Product Case Study — Monetizing Twitter The Right Way
Introduction
Step into the world of Twitter, where a single tweet can ignite revolutions and shape the course of history. With its humble beginnings, marked by Jack Dorsey’s iconic “just setting up my twttr” tweet, Twitter has emerged as a powerful voice that resonates with millions.
Regardless of its remarkable reputation and significant influence, Twitter faces considerable challenges. Its valuation has experienced a downward trend, and its stock performance has been lackluster. Detractors have even labeled its business model as “broken,” pointing to its inability to turn a profit.
Despite being one of the early pioneers of social media, Twitter continues to struggle with revenue generation and profitability and has failed to turn a profit for eight out of the past ten years. Moreover, Twitter sits at the 14th spot in popularity (556 million MAU as of January 2023). In contrast, Facebook dominates the scene with a whopping 2.98 billion MAU. That’s like a colossal fivefold difference!
Now it’s facing leadership changes with Elon Musk, after striking a monumental deal worth $44 billion for the company, as the newest addition to the list.
This is not a way to make money… Having a platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. This is not about the economics at all — The world’s richest man
The acquisition triggers a chain reaction, causing Twitter’s debt to soar into the stratosphere. Billions of dollars in loans are secured against the very foundation of the platform itself. Now burdened by this staggering debt, Twitter faces an uphill battle as it grapples with annual interest payments that exceed a billion dollars — more than its total profits for 2021. Talk about a rocky road to profitability!
Nonetheless, Twitter remains a private company striving to navigate the complex landscape of business. While its societal impact is undeniable, generating revenue becomes paramount for its sustainability. In this case study, we delve into the quest to monetize Twitter effectively, as previous attempts, including those under Elon Musk’s leadership, have resulted in turmoil.
Twitter’s Revenue Model
Twitter’s revenue model can be broken down into 2 main streams: Advertising and Data Licensing
In 2022, Twitter generated total revenue of $4.4 billion, experiencing an 11% decrease compared to the previous year’s earnings. Year after year, the company has witnessed negative profits, and it’s clear that unless the business model undergoes significant changes or tweaks, these losses will persist.
However, the bad news doesn’t end there, the digital advertising market, which had been the primary source of revenue for Twitter, is drying up. Even industry giants like Google and Facebook are feeling the impact. Following Musk’s takeover, major advertising agencies have advised their clients to halt Twitter advertising altogether. According to The New York Times, Twitter experienced a staggering 59% decline in US advertising revenue during a five-week period from April 1 to the first week of May compared to the same timeframe the previous year.
Whether due to the sudden chaos or the broader economic climate, the consequences are the same — an urgent need to make money from sources other than advertising, but what’s been proposed so far doesn’t come close to filling the gap.
What has Twitter been doing wrong?
Apart from the ones that are causing impending chaos, let’s talk about the ones that directly impact revenue.
Twitter Blue turning users Red 😡
Twitter Blue, the subscription service, should deliver value that truly justifies the extra cost. However, instead of innovating, they’ve locked basic features like SMS 2FA and overdue ones like encrypted DMs behind a paywall, even though ads are still present (though reduced by 50%).
Paying for a blue checkmark undermines the purpose of “Verification,” causing chaos with impersonation and scams. While other platforms like Meta are following suit, they at least have a thorough verification process to ensure authenticity.
A subscription model helps reduce reliance on declining ad revenue, as demonstrated by YouTube’s 80 million subscribers for YouTube Premium. Users gladly pay for features like background play, ad-free viewing, and high-quality offline video access.
Twitter Blue feels like a weak attempt to maximize profits from a large user base. Instead, they should focus on a select group of power users and creators, offering a compelling subscription service that users will eagerly embrace.
Illogical API tier revisions 😤
Following the changes made to the API tiers, there was a considerable backlash in the developer community because the free tier is basically not useful for anything, and the basic tier, aimed at hobbyists and students doesn’t offer anything for practical purposes. This change felt like a blatant cash grab. Many developers who tried to subscribe to the new basic tier have found out to their dismay that they were already over the post and read limits. The result? Early-stage developers can’t afford to enter the market.
The API tier changes were followed by the platform updating its developer rules to ban third-party clients, causing popular third-party Twitter apps like Twitterrific and Tweetbot to abandon the platform. I get they’re trying their best to make money but the execution of these strategies is appalling. Changes are meant to be met with resistance but that’s why you roll them out incrementally and strategically.
Playing to our strengths 💪
Whatever Twitter has done till now is basically shooting arrows in the dark. That is the reason why there is such backlash at all of Elon Musk’s attempts at trying to make Twitter money. We’re forgetting one thing: Twitter is its own thing.
