- TikTok Tips, ecommerce links
This indicates social networks now expect individual earning potential to co-exist with – if not eventually supersede – advertising.
In an interview with Casey Newton, Mark Zuckerberg suggested further monetization options lie ahead:
“There’s an opportunity…for creators to be able to basically monetize all these different fan bases directly..”
With over 200 million active creators on Instagram alone, even small optional charges by a fraction of users could stack up to be highly lucrative.
How Will Charging Users Impact Organic Reach For Businesses?
For small businesses trying to grow online, platform algorithms promoting their unpaid content has been crucial for visibility. But once Facebook and Instagram begin squeezing money directly out of individual users, organic reach seems likely to plummet even further.
So could introducing charges improve ad targeting and affordability for those willing to spend? Some data indicates this:
- Twitter has reported a 60% y-o-y increase in ad engagements after launching Blue, with clicks getting cheaper.
- Reddit credits premium memberships for its highest ad revenue growth – 66% year-over-year.
The theory is that charging users who don’t want ads could produce higher quality data, improved targeting and crucially – more budget left for brands wanting exposure.
While the impact on small businesses remains uncertain, introducing charges along with privacy changes might just improve accessibility and precision of the very digital ads many rely on.
What Does Charging Users Mean for The Future of Social Media?
A key question is whether mainstream platforms essentially ‘taxing’ the audiences that made them mainstream could trigger an exodus.
Meta has cautioned that the “majority of iOS users are opting out of tracking”, while 86% dislike seeing ads served via social media targeting.
So between privacy moves and now direct charges…will increasing monetization disenfranchise users?
Early warnings signs are evident from platforms rolling out paid features:
- Flickr saw a mass exodus of users following policy changes around free accounts.
- Patreon sparked creator criticism over its revamped service fees.
- Peloton’s market value has tanked nearly 80% following pricing hikes on bikes and subscriptions.
These cases indicate that while die-hard fans may stick around, mainstream users who feel ‘nickeled-and-dimed’ for services once free could ditch entirely.
This revenue risk means that while Facebook and Instagram explore subscriptions, they’ll likely manage rollouts gradually. But ultimately these networks know retaining loyalty without some tradeoff around privacy, convenience or cost will be near impossible.
Alternative Community Options For Creators
For digital influencers specifically, cementing ownership somewhere other than third-party algorithms looks increasingly prudent in case ‘big social’ suffers declines.
Options include:
Email lists
Direct access to subscribers avoids volatile systems. Email boasts exceptional engagement metrics too – 4,200% higher than social media.
Membership Sites
Gating exclusive content to paying members can drive recurring revenue, with control retained over data and pricing.
Podcasting
Loyal listeners tune into preferred hosts routinely. Audio formats foster intimacy and trust ideal for conversions.
Discord servers
Central hubs for niche communities to chat, collaborate and support creators they care about.
Custom apps
Owned platforms bring together subscriptions, content libraries, forums etc under one branded ecosystem.
Building new social networks
New platforms emerging around creator monetization include Pearpop, Poparazzi and Stir while Twitter-alternative Mastodon is gaining traction.
The common thread? Relying less on external platforms, more on owned channels. This protects reach while nurturing loyalty and enabling monetization should major networks start squeezing creators dry.
Will Mainstream Social Media Users Really Pay?
Recent research into Gen Z attitudes shows young audiences embrace subscription models for convenience – but financial barriers remain prevalent.
Among US adults, 77% say subscription costs too high prevents adoption, while 38% of digital subscribers feel they pay for too many.
So with resistance already emerging as entertainment, news, software and more migrate to paid tiers, mainstream fatigue around ‘yet another’ social media bill seems inevitable.
Indeed history shows that once formerly free platforms introduce fees, mass disconnects frequently follow thanks to accessible alternatives. Just look what happened when evangelists Wikipedia and Duolingo experimented with raising funds this way.
“Any site that loses 90 to 95% of its subscribers after introducing paid memberships knows it made a mistake in charging the audience that made it relevant in the first place.”
Therefore while Gen Z creators may pay for exclusive access and ad-free experiences, ubiquitous networks starting to charge average users could mark the beginning of the end of their mainstream relevance.
The Bottom Line
There remain many unanswered questions around whether loyalty and demand are high enough for Facebook and Instagram to get away with transferring revenue responsibility directly onto users.
But with regulators applying pressure and both companies actively exploring subscription models, some level of fees to access these social networks in future seems inevitable.
Rather than resisting this shift, digital influencers, small businesses and personal brand builders would be smart to explore more owned and creator-centric platforms. Then they can retain control over their data, access and income.
Combining decentralized community building with consistent engagement across one-to-one mediums looks to be the most reliable way to prosper in the inevitable Web 3.0 landscape ahead.
Because while social media giants now may look imposing and indispensible -TRY asked MySpace founders once felt that way too before the mass exodus to Facebook began. And history indicates lightning can certainly strike twice!