Pricing Page Teardown - Should Twitter have a subscription?
We break down whether or not Twitter should have a subscription.
This episode might reference ProfitWell and ProfitWell Recur. Some information may be out of date.
Founded in 2006, Twitter has 330 million monthly active users, half of which are active daily. It's been used for revolutions, memes, and spreading information. Twitter's founding story started with Noah Glass creating Odeo, which later became a podcasting platform. Jack Dorsey suggested a social network made up of a person's status, which led to the creation of Twitter. Despite creating the name Twitter and contributing to its development, Glass's involvement was not fully recognized. Twitter's success comes from its influence and accessibility, with over 90% of journalists and 83% of world leaders using the platform. However, Twitter only turned a profit in 2017, 12 years after its founding. User and revenue growth has stalled, leading critics to question the ad model. Twitter's CEO, Jack Dorsey, is also the CEO of Square, which has opened him and Twitter to criticism.
The question becomes: Can Twitter use innovation to get beyond the ad model and take advantage of their relevance in our world, especially when Facebook and other social media platforms are able to monetize their traffic at almost triple the rate of Twitter? It seems it’s time for a revolution when it comes to Twitter, so we’re going to answer this question by collecting data from 10, 542 current and prospective Twitter customers who would be interested in a Twitter subscription. Read on to get the data and answers to all these questions.
The wrong revenue model
Despite the negative attention on Trump's use of Twitter, I believe the platform still holds value. However, from a business perspective, Twitter's stock price hasn't increased despite its widespread influence on culture and media since Trump's presidency. While revenue has improved, Twitter's ad-focused revenue model isn't effectively monetizing its traffic. This is similar to YouTube and Facebook, which struggled to monetize non-brand-friendly content. Surprisingly, Twitter only makes about $25 per user per year, compared to Facebook's $7.50 per user per quarter, despite having fewer users. Twitter needs to change its revenue model to better align with its goals and user needs.
So, we're going to walk through how we would actually build a subscription for Twitter and validate just an idea in general. I think a lot of times, especially in B2B businesses, people want to go up market, or downmarket, or everything in between, but don't know where to start. So I think this is a good example to not only show that Twitter has a viable option for a subscription, but also what some of the things that should be in it are.
Twitter's data and analysis
Willingness to pay helps determine feasibility
We gathered data on the willingness to pay for a Twitter subscription. This data was collected from both personal and business users. The aim was to understand the baseline of willingness to pay for a subscription with cool features and premiums. For personal subscriptions, those with a household income under $75k are still willing to pay around $40. This may not be the main target audience for a subscription business, but getting just one million users to sign up could still generate over $100 million in revenue. It could also provide Twitter with some flexibility in the context of the ad model. For those with a household income between $75k and $150k, the upper echelon of willingness to pay is $100 per month. The same goes for those making over $150k per year.
There's a small movement around $100 per month. Twitter is like the Apple of social media. For personal use, charge $99 per month at the high end. If a million of the 330 million users sign up, it's great.
On the business side, those making less than a million a year are willing to pay about $50 a month for a premium product. Those making over a million are willing to pay between $1 and $1,000 with high variance. DTC companies making over a million to 10 million are willing to pay much more. Companies making over 10 million with marketing teams are willing to pay for premium tiers.
Segment willingness to pay based on value props
To determine viability, segment willingness to pay based on value propositions. A Twitter subscription is a potential opportunity, but charging $1 to $5 per month, as done for ad-driven models, won't be effective unless you have many users. It may be best to use both an ad and subscription model if you have a large user base.
To correlate willingness to pay with desired features, consider whether the value proposition or feature is what someone is seeking. The concept of automated follower boosting has high variance, and the existing subscription costs $100 per month. The company fills remnant inventory with subscriber tweets to attract more users. It is unclear whether this strategy is working. Occasionally, someone who doesn't follow a subscriber will see their promoted tweets and respond.
There are people willing to pay a lot more than others for ad subscriptions. Twitter could offer an ad-free experience as a proxy for privacy, but they may not want to be seen as a privacy-like platform. They could also charge for verification, which some people would pay more for. Twitter has the potential to make money from a premium subscription in addition to ads, like dating apps have done successfully.
The value matrix
You're about to see something called a value matrix. Here, we collected data from the group comparing feature preferences and plotted those on the horizontal axis. More valued features on the right, less valued on the left. We then collected willingness to pay for the overall product and plotted that based on their number-one feature preference on the y-axis. Analyzing data in this manner allows us to determine which features are differentiable ad-ons, core, or commoditized for each segment.
Dig deep on feature matrices
Next up, dig deep on feature matrices to build bundles. We're back on the B2B side looking at some of the features that actually moved the needle for this proposed subscription. And you can see automated audience building, again, something that's really resonating with potential users here. It makes a ton of sense—people get on Twitter and want to build their audience. They want to utilize that audience.
I was encouraged by the audience curation aspect of this. Instead of just growing your audience, consider the success of brands like Wendy's on Twitter. For those aspiring to be like Wendy's, a paywall can be implemented to create a community aspect. Page customization and branding, although not impactful from a marketing perspective, can still be valuable. It's important to determine which features will drive value and which should be removed to determine how to monetize. Ad-ons are often overlooked, and with a fragmented user base like Twitter, a consumer play could be pursued alongside a B2B play to hedge ad revenue. It's disappointing to see Twitter not embrace this approach, as it could greatly improve their stock price.
In conclusion, Twitter's revenue model needs to change in order to better align with its goals and user needs. A subscription model may be a viable option for Twitter, but it is important to segment willingness to pay based on value propositions and to determine which features will drive value and which should be removed to determine how to monetize. Ad-ons are often overlooked, and with a fragmented user base like Twitter, a consumer play could be pursued alongside a B2B play to hedge ad revenue. It remains to be seen whether Twitter will take this approach, but it is clear that innovation is necessary for Twitter to get beyond the ad model and take advantage of its relevance in our world.
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