Twitter is considering charging a subscription for some features
Twitter is building a subscription product as a way to ease its dependence on advertising, a plan that the social network has considered it for years and has taken on a higher priority during the pandemic and pressure from activist investors to accelerate its growth.
Most of Twitter’s revenue comes from targeted advertising, which offers promoted posts that are targeted at specific groups of users. That business has grown in recent years at a slower rate than competitors like Facebook and Snap Inc., and Twitter’s share of the global digital advertising market remains at 0.8 percent, according to EMarketer.
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Twitter is thought to benefit from a separate revenue stream that is less reliant on brand advertising. The company’s user base in the US, its most valuable market, has also started to stagnate, meaning it can’t just rely on adding users to juice revenue.
To explore potential options outside of ad sales, several Twitter teams are investigating subscription offers, including one that uses the codename “Rogue One,” according to people familiar with the effort. At least one idea being considered is related to tips, or the ability for users to pay people they follow for exclusive content.
Other possible ways to generate recurring revenue include charging for the use of services like Tweetdeck or advanced user features like “undo send” or profile customization options.
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Subscriptions have always offered a tempting alternative to advertising, but social media has traditionally been kept free as a way to encourage growth and user engagement, which is then subsidized with paid marketing posts.
Still, Twitter CFO Ned Segal said in a call with investors last year that a subscription option of some kind would offer “lasting” sales and that recurring revenue is more consistent than ad spend. Segal warned in July that Twitter was not only “very, very early” in exploring a subscription service, but also planned to be picky about how it develops. “We have a very high bar for asking consumers to pay for aspects of Twitter,” he said.
The San Francisco-based company has brought up the idea of subscriptions in the last two quarterly calls, but historically the company has been slow in making product decisions. For the fourth quarter, analysts’ project revenue increased 18 percent from a year earlier to $ 1.19 billion, with an estimated profit of 30 cents a share, according to data compiled by Bloomberg.
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“Increasing the durability of revenue is our number one business goal,” Bruce Falck, Twitter’s head of revenue products, said in a statement, adding that this “may include” subscriptions. “While we are excited about this potential, it is important to note that we are still in a very early exploration phase and do not expect significant revenue attributable to these opportunities in 2021. “
Some possibilities for this type of recurring income have emerged based on previous user surveys, executive comments, or product moves. Twitter tested the idea for user tips in the past with its soon-to-be-extinct Periscope live video service, and it has become a popular business model for companies hoping to help creators make money from their fans or followers. Twitter would take a part of the transactions.
The company is also considering charging some power users for a suite of services, which could include Tweetdeck, a kind of dashboard useful for viewing multiple feeds and monitor different accounts. The service is typically used by more advanced Twitter users and allows them to follow multiple streams of tweets at once. Tweetdeck is currently free and has no ads, which makes it attractive to some users as an alternative to feed principal.
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A recent poll from July, discovered by journalist Andrew Roth, also shows that Twitter is weighing whether consumers would pay for special features, as an “undo shipping” option or custom colors for your profiles. It is not yet clear which products will eventually reach Twitter consumers.
Analysts have different ideas about which options might work best. “A subscription offer that offers more content or removes ads would be welcomed by the most loyal users of Twitter,” wrote Ron Josey, an analyst at JMP Securities, last summer.
Michael Levine, a senior analyst at Pivotal Research Group, doesn’t think people pay for Twitter without advertising, but he agrees that the company’s best option is to start selling some kind of exclusive content.