Twitter 100% paid? A great 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 a restless manner. The victim of a new owner who has removed all semblance of checks and balances and is incapable of a modicum of behavioral control, Twitter is going, at first glance, to the wall.

A businessman who has the ability to insult one of his clients is not good for the company. This is exactly what Elon Musk did last weekend, responding to a Democratic senator complaining about the ease with which a journalist from Washington post has created a fake account in his name: “Maybe because your account looks like a parody.” But let’s put aside the psychiatric dimension of Musk’s management to explore one of the options being considered to restore Twitter’s fundamentally flawed economy.

Twitter earns ten times less than Meta per user

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One of the main indicators for judging the economic performance of a platform is the average revenue per user (in jargon, “ARPU” for Average Revenue per User) . Based on the 230 million so-called “monetizable” users – who (supposedly) are not robots or fake accounts – reported in the turnover of the platform, Twitter realizes about 23 dollars of revenue per year and per person. At first glance, it’s not bad. That’s almost as much as Instagram, twice as much as YouTube or Snap.

But giants like Meta or Google benefit from an effect of size and diversity of revenue sources. They make it possible to serve specific segments, to achieve large economies of scale and 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 higher than Twitter. All of this makes a big difference depending on whether it’s a YouTube fan who lives in London, a Brazilian student who makes dozens of searches a week, or a Kenyan who uses an Android phone in cheap.

More interesting is the revenue breakdown of Meta Platforms – which is ahead of 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 surpasses 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 just a global average that hides deep geographic differences. 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 an 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 each year is modest and fragile because it depends only on advertising.

The relevance of a paid service

Charging for Twitter usage would have three main advantages:

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

2/ Create recurring, more stable and more predictable revenue for a platform that needs to undergo a major modernization. Building a subscriber base is often smarter than betting on the fickle nature of digital advertising.

3/ The paid model can reduce a vast stratum that only thrives on invective and division. This covers most of the costs of moderating the platform. Removing it naturally would have the advantage of “quieting” Twitter.

The next question is the acceptable price level for Twitter users. For this type of platform, the choice is either to charge a small number of intensive users relatively expensive or rely on a large mass paying very little.

Interestingly, this is exactly what the founders of WhatsApp thought about in the years 2009-2014, before the acquisition of Facebook. At first, Brian Acton and Jan Koum didn’t want to hear about the publicity and privacy pressure this model would bring. So they came up with a system where users would pay a dollar to download the app to their phone, plus a dollars per year (!) of royalties. With 200 million users in 2013 it could work, especially since the company was very economical as it only worked with 50 people. There were 7,500 employees when Musk bought Twitter to serve a similar audience; even counting the big one gives an idea of ​​the extra work that the new owner happily carved out.

One dollar a year for WhatsApp

Today, Elon Musk can bet on a model like the first version of WhatsApp, by adapting it a little, for example by aiming for 10 dollars per year for its 230 million identified users, which will earn 2.3 billion every year. It will be viable if operating costs can be reduced by 50% like Musk’s dream.

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

Elon Musk wants to reduce Twitter’s annual charge to 2.5 billion, from the current 5 billion; to cover this cost of 8 dollars per month subscription would require converting about 10% of its current audience. Moreover, these 10% of users account for 92% of tweets made in the United States, according to the Pew Research Center. It is clear that these are the ones that Elon Musk should strive to convert into payment, through a well-developed communication campaign, accompanied by a promise of indisputable advantages such as, for example, the removal of ads, and flawless moderation. . But that doesn’t take into account the unfiltered communication of the new owner rushing through the fog, screaming.


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