I recently received this email from Meta. If you run ads on Meta's platforms, like Facebook and Instagram, you likely received this email too.
In this newsletter, I'm going to break down how you will be paying this bill out of your own pockets. Not your clients' pockets, not your company's pockets ... out of your personal pockets with personal cash.
These fees range from roughly 2 percent to 5 percent depending on the country and are designed to cover Digital Service Taxes imposed by those governments.
On the surface, Meta is referring to this extra expense as a fee. But make no mistake that this is a tax imposed on Meta that they are passing on to the advertiser. Meta cannot impose a tax, only governments can do that, but they sure as shit can pass taxes onto their customer via a "location fee".
The truth reveals itself if you read the whole email. If you run $100 in ads to Italy, Meta charges $100 for the ads and then adds a $3 location fee on top. Note that they are not taking $3 off the top and the rest goes to them. They still get their $100 and the advertiser pays the tax on top of that.
Meta is not paying the tax. You are.
Here is how the chain actually works.
A country taxes Meta.
Meta adds a fee to the advertiser.
The advertiser adds the cost into business expenses.
Businesses raise prices to maintain margins.
Consumers pay more.
The money flows through the entire system until it lands exactly where it always lands: the end customer.
Who is this "end consumer" I speak of?
It's you!
We've all heard politicians talk about taxing big tech or taxing corporations. They make it sound like it's someone is going to get stuck with the bill. "Yah, tax the greedy companies!!!"
“We shouldn’t be afraid of talking about a tax cut for working people that’s paid for by making big corporations and the wealthiest few pay their fair share.“
Corporate taxes almost never stay with corporations. They move downstream and there is a good chance you are somewhere in that stream.
Which leads to the second lesson in this story.
Meta is not absorbing this cost. They are passing it directly to the advertiser. That should be a signal to every agency owner reading this. You should do the exact same thing.
Do not absorb platform costs that are outside your control. If Meta increases costs, if countries add taxes, if regulations create new expenses, those costs should flow through to the client the same way Meta is pushing them to you or your clients.
If a $160 billion company refuses to eat those costs, there is no reason a $200k or a $5 million agency should.
Protect your margins. Price honestly. And make sure your clients understand how these platforms actually work.
This is the kind of real world lesson I share in this newsletter. I write about how agency owners can build profitable agencies that give them more freedom, stronger margins, and the ability to scale without burning out.
Subscribe to this newsletter at businessofagency.com.
I hope that helps and gives you something to think about.
~ Erik