Subscriptions Are Key to Meta’s AI Transformation
Meta CEO Mark Zuckerberg sees a future of superintelligent digital assistants. The vision will require massive amounts of spending and drastic change.
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When you think about Facebook, you don’t think about monthly subscription fees. Meta wants to change that with the upcoming launch of subscription plans.
Diversifying revenue makes sense for a company that makes 98% of its sales from ads. But another factor is at play: The need to cover the soaring cost of AI infrastructure. Meta is all-in on the AI race and recently raised its planned capital expenditures for the year to between $125 billion and $145 billion, mostly because of rising memory chip prices.
Meta’s sales are smaller than the other Big Tech companies that are plowing money into AI. And unlike the other three AI giants — Alphabet, Amazon and Microsoft — Meta doesn’t have a cloud computing business that sells computing to outside customers.
Meta hopes for new ways to pay for "superintelligence"
Subscriptions are part of a bigger transformation CEO Mark Zuckerberg laid out in the company’s most recent earnings call. It’s a "vision of superintelligence," Zuckerberg said during the first-quarter earnings call at the end of April. "Our goal is not just to deliver Meta AI as an assistant, but to deliver agents that can understand your goals and then work day and night to help you achieve them."
The specifics of this vision are a bit hazy, but the focus is AI agents, the autonomous tools that do multistep tasks on a computer. Zuckerberg talked about AI helping with health, education, relationships, social media content, games, and personal and career goals. He said AI agents could buy a shirt for your daughter or help researchers cure a disease.
"I think people are going to also be willing to pay a lot of money to have premium or high-compute versions" of AI that helps achieve goals, Zuckerberg said.
There aren't many details so far on the subscriptions, which were unveiled in an Instagram post by Meta's head of product. The company revealed pricing to some news outlets, including TechCrunch. The social media versions come with extra features, such as more analytics and methods to increase viewership for posts. The AI subscriptions offer the ability to do more complex tasks with higher caps on subscribers’ usage. Meta is also targeting businesses with paid AI tools that can answer customer messages, book appointments and close sales.
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Meta faces an uphill battle with subscriptions
Meta subscriptions are a long shot for the consumer market. Users have gotten used to free social media, video, messaging and other features on Facebook, Instagram and WhatsApp. And the market for AI tools is fiercely competitive, as companies such as Google and OpenAI battle for consumers. It wouldn’t be surprising if Meta struggles to get the subscriptions business to a level that would be significant to its overall revenue.
But success is relative to Meta’s formidable scale. The company made $200 billion in sales last year and now has 3.5 billion people using at least one of its apps every day. With such a huge pool of potential customers to market subscriptions to, Meta could easily find millions of willing buyers, especially among dedicated content creators. Meta will likely offer the most cutting-edge AI features to paying customers, hoping to entice free users to upgrade.
Meta Subscription Plans
1. For Social Media and Messaging
- Instagram Plus: $3.99/month
- Facebook Plus: $3.99/month
- WhatsApp Plus: $2.99/month
2. For Creators and Businesses
- Meta One Essential: $14.99/month
- Meta One Advanced: $49.99/month
3. For AI Users
- Meta One Plus: $7.99/month
- Meta One Premium: $19.99/month
The challenge of tracking Meta’s AI spending ROI
One analyst asked Zuckerberg what he is watching to make sure there’s a healthy return on investment when it comes to the soaring capex spending. Zuckerberg said the focus is building a top AI model that goes head-to-head with Anthropic, Google, OpenAI and xAI. Then he said, "I mean like, I don’t think we have a precise plan for exactly how each product is going to scale month-over-month or anything like that."
The lack of specifics, tied to the exorbitant spending required to be an AI leader, is one reason some investors are concerned, even though Meta continues to point to growing ad sales as a benefit of AI.
However, part of this new AI vision fits with Meta’s tried-and-true strategy: Get users to stay longer and see more ads. Zuckerberg said AI helps Meta understand users in more detail and makes ads more effective. He also highlighted that Meta has always focused on building a huge audience first and making money later.
Meta says it has an escape hatch of sorts to avoid owning a glut of unused data center capacity. Zuckerberg says the company has flexibility to bring data centers online more slowly or reduce spending in future years. He’s even said Meta could launch a cloud computing business to rent out computing power to other companies.
Those ideas aren’t in the works yet. "Our experience so far has been that we have continued to underestimate our compute needs," he said. That’s mainly because Meta has aggressively rolled out free AI tools to both consumers and businesses, whether they want them or not.
This is not the first time Meta has pivoted
The transformation into an AI company, grounded by a massive social media platform, isn’t the first corporate shift. Recall how Facebook changed its name to Meta in 2021 to make a big push into the virtual reality-based metaverse, a move that hasn’t gained traction with users. That endeavor cost the company an estimated $80 billion.
It underscores Zuckerberg’s flexibility in pursuit of growth, like his abrupt shift to short-form video to compete with TikTok. That flexibility now underpins the bet on AI, his biggest one yet.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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