In November 2022, shortly after Elon Musk became the new owner of Twitter, Robert Reich listed three things Musk didn’t understand. He suggested that first Musk didn’t recognize the value of the platform’s workers. So, second, when “he fired half” of them and “drove off even more, he wasn’t cutting costs.” And third, he didn’t understand that “he was actively destroying what he bought.”
Musk found the comment interesting. Then demanded eight bucks for posting it.
The next day, Musk announced the launch of a new “Verified” program. Companies would receive gold checks, governments would receive grey checks and individuals whether, famous or not, would receive blue check marks. The move was the latest attempt to make Twitter Blue, the platform’s subscription program work.
Twitter, Musk argued was losing money and couldn’t break even with its huge workforce and advertiser revenue alone. It needed subscriptions. The people who used Twitter would need to pay a regular monthly fee to get the most out of the service.
His reasoning was neither surprising nor unreasonable. Subscription programs enable businesses to ensure customer retention without relying on sales and special offers. They give the firms a smooth cashflow, allowing them to plan and allocate budgets. And the regular use of a product also produces reams of data, enabling the companies to improve their services and fine-tune their offers—as well as charge more to advertisers.
Software products have increasingly relied on subscriptions to replace one-time payments for single licenses. Microsoft started its shift to Office 365 in 2010. The company’s Game Pass program, which gives owners of its Xbox gaming console access to more than a hundred games, has been growing for more than six years. Microsoft is now trying to buy game giant Activision Blizzard to increase the value of its offer. The company is willing to pay almost $70 billion to offer Call of Duty and World of Warcraft games to its subscribers. Subscriptions have emerged from television content and telephone lines to cover everything from razors to rabbit food.
And yet the success of Twitter Blue hasn’t been quite as stellar as a SpaceX launch. According to a report from Mashable, Twitter had only managed to convert around 640,000 Twitter users to subscribers between November 2022 and May 2023. Of the first 150,000 subscribers, more than half had dropped away by the end of April. Mashable suggests that the average churn rate for a subscription-based business is just over 5 percent. Twitter is suffering a churn rate of over 50 percent.
The figures may even be worse than they look. Mashable cites a report stating that a number of Twitter subscribers are continuing to receive subscription services long after they’ve stopped paying. The promise of edits and longer posts, fewer ads and preferred weighting in the algorithm, and a blue check mark just don’t seem to be doing the job for Musk.
The appointment in May of Linda Yaccarino as the company’s new CEO suggests Musk recognizes the scale of the problem. Yaccarino is not an expert on subscription programs. She was formerly the head of advertising at NBCUniversal. By appointing Yaccarino, Musk appears to be suggesting advertising revenue has more potential than his failed attempt to create a product for which Twitter’s users would be willing to pay a monthly fee.
So what went wrong during Twitter’s attempts to build a subscription model and what lessons can other companies take from Elon Musk’s failure?
According to Robbie Kellman Baxter, a consultant who helps companies create subscription models, Twitter needed to begin planning its subscription service with two basic steps: knowing who would pay for it; and what they’d get for their money.
“The first thing they needed to determine was who is the subscription for, and what would be the forever promise they are making to that subscriber,” she said.
Charge the consumer or charge the creator?
For many companies, those determinations are relatively straightforward. Microsoft can aim its software at its end users, and the forever promise they make is that those subscribers will always have access to the latest version of the platform. Subscribers to Office 365 will always be able to create their documents and generate their worksheets. Game Pass subscriptions are similarly aimed at gamers. Developers don’t pay to add their games to the inventory; they receive a deal that can vary with the game and the studio that made it. The benefits of the subscription are aimed entirely at the consumer who pays for it.
Social media platforms though can benefit both creators and consumers. Creators of social media content get to build audiences and advertise their products. Consumers are able to read and see content they find interesting, entertaining and useful.
Other platforms for creators and consumers have, like Microsoft, focused on the consumer. Alphabet’s YouTube offers viewers and listeners ad-free consumption, the ability to download videos, and background playing. Spotify charges listeners and pays artists.
A subscription for Twitter consumers would mean fewer ads and less unwanted content pushed into the user’s timeline. They’d would see posts from accounts they follow, and less content from accounts paying for attention, reducing audiences for other creators. But it’s a hard sell. The Internet’s users expect content to be free and ad-supported. They’ll pay for large amounts of content they can’t easily find anywhere else, such as a music or video library. It’s less clear that they’d pay for the random thoughts of journalists and the outraged opinions of people on Twitter.
But targeting the subscription at content creators risks damaging the experience of consumers, Baxter warns. Instead of seeing the content they want, they’ll get the content Twitter is paid to present. It’s another step in what writer Cory Doctorow has called the “enshittification” of platforms. As a platform shifts from pleasing consumers to pleasing creators to pleasing advertisers to pleasing shareholders, the usefulness of the platform falls. Early users of Google were thrilled to discover they could find the content they wanted on the Web. Early advertisers were thrilled to learn they could reach customers looking for their products. Today, consumers have to wade through a page of ads to find a listing that wasn’t bought and advertisers are either priced out of the market or forced to compete against turgid SEO content.
A Twitter subscription service aimed at publishers would prioritize paid content over free content, and annoy consumers don’t want to see the content of paying creators. It also reduces the experience for creators who want to reach target audiences and gain insights into who those people are.
So the first challenge Twitter faced was whether to target its offer at consumers, creators, or both.
“If they choose to have two subscriptions, one for consumers one for creators, or a hybrid offering, they will need to balance the needs of both groups,” said Baxter. “Or they need to be really clear about who is paying the bills and optimize just for them.”
Musk eventually opted for a hybrid model weighted toward creators. Consumers see fewer ads and can place their bookmarks in folders but publishers receive longer posts and higher exposure through preferential listings. They also receive a form of verification which satisfies neither group. The weakness of paid verification means that consumers can’t trust the content they’re seeing and genuine creators aren’t recognized for their quality content.
“Anything relating to security and validation should be table stakes (i.e. free),” says Baxter.
At the same time. users feel that premium placement should be earned through good content, not bought with a subscription—unless paid for with a clearly marked ad.
The subscription model that Musk chose then satisfied no one. The corruption of the For You feed with paid content has put off consumers who want to see the most interesting content, not just paid content. The additional editing tools are too weak to be valuable and the blue check that now comes only with a paid subscription is seen by Twitter’s users as little more than a mark of shame, a sign that the creator may be a right-wing Musk fanboi. And just as the product itself has been poorly aimed and badly designed, its rollout has also been rocky.
“Subscription products and businesses are in constant evolution,” said Baxter. “Twitter’s approach has been characterized by starts and stops, not consistent and continuous improvement.”
The conclusion for companies wondering how to launch their own subscription model then is to begin by understanding who you’re going to charge and what they’ll receive for those fees. If you can’t come up with a long-lasting promise of a service subscribers will value and can’t obtain for free, you might want to hire someone with a background in advertising.
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