Personalized ads seen to stay amid shift to subscription models — analysts
Social media companies are turning to paid subscription models for revenue amid regulatory headwinds and artificial intelligence (AI) advancements, according to analysts.
“The financial market very generously rewards recurring revenues from subscriptions,” Anthony Oundjian, managing director and senior partner at the Boston Consulting Group in the Philippines, told BusinessWorld on Wednesday. “While ad revenues are seen as more volatile and have proven more challenging to sustain during an economic slowdown,” he added.
“The effort by social media companies is understandable, but the value they provide to consumers needs to be in line with the fees commitment they ask,” he also said in an e-mailed reply to questions.
Ronald Gustilo, national campaigner for Digital Pinoys, noted that premium subscribers, mostly monetized content creators, should have “better benefits” aligned with the amount they pay.
These include ad-free services, platform customization, longer content allocation, or higher resolution for photos and videos, Mr. Gustilo noted.
However, security features still need to be applied to all users and should not be exclusive to premium users, he added.
Meta is planning to charge European Union users for ad-free services on Facebook and Instagram to supposedly comply with regulations that impact their revenues and perceived future of free services supported by personalized ads, Reuters reported last week.
Social media platforms such as X, YouTube, Snapchat, and LinkedIn offer paid subscription models for their users.
Mr. Oundjian noted the uptick in personalized ads due to the use of advanced algorithm and AI. “Generative AI will help further increase the personalization of engagement through ads and other means, and we see social media companies actively embracing these evolutions.”
He said that consumers are largely willing to share data for an enhanced social media experience. “Think location for Grab, music preferences for Spotify, etc.”
“When it comes to ads, while consumers would rather see less — and there are premium models allowing that — most would still prefer to see ads that at least have some relevance to them,” he added.
In a market like the Philippines, Mr. Oundjian said, people have historically been unwilling to spend on subscriptions, but willingness should increase over time.
“Pricing has been aggressive to entice people, but we see price increases efforts already. Non-paying users should expect to still see a fair bit of sponsored content, while more tiers of services for paid users could appear,” he noted. — Miguel Hanz L. Antivola
