In a digital media landscape where subscription services are all the rage, don't count on Facebook (FB) joining the party.
Mark Zuckerberg suggested as much in an interview he posted on Wednesday with Harvard Law professor Jonathan Zittrain. When asked about the possibility of an ad-free, subscription-based version of Facebook, Zuckerberg argued that consumer interest in such a service wouldn't simply stem from a desire not to see any ads, but from being able to control and limit the data that Facebook collects from users. And that as a matter of principle, Facebook wouldn't restrict such data controls to paid users.
"I don't think people are going to be that psyched about not seeing ads, but then not having different controls over how their data is used," Zuckerberg said. The comments come less than a year after Facebook, contending with both the Cambridge Analytica scandal and the arrival of the EU's GDPR data-sharing regulations, rolled out new privacy tools for users and placed fresh restrictions on how third-party apps and services can access user data.
To back up his point, Zuckerberg noted Facebook is working on a "Clear History" feature that lets users erase the data that Facebook has about their activity on non-Facebook sites and apps, and that the company wouldn't be comfortable with limiting access to the feature to paid users. "If we're going to give controls over data use, we're going to do that for everyone in the community," he said.
There are also probably a couple other reasons why Facebook isn't keen on launching an ad-free subscription service. One is that if Facebook launched a service that fully satisfied the wishes of those who want the company to collect no data about them, such a service would be less useful and also potentially less secure.
Facebook collects user data not only to deliver targeted ads, but also to do things such as figure out which news feed posts and Instagram Stories to promote, which friend suggestions to make, which Groups and Facebook Watch videos to recommend and which notifications to send. And as Zuckerberg noted in a recent Wall Street Journal op-ed, Facebook also collects data from third-party sites and apps to aid its security efforts -- for example, to detect bot activity or determine when someone has gained unauthorized access to a Facebook account.
The second reason, one that Zuckerberg likely isn't keen on bringing up, is that in North America at least, a Facebook subscription service would need to be priced pretty high in order to offset lost ad revenue.
In 2018, based on the quarterly data it has shared, Facebook's advertising revenue per user was $109.77 in the U.S. and Canada, for its 240 million-plus monthly active users (MAUs) in the region. That translates into monthly ad revenue per user of about $9.15. And with Facebook's ad revenue per user still growing rapidly -- it was up 30% annually in North America in Q4 -- that monthly figure will probably be a lot higher in a few years' time.
Facebook produces quite a lot of ad revenue from its North American users. Source: Facebook.
Moreover, since users of an ad-free subscription service are likely to be wealthier, on average, than the typical Facebook user, the monthly ad revenue that Facebook could be surrendering through a typical subscription sale might be a lot higher than the average of $9.15. Facebook would also have to take into account the fact that subscription sign-ups would reduce the the number of active users it could give marketers access to, thus potentially reducing Facebook's appeal as an advertising platform to some of them.
With all that said, just as Alphabet/Google (GOOGL) has launched a subscription service that (among other things) provides ad-free YouTube access but doesn't care to sell an ad-free version of Google Search, it's conceivable that Facebook could eventually offer subscriptions that don't provide any new data controls, but do remove ads that consumers might deem to be a bigger nuisance than traditional news feed ads. For example, Facebook could provide an ad-free option for Watch video content.
However, for now, Facebook hasn't given any sign that it's looking to offer such services. And even if it does one day, it's a safe bet that targeted advertising will remain at the heart of Facebook's business model.