On the evening of February 8, it was reported that Twitter was developing a subscription product to reduce its dependence on advertising.
In fact, Twitter has been considering this plan for years. In view of the spread of the epidemic and the pressure of investors to accelerate its development, this plan has become more priority.
Currently, most of Twitter's revenue comes from precision advertising, which provides promotional posts for specific user groups. Data from research firm eMarketer shows that Twitter's advertising business has grown slower than competitors such as Facebook and Snap-in in recent years. Currently, Twitter's share of the global digital advertising market is only 0.8%.
If it launches subscription service, Twitter will benefit from a new source of revenue, and will no longer rely so much on brand advertising. Today, Twitter's user base in the core US market has stabilized, which means that it cannot simply rely on increasing the number of users to increase revenue.
Explore multiple subscription options
Informed sources revealed that in order to explore potential options beyond advertising sales, some Twitter teams are studying subscription services, one of which is codenamed "Rogue One." People familiar with the matter said that at least one idea is related to "tips", that is, users pay for exclusive content to people they follow.
Other ways to generate recurring income include charging for services such as Tweetdeck (a client platform acquired by Twitter), or charging for advanced user features such as "Undo Send" or "Personal Profile Customization Options."
"Subscription services" have always been an attractive alternative to "advertising services," but social networks have traditionally been free as a way to encourage user growth and engagement, and then subsidized through paid marketing posts. But Twitter’s chief financial officer (CFO) Ned Sgar (Ned Sgar) said in a conference call with investors last year that certain subscription options would provide “persistent” sales, with recurring revenue more stable than advertising.
But Siegel pointed out at the time that Twitter was not only "very, very early" in exploring subscription services, but also very picky about how it works. He said: "When we ask consumers to pay for certain aspects of Twitter, we have a high threshold."
Twitter will release its fiscal fourth quarter and full-year earnings report for the 2020 fiscal year after the US stock market closes on February 9 (February 10, Beijing time). Analysts said that by then Twitter is likely to inform investors of its latest ideas. In the past two-quarters of conference calls, Twitter mentioned the idea of subscription. According to analysts’ estimates, Twitter’s fourth-quarter revenue will grow 18% year-on-year to $1.19 billion, while earnings per share will reach 30 cents.
In response, Bruce Falck, Twitter's head of revenue products, said in a statement: “Improving revenue persistence is our company’s primary goal, which may include subscriptions. Although we are excited about this potential, it should be pointed out that it is still in a very early stage of exploration and we do not expect to generate any significant revenue in 2021."
In addition, Twitter is also considering charging for services such as Tweetdeck. TweetDeck is currently free and there are no ads, which makes it attractive as a "main feed alternative".
In addition, a survey conducted in July last year also showed that Twitter is weighing whether consumers are willing to pay for special features, such as "unsend" options or custom colors for their personal data. It is unclear which products will eventually become subscription services.
Analysts differ
Analysts have different opinions on which option works best. JMP Securities analyst Ron Josey said last summer: “A subscription service either provides more content or removes ads so that loyal Twitter users will like it.”
And Pivotal Research senior analyst Michael Levine (Michael Levine) believes that people will not pay for Twitter without ads, Twitter's best choice is to sell some type of exclusive content.
According to former Twitter employees, Twitter has been considering the idea of subscriptions for years. As early as 2017, an internal team was studying how to charge Tweetdeck. But later, this research was abandoned and no subscription features were tested.
In addition, Twitter's vision of developing subscription services has also been complicated by competitors, including Facebook, which has always been free. Facebook CEO Mark Zuckerberg (Mark Zuckerberg) has said that charging users will affect growth and undermine its mission to "connect the world."
In 2014, when Facebook acquired the instant messaging app WhatsApp for US$19 billion, it canceled the app’s annual subscription of US$1 to encourage more people to sign up.