Meta (META) has launched the Meta One subscription service, an important move to diversify revenue amid sharply rising AI infrastructure spending and advertising revenue’s absolute dominance. The subscription business is currently small in scale but growing rapidly, and has been included in the “Other Revenue” segment. Meanwhile, Reality Labs continues to lose money, further highlighting the urgency for Meta to find new revenue sources. Over the next few quarters, whether the subscription service can grow into a substantial business will be a key focal point for observing Meta’s financial health and stock price performance.
Last month, Meta Platforms CEO Mark Zuckerberg published a 6,500-word manifesto outlining his vision for free AI agents and global AI access, and proposed that users willing to pay for additional features or computing power could choose paid services. This week, the public learned more about Zuckerberg’s specific vision for this idea. Meta launched a new subscription service called Meta One, offering expanded AI usage rights and other premium features across Meta-owned apps such as Facebook, Instagram, and WhatsApp.
In an article posted on its website, Meta said that Meta One provides subscribers with more self-expression features and AI usage rights, helping creators spend more time creating and less time guessing, and providing businesses with new tools designed to help them grow. The article also emphasized that the core experience of Meta’s apps and Meta AI has always been free, and this will not change; the subscription service unlocks more professional capabilities and expanded AI usage rights beyond the free experience.
These plans build on the company’s single-product subscription plans launched earlier this year, when WhatsApp Plus started at $2.99 per month, and Instagram Plus and Facebook Plus started at $3.99 per month. Under the Meta One bundled subscription, individual users can choose a core subscription at $7.99 per month, or a premium subscription at $19.99 per month. Businesses and content creators can choose from a basic option starting at $14.99 per month to a top tier with features at $499 per month.
Subscription services have long been an ideal way for businesses to obtain a stable revenue stream. Meta indeed needs the money. The company spent $31.08 billion on capital expenditures in the second quarter to build the AI infrastructure supporting its Llama large language model and to provide AI features for its apps. Total expenses for the quarter reached $42.03 billion, up 55% year-over-year.
Meta is expected to spend $130 billion to $145 billion on capital expenditures this year, roughly double last year’s spending. This spending is putting pressure on the company’s finances and cash flow. Fortunately, Meta’s revenue grew 28% to $60.8 billion last quarter, so despite increased spending, net income fell only 15%. But almost all of Meta’s revenue comes from advertising, making the search for other revenue sources such as subscriptions more attractive. Reality Labs—the business once responsible for building Zuckerberg’s metaverse vision—has failed to become such a revenue stream; the business lost $4.62 billion in the second quarter.
Analysts surveyed by Yahoo expect Meta’s third-quarter revenue to be approximately $73.66 billion, up about 23.5% year-over-year; full-year revenue is expected to be $254.1 billion, up 26.4%. The “Other Revenue” line item in Meta’s third-quarter earnings report deserves close attention. If the company’s subscription service begins to grow significantly, indicating that it could eventually become a $10 billion business, then it has great potential to help Meta improve profitability. Anything the company can do to offset the costs of AI expansion will help its shareholders and could potentially lift the stock price out of its year-long slump.