1️⃣ Unique User Base
Twitter is the place diverse opinions collide, from critiquing government policies to debating pineapple on pizza. One in four users proudly showcases their professional journeys. Twitter’s diverse user base and the myriad ways users utilize the platform are truly fascinating. Finally, enter the “power users,” a minority who dominate the tweet game. Let’s create standout features tailored to these influential forces.
2️⃣ Where You Hear About Things First
With its real-time nature and wide user base, Twitter has become an unparalleled tool for news aggregation, discovery, and lightning-fast viral spread. In fact, Twitter has solidified its position as the leading social platform for news and current events, with an impressive 61.2% of people relying on it to stay up to date.
3️⃣ Microblogging Powerhouse
Twitter is the only place where users don’t need to consume lengthy text content. With a limit of 280 characters, it’s microblogging at its finest. But the real charm of Twitter lies in its real-time public conversations. It’s a platform where transparency and openness thrive and you get direct access to your favorite public figures, celebrities, politicians, influencers, and industry experts.
User Profile
Since we now know Twitter’s strengths, we need to define sample user profiles that will help us zero down on solutions to help them.
Solutions
Now let’s come up with solutions for the above 2 user profiles!
Twitter Verified
Twitter’s got the eligibility criteria for a verification badge all wrong. Usually, when an account has a verification badge, it is associated with having a substantial amount of following or online presence. Currently, even someone with 55 followers can get a verification badge on Twitter which downplays the meaning of having a badge in the first place. Verification badges can be marketed as a subscription service but should be targeted toward power users. But, instead of just paying for the badge, we’ll give you a bunch of cool features that make it worth the extra bucks.
The blue checkmark means that the account has an active subscription to Twitter Blue and meets our eligibility requirements. — Twitter
Think about it, if a user has a following of 100k followers on Twitter, it’s evident they take social media seriously, leveraging it to shape their reputation and potentially generate income. Complaining about an $8 monthly fee for a platform that directly contributes to their earnings seems futile when they earn tens of thousands. Moreover, from now on people will have to start paying Meta for verification badges on Facebook and Twitter.
Here’s what I think the ideal Twitter Verified should be like:
- No crazy steep jumps in pricing tiers (currently Twitter Verified Organizations need to pay $1000 dollar a month and additional $50 dollars for each additional affiliate account 🤯)
- Good eligibility criteria and an application process to make it exclusive and free from impersonations
- Useful features that influential people would actually not mind paying for
- Streamlining verification badges, Twitter should adopt two types: a Blue badge for notable individuals and a Gold badge for notable organizations.
- Reasonable pricing according to different regions
When pricing previously unpriced items, it’s crucial to start from a base price and gradually increase it. That’s why we’ve set a reasonable price of $14.99 — demanding $1000 a month (for organizations) simply won’t attract customers. As of November 2022, Twitter boasted over 420,000 verified accounts. If we conservatively estimate that 70% of these accounts opt for a Blue verification badge, we could potentially generate a staggering annual revenue of $53 million from this alone. That’s a hefty sum!
Twitter Premium
Coming to the long-awaited Twitter Premium aka Twitter Blue subscription service. The reasoning behind rebranding this service as “Twitter Premium” as the word premium resonates with exclusivity and therefore the psychology of the user is affected. Similar to how Youtube Red was rebranded as Youtube Premium. Words do have a big impact. This is another subscription service aimed at all users of Twitter who want additional features that enhance their experience.
Twitter Premium will also include a lot more features, and will also carry some features over from the existing Twitter Blue subscription model. Things like reader mode for threads, text formatting, etc. but we won’t restrict features like editing tweets & 2FA to paying users since these should be made available to everyone on the platform.
API tiers
The newly proposed API tiers improve on the existing ones by finding a balance between what the business needs to generate a profit & what the developers need to continue developing on the platform.
This is achieved by getting rid of the ‘Basic’ & ‘Pro’ tiers which are currently being offered, and replacing them with the ‘Standard’ tier which offers more flexibility to developers by increasing the tweet caps for posts and pulls at a reasonable price. Also, the ‘Standard’ and ‘Professional’ tiers are now offered with an annual subscription option as well at discounted prices.
Twitter Creator Program
The virtuous cycle of the creator ecosystem is this: creators make content, contribute to the platform, and the platform builds tools around that content, which gets creators paid and happy, which gets them making more content, etc.
The best example of this is: YouTube has added things from all over the place, like the YouTube Partner Program(YPP), Super Thanks, Super Chats and Super Stickers, and Channel Memberships. The creators get 70% of the money from these things and all of this makes Youtube the most rewarding social platform for creators.
