For a long time, the age-old question has lingered in the world of social networks: can social platforms sustainably finance themselves through subscriptions and abolish ads for good? The answer isn’t as straightforward as one might think, as it largely depends on the objectives set by the platform.
When it comes to cold, hard cash, ad-based models are the golden goose of the digital realm. Businesses engage in bidding wars, driving up prices for ad placements in the relentless pursuit of our precious eyeballs.
But who can blame social networks? After all, the numbers don’t lie: reaching the same average revenue per user (ARPU) levels through subscriptions is a Herculean task, given that only a handful of people (usually 1–5%) convert into paid plans. The rest eats free lunch. Also, since these products have been free forever, it’s a tough sell to convince users to pay for them.
Take Discord, for instance. This upstart managed to build a thriving network for closed social spaces on the back of its Nitro subscriptions, boasting an impressive ~190 million monthly active users (MAU). But even with such a respectable audience, their revenue pales compared to Twitter’s ad-fueled billions. Indeed, Discord’s ~$300 million in revenue is but a drop in the ocean compared to Twitter’s $5 billion.
History has shown that many social networks have attempted to eliminate ads in favor of subscriptions—and failed. Remember YouTube Red? That little experiment was short-lived, to say the least. Sure, YouTube Premium has fared somewhat better, but it still only accounts for a mere ~15% of the platform’s total income. And let’s not forget Reddit, where Premium subscriptions contribute a modest ~5% to their bottom line. Tumblr, in its turn, is about the same as Reddit, although Ad-Free Browsing, our paid upgrade, is only one year old.
What about Twitter Blue, you may ask? Well, it’s not been going great for them either since Musk took over. As of November 2022, only 0.078% of Twitter’s MAU (368M) became Blue subscribers. Twitter is nowhere near money with subscriptions, and the below Twitter thread from Patrick outlines what would have to happen for that to change.
As a counter-example, Snapchat+ has seen pretty good traction since its launch in June of 2022. In Q4 2022, it grew by ~30%, and adoption is growing steadily, too. (0.53% of 363 million DAU). But $100 million in subscription revenue is nothing when your annual expenses reach $6 billion.
Expectedly, smaller networks like Imgur and 9GAG had their own subscription experiments. Imgur’s Emerald was trying to atone for the original sin of the Internet by combining micropayments (powered by Coil) with an ad-free subscription. Given that Imgur got acquired by Medialab and Coil got shut down, this leap of faith clearly didn’t pan out as planned.
9GAG, on the other hand, launched its Pro+ subscription to keep its meme factory afloat. Currently, the Pro plan is no longer available, but the app message informs about the potential relaunch when trying to hide ads. No one’s shutting down a profitable business unless it’s cannibalizing the main revenue source, right?
Even the behemoth of consumer subscriptions, Netflix, can’t escape the glass ceiling. With an astounding 231 million paid subscribers under its belt, the streaming giant had to launch ad-supported tiers to unlock new growth.
So, where does this leave us in the grand debate on subscription models for social networks? As much as we’d love to believe that there’s a brave new world beyond advertising, social networks will be still very much tethered to the ad-based models. For what it’s worth, the foreseeable future of social media monetization lies in cleverly combining the best of both worlds. Until the ultimate disruptor comes around…