Unveiling the Game-Changer: TikTok's Journey Towards an Ad-Free Future and Its Revolutionary Impact on Advertiser Budgets

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The digital advertising market in 2023 shows signs of recovery, with tech earnings indicating a return to positive growth halfway through the year. Marketers are optimistic about their social media spending. However, there is a new wave of uncertainty as industry giants Meta and TikTok are contemplating ad-free subscription options. Meta has proposed a monthly paid subscription for European users of Facebook and Instagram in response to stricter EU data privacy regulations. TikTok is also testing a similar offering outside of the U.S. The impact on marketers will depend on consumer response, according to Amy Rumpler, Senior Vice President of Search and Social Media Services at Basis Technologies.

Rumpler stated that although the impacts may not be as severe as people anticipate, there will still be a certain level of impact depending on the number of individuals who choose to participate.

According to WSJ, Meta is planning to charge European users €10 per month for ad-free browsing on Instagram or Facebook on a desktop, with an additional €6 per linked account. On mobile devices, the charge would increase to €13 per month to cover commission charges imposed by Apple and Google for in-app purchases. Meanwhile, TikTok is expected to have a monthly charge of $4.99, which is significantly lower compared to Meta's pricing plan.

In Meta's case, the introduction of an ad-free option is driven by pressure from the EU regarding its new Digital Services Act. This act allows European users to opt out of personalized data usage, including ads. However, reducing data insights could potentially harm the algorithm-based user experience. That's why Meta is trying to offer the ad-free option as a workaround. When considering the chances of consumer adoption for these ad-free tiers, the price of privacy is likely to be a significant factor, according to Rumpler.

According to Rumpler, many users are willing to give up their data and privacy in exchange for accessing free content on these apps. However, there are also users who value their privacy more and would be willing to pay a certain price, like $5, $10, or $13, to ensure their data is not utilized.

It should be noted that subscription models have been adopted by others such as YouTube and Snap. However, Snapchat+, the latter, is still in the process of implementing its ad-free offering. X, formerly known as Twitter, is also considering adding an ad-free component to its verified program. While this could suggest the potential for successful ad-free tiers on Meta or TikTok, one challenge for these giants lies in the discrepancy between consumer preferences and actions. According to Jed Meyer, senior vice president and media solutions leader at Kantar, what works for each platform may differ. Meta and TikTok have the ability to experiment and learn due to their vast reach.

"The beauty of the digital industry is that it provides the flexibility for these platforms to try out different approaches, testing them with consumers and advertisers, and continuously iterating," Meyer stated.

Blending into the experience

Consumer Factors Affecting Ad-Free Meta or TikTok Experience

Price and interest in privacy are key determinants when consumers decide whether to choose an ad-free Meta or TikTok experience. However, an additional aspect that could hinder user sign-ups is the native feel of social media advertisements. Platforms like TikTok, known for their short-form video format, require advertisers to adopt a distinctive approach to effectively engage with users.

"Ever since TikTok was introduced in the United States, their focus has been on minimizing disruption from ads for users who are enjoying content on their platform," Rumpler explained. "Many users are actually comfortable with ads in this environment and would prefer having a free social account with occasional ads during their short video consumption, rather than experiencing interruptions while watching streaming platforms like Hulu or others."

Furthermore, ads on platforms like YouTube, where users may spend 30 or 60 minutes watching a single video, could be seen as more intrusive compared to TikTok, where users spend the same amount of time but watch multiple pieces of content in quick succession," the executive added.

“I believe that the platforms were constructed in a manner that caters to the quick consumption scrolling habit, resulting in a distinct mindset," stated Rumpler. "I reckon this factor will greatly impact how consumers perceive and accept a paid version of these platforms."

Shifting social bets

Ad-free social media is gaining momentum with increased investments from marketers. A significant 51% of media decision-makers on the brand and agency side plan to increase their spending in this category. The global advertising industry is projected to grow by 4.4% this year, with ByteDance and Meta expected to capture 50.7% of global spending, according to WARC data.

Furthermore, changes in social media advertising spending patterns have been observed. Darrick Li, vice president of North America media owners at Guideline, mentioned that ad revenue on X has declined by over 50% compared to last year's August figures. On the other hand, TikTok has experienced a remarkable increase of over 70% in ad revenue during the same period, based on data from U.S. agency invoicing provided by Guideline, the owner of Standard Media Index. Meta has also demonstrated positive revenue growth this year after a challenging period.

Li commented in an email to Our Website about the possibility of ad-free social offerings entering the global market and how this could impact the platforms. Rumpler emphasized that while consumer buy-in and audience size are important, there are other factors that marketers should consider when advertising on Meta and TikTok.

Are the remaining ads effective in meeting advertisers' business goals? If so, they may be willing to sacrifice reach and their desired audience for strong performance. Many advertisers may not make any changes. It should be noted that neither Meta nor TikTok have announced plans to introduce an ad-free option in the U.S. However, if other countries adopt similar privacy regulations to the EU, the offerings may expand globally. Only time and future earnings statements will determine if the offerings are worth replicating.

"Within the next three to five months, once we gather sufficient data on the success of this model in Europe, I anticipate a significant increase in discussions about its potential replication or implementation in the United States, heading into the next year," stated Rumpler.