Recently, we’ve been seeing Twitter produce more and more monetization tools (Super Follows, Tips, Ticketed Spaces to name a few) to attract creators. Finally, on June 10, 2023, 16 years after Youtube launched the YPP, Elon Musk announced that Twitter will be reeling in ad revenue sharing for creators. Yeah, we’re a little late to the show.
The catch is you have to be a Twitter Blue subscriber to be even able to earn revenue through ads. So basically paying $8 per month (or more) to receive a share of the dough. That doesn’t make sense. Moreover, we should extend revenue sharing to include ads in tweets and on Twitter profiles, in addition to tweet threads and video pre-rolls.
What we’ve done here is that we have taken all the monetization features of Twitter and rebranded them under one program with revised eligibility criteria. The percentage of revenue share for creators and Twitter will be different for Twitter Premium users and non-Twitter Premium. Amazon does a similar thing for Prime. This will serve as an incentive for people to pay for Twitter Premium driving more revenue. Also, anyone (even casual users) will be able to apply to the Twitter Creator Program. However, the Twitter Verified users (power users) will get expedited access to the program.
What makes creator programs so attractive are the money-making opportunities, which is why we have kept revenue shares for creators up to 90%. As time passes and this model proves to be successful we can increase Twitter’s share of revenue gradually. It’s a win-win situation for both creators and Twitter and a sure-shot way to keep the cash flowing.
Evaluating Solutions
Let’s assess our solutions using the RICE method. This will help us prioritize the most effective one —
From the table above we can see that top priority should be given to Twitter Premium since it would have the maximum reach and the greatest impact, as it is available to each and every Twitter user and carries compelling features.
Twitter Premium GTM Strategy
Subscription models are an incredibly effective way to expand your revenue streams. In fact — 94% of the top-250 apps have already jumped on this success train but the catch is only a tiny 3–5% of users actually convert into subscribers, and by the third month, a staggering 80% of them churn away.
With these numbers, it becomes clear why launching a revamped version of Twitter Blue is an absolute must. And to make things even more challenging, the number of Twitter users has taken a dip of 3.90% in 2022, with projections showing a further decline of 5.14% by 2024.
So here’s the strategy — when rolling out a paid subscription, it’s wise to offer a freemium version. Surprisingly, an average of 38% of users who start a trial end up subscribing. It seems that once users get a taste of exclusive content, additional features, and an ad-free experience, they simply can’t resist.
But the battle is far from over! Monthly subscriptions boast a median first renewal rate of 56%, which only gets better over time. This means that if customers choose to renew their subscription after the initial term, they’re likely to keep renewing it in the future. However, lurking around the corner are those pesky churn risks, which can stem from high pricing, app performance issues, lackluster onboarding experiences, or even failed payments. The key lies in identifying these risks along the customer journey and crafting effective churn prevention campaigns.
Oh, and let’s not forget about pricing! It’s crucial to adapt your app prices to different regions and demographics. Consider experimenting with 7-, 14-, or 30-day trials and testing out various upgrade plans, like offering two months free for a full-year commitment or tempting users with additional discounts on longer subscriptions. Converting free app users into paying subscribers often comes down to presenting the right upgrade offer.
Final Thoughts
Twitter has weathered the storm and then some lately! Especially with the upcoming cage fight and Meta’s upcoming competitor rumored to be called ‘Threads’ launching this week. Every single day, there’s some new announcement making the rounds when it comes to Twitter. A couple of days back when Twitter decided to block non-logged-in users from reading tweets, then the very next day, they introduced these rate limits on how many tweets you can view in a day. An experiment found that you can hit that limit within a mere 10 minutes of mindlessly scrolling through Twitter with an unverified account. It’s no wonder these chaotic business decisions are taking a toll on Twitter and driving users away. Imagine shelling out $8 per month and having a limit on how many tweets you can view.
The solutions we offered above are not hotfixes, rather they are long-term solutions that need to be implemented with a lot of thought and strategy. Convincing people to pay for services can be quite a challenge. Monetization resistance is real! So, Twitter needs to get creative and take a smart approach to win over its users. It’s time to generate positive buzz and show everyone the incredible value they’ll receive in return for their investment.
As an avid Twitter user, I genuinely love the platform and want to see it thrive. The future may seem uncertain, but Twitter has a unique niche and an incredibly loyal user base. With some adjustments to their business model, they’ll overcome the chaos and reclaim their glory. So, let’s see how things work out for Twitter and hope for the best! ✨
