Twitter 100% paid? A viable idea… if only Elon Musk would calm down

Let’s try to distinguish the man from the business model. The way Twitter is conducted is reminiscent of a car accident filmed in slow motion where all the breakups follow each other in an implacable fashion. Victim of a new owner who has eliminated all forms of checks and balances and who is incapable of the slightest behavioral control, Twitter is going, at first sight, into the wall.

An entrepreneur capable of insulting one of his clients does not bode well for the company. This is precisely what Elon Musk did last weekend, retorting to a Democratic senator who was complaining about the ease with which a journalist from the washington post had created a fake account in his name: “It may be because your account looks like a parody”. But let’s leave aside the psychiatric dimension of Musk’s management to explore one of the options considered to restore the fundamentally flawed economy of Twitter.

Twitter earns ten times less than Meta per user

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One of the key indicators for judging the economic performance of a platform is the average revenue per user (in the jargon, “ARPU” for Average Revenue per User) . Based on the 230 million so-called “monetizable” users – who are (supposedly) neither robots nor fake accounts – reported to the turnover of the platform, Twitter realizes about 23 dollars of income per year and per person. At first glance, it’s not so bad. That’s about as much as Instagram, twice as much as YouTube or Snap.

But the giants like Meta or Google benefit from an effect of size and diversity of sources of income. They make it possible to serve specific segments, to achieve large economies of scale and to be less dependent on the economic situation.

The king of ARPU remains Alphabet, whose various services – the Google search engine, YouTube, business services – bring in an average of $130 per year per user, six times more than Twitter. All of this comes with huge disparities depending on whether it’s a YouTube fan living in London, a Brazilian student doing dozens of searches a week, or a Kenyan using an Android phone at low cost.

More interesting is the revenue breakdown of Meta Platforms – which tops Facebook, Instagram and WhatsApp. The company enjoys the mass effect that gives it its 2.93 billion users, ten times more than Twitter. Its revenue per user crushes that of other social networks with an ARPU of $40 per person per year (calculated over 12 rolling months at the end of September 2022). But again, this is only a global average that hides deep geographical disparities. Thus, an American user of Meta will generate more than 200 dollars per year of income, against 65 dollars for a European, 20 dollars for Asian and 12 dollars in the rest of the world.

However, Twitter is essentially a tool reserved for an urban audience in rich countries. According to this prism, the twenty dollars per year that it generates per year is modest and fragile because it depends solely on advertising.

The relevance of a paid service

Charging for the use of Twitter would have three main advantages:

1/ Remove Twitter from the competition of advertising war machines such as Meta and Google, which employ thousands of engineers with the sole aim of maximizing the audience and the engagement (the click) of users in 190 countries.

2/ Produce recurring, more stable and more predictable income for a platform that needs to carry out a major modernization. Developing a subscriber base is often wiser than betting on inherently fickle digital advertising.

3/ The paid model can reduce a vast stratum that only thrives on invective and division. This concentrates most of the platform’s moderation costs. Getting rid of it in a natural way would have the advantage of “calming” Twitter.

The next question being the acceptable price level for Twitter users. For this kind of platform, the choice is either to charge a small number of intensive users quite dearly or to count on a large mass paying very little.

Interestingly, this is exactly what the founders of WhatsApp envisioned in the years 2009-2014, before the takeover by Facebook. Initially, Brian Acton and Jan Koum did not want to hear about publicity and the pressure on privacy induced by this model. So they had envisioned a system where users would pay a dollar to download the app to their phone, plus a dollar per year (!) of royalties. With 200 million users in 2013 it could work, especially since the company was extremely frugal since it only worked with 50 people. There were 7,500 employees when Musk bought Twitter to serve a similar audience; even counting large gives an idea of ​​the excess labor the new owner has happily carved out.

A dollar a year for WhatsApp

Today, Elon Musk could bet on a model like WhatsApp first version, by adapting it a little, for example by aiming for 10 dollars per year for its 230 million identified users, which would make 2.3 billion per year. It’s viable if operating costs are reduced by 50% like Musk’s dream.

The other option is to target the most intensive users and make them pay more (eg a hundred dollars per year). It was Musk’s idea who wanted to price verified accounts. Its latest price is $8 per month ($96 per year). It’s expensive to pay for a service that is only necessary for a very small minority of users vulnerable to fake accounts (public persons), but which remains a label of social vanity for the vast majority of “badgers” – until now , you had to ask for it with an instance from Twitter whose verification system was porous. Today, barely 0.2% of the social network’s active accounts are certified.

Elon Musk wants to reduce Twitter’s annual charges to 2.5 billion, from the current 5 billion; to cover this amount with an 8 dollar per month subscription would therefore require converting about 10% of its current audience. Moreover, these 10% of users account for 92% of tweets produced in the United States, according to the Pew Research Center. These are obviously the ones that Elon Musk should strive to convert to paying, through a well-constructed communication campaign, accompanied by a promise of indisputable advantages such as, for example, the removal of advertisements, and flawless moderation. . But that’s without taking into account the unfiltered communication of the new owner who rushes into the fog, vociferating.


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