I’m not exactly sure how Twitter’s current product mapping process is structured, but I’m pretty sure that Elon Musk doesn’t consult anyone else before announcing future directions. Which, I guess, when you own the app, you can do, though it does, seemingly, put Twitter itself into some tough spots in regards to delivering on Elon’s promises.
Yesterday, amid discussion about the resumption of Twitter’s $8 verification program, Musk responded to a tweet, and noted that:
Basic Blue will have half the number of ads. We will offer a higher tier with no ads next year.— Elon Musk (@elonmusk) December 13, 2022
So right now, Musk and Twitter are working towards a version of Twitter Blue that will display half the ads. That’s not available as yet, but it’s coming, while Musk wants to go even further, with an ad-free subscription model, sometime next year.
Which could be good – some people hate ads, and will pay to have them eradicated from view. YouTube Premium, for example, which currently costs $11.99 per month, has, reportedly, around 50 million subscribers.
But it could be challenging, economically, and will be largely dependent on how many people sign up to Twitter’s $8 (or $11 on iOS) plan - because if Twitter wants to make money, it needs to serve ads, or it needs a lot of people to sign up to its new paid programs.
For example, Elon’s stated target for subscription revenue, at this stage, is half of Twitter’s revenue intake. If we go by what Twitter generated in Q2 this year, the last time it reported its performance, then that means we’re looking at around $1.18 billion for the three month period - or just over $393 million per month. Half of that is $196.66m – so Elon’s keen to make close to $200 per month from subscriptions alone, in order to reduce the app’s reliance on advertisers, and thereby enable it to operate with fewer brand safety restrictions and moderation rules.
Based on $8 subscription costs, that would require around 24.6 million paying subscribers, either paying $8 via the web or $11 on iOS (minus Apple’s 30% in-app transaction fees). Which is a lot, but given Elon’s popularity and presence, maybe it’s possible. Maybe.
I mean, as noted, YouTube Premium has 50 million subs - but then again, YouTube has over 2 billion users, versus Twitter’s 238m daily actives. Twitter’s monthly actives would be slightly higher, but still, percentage-wise, it would require an unprecedented level of take-up for Twitter to reach the numbers required to meet that half revenue goal.
But let’s say it does – that would also complicate things from an ad perspective, because if 24 million Twitter users are seeing half the ads, that will then mean that non-paying users will either have to see more ads, or Twitter will have to make even more money from Twitter Blue to make up the potential shortfall in ad exposure.
For example, Twitter currently generates around $12 per US user, per month, based on ad exposure. For every person that’s eventually being shown half the ads, that’ll eat into that revenue stream, which will mean that Twitter will need a lot more people to sign up for Twitter Blue to offset this loss as it goes.
Which is why Twitter’s not rolling this out at launch, because it needs to reach its first threshold (20m+ Blue subscribers) before it can even consider this element, or it’ll end up diluting the revenue benefits.
Providing an extra Twitter Blue tier on top of that, with no ads at all, would then either need to be very pricey, or Twitter will need many, many millions more people to sign-up to Twitter Blue to balance those losses.
Which, really, is Elon’s optimistic aim.
Elon’s hope is that enough people sign-on to pay $8 per month to then use this as a means to combat bots in the app - because if all the real humans are ‘payment verified’, then the only non-checkmark accounts will be bots, helping people identify and avoid those accounts.
But that, again, would require huge take-up, more than we’ve ever come close to seeing from any other subscription offering in any other social app.
Essentially, what I’m saying is that while Twitter is pitching potential ad-reduced and ad-free models for Twitter Blue in future, I wouldn’t hold my breath, as those options will be dependent on large-scale take-up of the initial $8 checkmark offering. Which, I suspect, will end up getting a few million sign-ups, maybe. But it won’t reach the levels required to make it a viable revenue alternative for the app.
But again, it could. Musk’s followers are very passionate, and are very keen to join his mission to free Twitter, and allow more open speech in the app. And there are a lot of them, so it’s possible that Twitter could reach the required levels to make this a viable offering.
Elon certainly seems to think that he’s popular enough to inspire that level of support, but essentially, that’s what he’s betting on – Elon’s selling his popularity as a means to drive subscription take-up in the app, and he believes that he will indeed be able to eek out 24 million plus subscriptions, based on his supporter base.
We’ll see how that plays out, but essentially, you won’t be seeing ad-reduced or ad-free Twitter Blue options form a little while yet.