Meta Platforms (META:NSD) is set to roll out a paid subscription model in Europe. This plan will offer ad-free access to its apps. This strategic move aims to navigate the increasing pressure from the European Union (EU) to adopt more stringent privacy policies for targeted advertising. This article will highlight the influence of this approach on META stock forecast.
Meta’s Pricing for Ad-Free Access:
According to a report by The Wall Street Journal, Meta plans to charge users $14 per month for ad-free Instagram access on mobile devices and $17 per month for a package that includes both ad-free Instagram and Facebook on desktops. Users opting for free services will need to consent to receive personalized ads within the apps.
Meta’s Subscription Proposition:
Meta has submitted a comprehensive proposal to European regulators, seeking their approval before launching the “subscription no ads” (SNA) plan across the EU. Under this proposal, European users can expect to pay approximately 10 euros ($10.46) per month for ad-free access to Instagram or Facebook on desktop platforms. Any additional services bundled into the subscription will incur an extra charge of 6 euros.
Higher Pricing Due to App Store Commissions:
Furthermore, for an ad-free experience on mobile phones, a single-app subscription will be priced at 13 euros. This higher cost is due to the commissions imposed by Apple (AAPL:NSD) and Google (GOOGL:NSD) app stores. Meta currently boasts 258 million monthly Facebook users and 257 million monthly Instagram users in the European Union, potentially translating into substantial recurring revenue for the company.
Meta’s Ongoing Dispute with the EU:
Earlier this year, Meta faced a 390 million euro fine from Ireland’s Data Privacy Commissioner for employing digitally targeted advertising techniques. As a response, Meta took steps to obtain explicit user consent before delivering personalized ads. Targeted advertising has historically been a lucrative revenue stream for the social media giant.
In recent months, several social media platforms like Snapchat (SNAP:NYE) and Twitter have introduced paid subscription models as a means of bolstering their revenues. However, Meta’s move to charge users could attract scrutiny from EU regulators if they deem the subscription fees to be excessively high for the average user. The European watchdog may insist that Meta offers more affordable plans or entirely free ad-free services to its user base.
META’s Financial Outlook:
Financial analysts have weighed in on Meta’s stock, offering favorable projections. Truist Financial analyst Youssef Squali reaffirmed a Buy rating on META with a price target of $390, representing a potential upside of 27.1%. Squali remains optimistic about strong growth in Q3 and sustained growth in Q4, particularly in light of Meta’s developments in artificial intelligence-based user experiences and hardware, as unveiled at the recent Meta Connect event.
META Stock Forecast:
Based on the META stock forecast from 45 analysts, the average target price is USD 326.82 over the next 12 months. The average rating is Strong Buy. Stock Target Advisor’s analysts are Slightly Bullish, which is based on 8 positive signals and 6 negative signals.
Recent Performance:
At the last closing, the stock price was USD 306.82. This price has changed by +1.99% over the past week, +3.52% over the past month, and +126.14% over the last year.
Conclusion:
Meta Platforms is making a strategic move by introducing a paid subscription model in Europe to offer ad-free access to its popular Instagram and Facebook apps. This decision comes amidst mounting pressure from the EU to enhance privacy policies for targeted advertising. While the move holds the potential for increased revenue, it may also face scrutiny from EU regulators concerning subscription pricing.
