Corporations Media

Facebook & Twitter – A Move to Subscription Makes Sense

A recent report claims $TWTR is considering a subscription model to augment a significant decline in advertising revenue. This would be among the first of the big social media companies to consider this approach and I believe could lead to a reckoning in the industry. $FB is currently facing a backlash among advertisers who claim the social media company isn’t doing enough to control controversial rhetoric on its platform and will inevitably see a decline in advertising revenue. A few years ago, the idea of paying to access online “news” content wasn’t a thing. Publishers were primarily in the business of selling ads in offline media and as they built their online presence they carried this business model over. As consumers got irritated with intrusive ads, it became clear they had to change their offering. Newspapers such as the NYTimes piloted new paywall programs to test consumers’ appetite for subscription based products. The result was mostly favorable, and as a result, many publishers today have pivoted their business models to favor subscription over advertising revenue especially as it becomes increasingly difficult to get ad dollars from brands in a world in which the big tech companies ($GOOG, $FB, etc) dwarf smaller publishers in traffic.

Now that consumers have become more accustomed to paying for content, a hybrid approach at Twitter could be the answer. Twitter is seen as a news source by many and if the NYTimes and others can charge for this then it’s probable that core users will be willing to pay for Twitter. If this rolls out, expect it to be under a freemium model whereby non paying users will get some unfettered access before being prompted to pay. 

This is just the beginning. Facebook is next. As much as they refer to themselves as a ‘social network’ they are really becoming a modern day alternative news organization. As mounting regulatory pressure grows they will have to look at new sources of growth (they’ve done nothing to monetize What’sApp for example). One idea could be creating a subscription ad-free super bundle of their 3 core products: Instagram, FB and What’sApp – with premium connectivity features for paid subscribers. The fear now is cutting off the hand that feeds you and for FB that’s mostly ad revenue. There comes a time though when the opportunity is worth the risk. In the streaming world, Disney and NBCUniversal risked their relationships with payTV operators by creating Disney+ and Peacock, respectively, because they recognized the longer term profitability of going direct-to-consumer through a subscription model. 

There are ways to create a freemium experience without cannibalization and it’s just a matter of time before Facebook and others follow in Twitter’s steps whether they want to or not. 

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