Could an $8 Twitter Subscription Save Elon Musk? Let’s look at the numbers.

Could an  Twitter Subscription Save Elon Musk?  Let’s look at the numbers.

Could an $8 Twitter Subscription Save Elon Musk? Let’s look at the numbers.

Elon Musk He needs to make money… and fast. looking forward Twitter User wallets to do this.

caught recently I paid $44 billion to Twitter, a company that has only made a profit twice in the past 10 years, and now has billions in debt as well as creditors and investors to satisfy. Moreover, advertisers are fleeing the platform due to his driving and the resulting increase in toxicity.

So, what should the new Twitter CEO do to get the money back? Charging a monthly fee to users for verification status.

You may have heard the spin: “He’s doing it to level the playing field with fans and blue elite checks!” But this is not based on reality. The truth is, Musk hopes that the $8 per month subscription will make up for the lost ad revenue.

Only it will not. And we have the numbers to prove it.

Welcome to E-commerce 101, Elon

If Musk really thinks Twitter users will pay for an $8 monthly subscription in droves, thus solving all his cash flow problems, he’s in for a rude awakening. There is a reason why Netflix is ​​one of the most successful subscription services with 223 million global subscribersit is Go to ad template.

Elon Musk supporters have turned themselves into contract to try to make sense of the numbers for the proposed subscription service. For example, one Verified account With over a million followers it is estimated that Musk will make $1.9 billion a month once Twitter’s 238 million daily active users sign up for the service. That’s a 100 percent conversion rate… with absolutely no slowdown. It is not realistic.

Bloomberg Markets anchor John Ehrlichman offered a more consistent view when he estimated that Musk would do so. You only need a third of these usersor 78 million of them, for signups to offset Twitter ad revenue losses.

That estimate is generously optimistic, to say the least. For context, almost 78 million subscribers Double The number of US customers who service broadcasting Disney + she has. It’s a best case scenario but still incredibly unlikely, especially when you consider that average conversion rate For e-commerce much less than five percent. In fact, a Good The conversion rate, that is, the percentage of people who see your ad and then buy your product or service, is about two to three percent.

To give a similar example from the real world, let’s take a look at YouTube. Video platform has Over 2 billion monthly logged in users. A YouTube spokesperson told me that the paid subscription service, YouTube Premium, has 50 million subscribers, including beta users. This amounts to a 2.5 percent conversion rate.

Of course, when you’re dealing with subscriptions, you also have to consider the rate of change, or the percentage of people who have canceled their monthly payments.

So even as our forecasts are adjusted, it’s still an exaggeration to assume that 2 to 5 percent of the 238 million daily active Twitter users will subscribe to Musk’s modified subscription service.

Case study: Twitter’s old subscription service

Twitter already has a $5 subscription product — $3 cheaper than Musk’s proposed plan. It’s already called Twitter Blue, too, which is the name Musk sticks to for his $8 special service. The current $5 version offers users the much needed Edit Tweet feature, an ad-free news reader, an expanded bookmark feature, and some menu customization options.

And it wasn’t working well.

According to data from mobile analytics company sensor towerTwitter has only generated $7 million in in-app purchase revenue since 2014. The majority of this revenue comes from Twitter Blue, which launched in June 2021. This number also includes revenue from other Twitter products for in-app purchases, such as Twitter Spaces tickets. Twitter Blue makes up the bulk of these purchases. Sensor Tower only tracks purchases from the Twitter mobile app, but it’s more than that 80 percent For Twitter users who access the platform on their mobile devices, the company number is a very good indicator.

To be fair, if $7 million is generated from 80 percent of Twitter’s mobile users, let’s put in an additional 20 percent for that segment of desktop users totaling $8.4 million from Twitter Blue.

$8.4 million over sixteen months is roughly $525,000 per month or 105,000 users paying $5. and that without Considering Apple and Google cut 30 percent of purchases from their app stores as well. Casey Newton Curriculum the news Support this estimate In a recent article, he says Twitter Blue has “just over 100,000 active subscribers”.

