Why Google or Meta Won't Let You Pay for Privacy
Lots of people hate ads. They also hate being tracked, and they’re very vocal about it. I always wondered: why won’t services like Google and Meta let people pay to opt out of being the product? They can accept payments at scale. Why not diversify their ad dollars with some sweet MRR? Do they hate money or something?
It seemed like a no-brainer during the Senate hearings and privacy scrutiny in the EU. Give people the option to pay and stop the arguments dead in the tracks.
They didn’t do it, and I finally think I understand why.
Note: I’m aware that you can pay for YouTube Premium. X also lets you pay to remove ads. I’ll address those later in the article.
The Value Isn’t Evenly Distributed
Why not divide your ad revenue by the number of users and let people pay that to opt out? That sounds fair, doesn’t it?
The problem is that not all users are equally valuable to advertisers. You can’t buy anything if you’re skint.
Each ad impression and click has a certain value. In most cases, the ad platforms have a pretty good understanding of how much. If you’ve been on Facebook for 20 years and haven’t once clicked on an ad, Meta doesn’t need a crazy AI model to figure out that you won’t start buying every product they show you. And yet, every fifth post you see is an ad. Someone is paying for those low-quality impressions.
The other end of the spectrum has open-minded users with plenty of disposable income. They don’t mind spending money on cool products to improve their life. These users are more likely to respond to ads and convert.
These high-quality impressions subsidise the low-quality ones. People who buy stuff make the whole thing work.
Pay to Remove Ads
Who would pay to remove ads on Facebook or Google? People who don’t like ads and value their privacy, right? Eh, I’m not so sure.
In my mind, the group most likely to convert are users who spend a lot of time on those platforms. They have the means and don’t mind paying for products and services if they improve their life. It just so happens to be the same people who provide the high-quality impressions in the ad inventory. In other words, the golden goose that keeps the ad-supported model in business.
Sure, it won’t be as clear-cut in reality. Advertising affects people even if they don’t click or convert immediately. Some well-off users won’t sign up to remove ads. Some people who never click on ads will pay to remove them.
However, you don’t have to lose all the high-quality impressions to nuke your ad-supported business model. Even a small change can devalue the whole pie.
The pay-per-click crowd is known for their obsessive testing of everything. They run ads on many platforms at the same time. When your placements stop performing, they’ll move the spend to higher-ROI campaigns with a competitor.
The Death Spiral of Increasing Conversion
With the ad-generated revenue down, you’ll want more people to pay to remove ads. You may even have a team that focuses on increasing conversion. They’ll sprinkle various nudges to subscribe throughout the app. The next step is to start adding exclusive features for paid users. In other words, making the platform worse for everyone else.
The new features will convince more people to subscribe. But they will annoy those who choose not to. Engagement will go down.
How do you keep your platform good enough for people to put up with the ads on the free plan while making it annoying enough to have more of them subscribe? It’s hard to do both.
What About YouTube Premium and X Premium+?
Some large platforms let users remove ads. You can pay for YouTube Premium and X Premium+. Looking closer at these, it doesn’t seem like things have been going particularly well.
YouTube Premium
YouTube Premium has been around since 2014. They reached 100 million subscribers in February 2024. Oddly, the figure includes free trials as well.
As of April 2024, the service is reported to have about 2.7 billion monthly active users. That means only about 3.7% of users are paying customers. After 10 years, I can’t imagine this is the result Google was hoping for.
The rather heavy-handed ad-block crackdown from late 2023 shows that YouTube would very much like more people to subscribe.
YouTube’s ad revenue in 2023 was $31.5B. The subscriptions amounted to $11B. That looks decent, doesn’t it? The 3.7% of paid uses are bringing in significant revenue.
That said, Meta brought in $134B during the same period. Although they have 48% more monthly active users, they earned over 4x the ad dollars.
X Premium+
X/Twitter gave people the option to pay to remove ads post-acquisition by Elon. Their ad revenue plummeted, which most people blame on woke corporations boycotting the new management. That might have been the case initially, but it’s been a while now.
With all the big spenders pulling back for ethical reasons, X ads must be a bargain these days. That should bring advertisers right back, shouldn’t it? If anything, profit-hungry corporations don’t let their morals stand in the way of a good deal for too long.
But what if the ads perform way worse than they used to? Many power users who can afford it pay monthly for their blue tick. That also takes them out of the ad inventory. What remains are bot clicks and low-quality impressions.
Final Thoughts
Following regulatory pressure, Meta introduced a ‘subscription for no ads’ plan in the EU. It will remain an EU-exclusive, though. The subscribe button is deep in the ad preferences menu somewhere. And they couldn’t sound more excited about it in the press release.
When you create the ability to opt out of advertising, your most valuable users will. You may see some extra MRR, but you will cannibalise your previous ad-supported business model. To make your paid offer more attractive, you must make the ad-supported service seem worse in comparison.
Selling good ROI to advertisers is a better business than selling $8.99 subscriptions to the ever-churning consumer.