The advertising is not dead, but giants need more sources of income.

Written by: Hu Lin Dance King

Edited by: Jing Yu

Once upon a time, users accessed internet products for free, at the cost of viewing "advertisements." In the AI era, this model has finally reached its end.

On May 27, Meta officially announced the launch of a paid subscription plan globally, with Instagram Plus priced at $3.99 per month, Facebook Plus at $3.99 per month, and WhatsApp Plus at $2.99 per month.

At the same time, Meta is testing advanced AI plans for heavy AI users ($7.99 and $19.99 tiers) and a professional package for creators ($49.99), all integrated under the "Meta One" brand.

This is not just a simple product update, but a key move in a larger strategic transformation by Meta. Behind this, it may signify that the "free internet era" we once knew has come to an end.

01 The landlord's family has no surplus grain

To understand the significance of today’s subscription plan, we need to rewind time to a month ago.

On May 20, Meta launched a round of layoffs that shook Silicon Valley, laying off about 8,000 employees while freezing 6,000 open positions. However, at the same time, the company announced it would invest $125 billion to $145 billion in AI infrastructure. Layoffs were to concentrate funds on AI.

The Meta CTO then stated on May 25 that the company would utilize AI tools for a "massive transformation" of its workforce. 7,000 employees were moved to AI-related positions. The entire company’s focus is visibly shifting towards AI.

This brings up a core contradiction: how can one convince investors to invest so much money in AI?

For Wall Street, the biggest headache is not how much Meta spends, but what kind of predictable returns this investment will bring. Google has its cloud, Microsoft has Azure, Amazon has AWS—these AI investments can measure returns through subscriptions and API calls. But what does Meta rely on?

Advertising revenue fluctuates with the market and is not stable; the open-source large model Llama enhances technical reputation but does not directly generate profit; AI glasses and AR devices are still in early stages.

Subscriptions have thus entered Meta’s sight.

This timing is not coincidental.

02 How to convince users to "pay"?

Meta’s products have always operated under an implicit contract— you use my platform, and I use your attention to sell advertisements. This logic has functioned well for twenty years, with Facebook’s monthly active users exceeding 3 billion, Instagram surpassing 2 billion, and WhatsApp users spread throughout the globe.

However, cracks have begun to show on this wall.

European regulatory agencies have been the biggest driving force. To cope with the EU's data privacy regulations, Meta tested a "no-ad subscription" option in Europe back in 2023, offering users a paid choice free from tracked data. This global rollout of the subscription plan is, to some extent, an extension and deepening of that European experiment.

However, this time, Meta is adopting a different logic— it’s not "pay to avoid ads," but "pay to unlock more."

The core selling points of Instagram Plus include anonymous browsing of Stories, detailed replay data analysis, extended disappearing post duration, and customizable themes and reactions. WhatsApp Plus focuses on enhanced privacy and expanded functionality.

The common characteristic of these features is that the free version is already sufficient, but the paid version allows you to have "a bit more control."

From a product design perspective, this is more challenging than "paying to avoid ads." Avoiding ads means the user has clear pain points and a straightforward functional trade-off; yet "unlocking more" requires Meta to prove that these "more" features are genuinely worth the price.

Forrester's survey data provided a cold reality check: 70% of respondents indicated they "definitely" or "probably" would not pay for a Meta subscription. Reasons varied—some feel the current free version is sufficient, others have longstanding grievances against Meta's privacy practices, and some simply ask, "Why should I pay you more?".

This resistance is real, but it is not insurmountable.

Snapchat+ is the best reference case. When Snap launched its paid subscription in 2022, the general consensus was skeptical, believing users wouldn't pay for a messaging app. Yet to date, paid subscribers of Snapchat+ have surpassed 15 million. The key lies not in whether users are willing to pay, but rather in whether the product provides sufficiently concrete and direct value.

X (formerly Twitter), Telegram, and Snap are all increasing their bets on subscriptions. Paid subscriptions are becoming an increasingly important part of the revenue mix for social platforms.

03 AI features, the real battlefield for monetization

If Instagram Plus and WhatsApp Plus are merely testing the waters, then AI subscriptions represent the core ambition of Meta's strategy.

Meta announced it would test two tiers of AI subscription plans, priced at $7.99 and $19.99, with the primary difference being the usage of advanced reasoning and "thinking modes." The basic version of Meta AI remains free, but to achieve faster response times, stronger reasoning capabilities, and higher usage limits, one needs to pay to unlock these features.

This design logic is nearly identical to the freemium models of OpenAI and Anthropic.

The distinction lies in scale.

OpenAI’s user base is in the hundreds of millions, while Meta’s monthly active users are in the billions. Even with a conversion rate of just 1%, the numbers would be drastically different. An analyst from Seeking Alpha estimated that with the $2.99 pricing of WhatsApp Plus and a 1.5% conversion rate, this single product could potentially bring in around $2 billion in revenue annually, with a gross margin close to 100%.

What excites investors even more is the certainty of such revenue. Advertising revenues fluctuate with macroeconomic changes and privacy regulations, but subscription revenues are expected to be regular income. This is precisely what Meta had trouble articulating regarding its past AI investments—now it has a story to tell investors.

On the day the news was released, Meta's stock price rose nearly 3%, and the market's reaction was straightforward and clear. Evercore ISI analyst Mark Mahaney gave a buy rating, particularly optimistic about WhatsApp's long-term monetization potential, projecting that by 2030, WhatsApp alone could generate $40 billion in annual revenue.

This is certainly the most optimistic scenario; the path ahead is filled with variables. But at the very least, it indicates that this path is not a fantasy, but rather a business logic supported by numbers.

04 The "free era" has ended

Do you remember the saying that has circulated for a long time in the tech circle— "When the product is free, you are the product."

Meta’s business model has always been the most typical footnote to this statement. Users exchange attention and data for free services, and Meta sells this data to advertisers. This logic ran swiftly during the smartphone era, with Facebook’s rise, Instagram’s explosion, and WhatsApp’s global expansion all built on this foundation.

However, the definition of "free" is quietly changing.

On the one hand, the awakening of privacy awareness has led more and more users to become wary of the "exchange of services for data." The EU's GDPR and DMA regulations are tightening step by step, and Meta's regulatory costs run into the billions annually. On the other hand, the competitive landscape of the AI era has made the costs of "free" unprecedentedly high—training an advanced model and maintaining the computational expenses of an AI assistant are much more expensive than displaying a few ads.

Mark Zuckerberg needs a way for users who derive real value from Meta AI to pay directly for that value.

This is not a betrayal of the original intention of "free internet," but an acknowledgment of a reality— the "free" in the AI era requires someone to pay elsewhere.

The ones paying can be advertisers or the users themselves. Meta now wants both to exist simultaneously.

The success or failure of the subscription plan ultimately hinges on the answer to one question: are features like anonymous browsing of Stories, advanced AI reasoning, and data analysis for creators really worth you pulling out a few dollars every month?

Twenty years ago, when Zuckerberg typed the first line of code in a Harvard dorm, he probably never imagined he would one day charge users.

But that is already a story from twenty years ago.