It’s clear that Musk’s ambitions for a paid Twitter user base are exemplary at best. And to improve the temptation, he has included the verification badge as a Twitter Blue feature. The thinking goes that since everyone wants the blue check mark, more people will pay for the service. But there is a problem with this logic. First, the attraction of the verification badge is that it exclusive. If anyone could buy it, it stands to reason that most people wouldn’t want it anymore.

Aside from this point, let’s take a look at who truly The customer base is dedicated to Twitter’s subscription products and why the previous iteration didn’t work (and why Musk’s plan didn’t work either).

Twitter’s Small Power Base

If you look at what Musk has to offer, you’ll quickly see that Twitter Blue is for Twitter content creators. This is different from subscriptions of a streaming service like Netflix or HBOMax, or even a premium subscription without ads on YouTube; Content-oriented services viewers. These subscriptions, with their massive catalogs of content, provide an entertainment service that appeals to the masses.

However, Twitter does not carry the same appeal and does not offer the same breadth of content. Someone who rarely posts on Twitter and just scrolls through the feed of people they follow won’t care about a verification badge or prioritize their responses. They do not publish! And just to be clear, the vast majority of people are on Twitter barely Mail.

according to internal search From Twitter, 90 percent of all tweets are created by Less than 10 percent of its total monthly users. The study described these users as “heavy tweeters” and defined them as “a person who logs on to Twitter six or seven days a week and tweets about three to four times a week.” Read that again. Experienced Twitter users, who make up almost all of the content, don’t even post daily.

But let’s say less than 10 percent, or roughly 23.8 million people who post fairly regularly, are the user base that Musk wants to convert into Twitter Blue subscribers. Based on an average conversion rate of 2.5 percent, we’re looking at 595,000 Twitter Blue subscribers. In order for Musk to meet his annual debts, Forbes Estimates That 10.4 million users will need to sign up for $8 per month.

At $8 per month with no opt-outs and a subscriber base of 595,000 “powerful users,” Musk is looking to generate $4.76 million per month in revenue, or about $57 million per year. For comparison, Twitter shared earlier this year that it did 4.5 dollars Billion in advertising revenue In 2021 and additional $571 million in data licensing. If Musk’s changes put users off, he’ll hit those two areas against a subscription product that won’t generate anything close to that kind of revenue.

Perhaps the closest social media subscription product that can be compared to Twitter Blue is Snapchat’s new premium service, Snapchat Plus. Launched on June 29, it has already pulled off Twitter’s Blue numbers, bringing in nearly $29.3 million in just four months according to Sensor Tower. Snapchat Plus sells a yearly subscription, so it’s a little hard to pin down, but broken down into $3.99 monthly payments, we’re looking at about 1.8 million Snapchat Plus users per month.

Regardless, even when looking at all the potential here, things still look bad for Twitter by comparison. Last month, Snapchat announced it 363 million daily active users. This means 125 million more daily active users than Twitter currently has.

accidental peek

Last Saturday, Twitter jumped in and sent out a mobile update that claimed its new $8 per month subscription feature. Launched. Turns out that wasn’t true and the new subscription plan hasn’t been released yet.

As you might imagine, users most interested in paying a monthly fee for a blue check mark were among the first to sign up. And while these individuals have been vocal about their Twitter complaints about paying for a verification badge they haven’t received as a result of the inanimate service yet, it turns out there weren’t many of them.

Sensor Tower estimates that users spent $147,000 on Twitter between November 5 and 6. While that’s 86 percent more than the previous two days…that’s it? According to the analytics company, less than 30,000 users signed up in two days. And again, this is ostensibly the hardest-working group of Twitter users – the ones most likely to sign up.

On top of all that, a source said on Twitter Curriculum That his own internal report found that reducing ads, a feature of the subscription plan, would lose the company nearly $6 in ad revenue per user. Factor in Apple and Google cuts, and Musk could end up releasing Twitter Blue the cost Company funds.

If Musk really believed that his $8 subscription plan would save the platform and replace ad revenue, Twitter was really screwed up.

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