Social Media Giants Embracing Subscription Models

By Duncan Ferris

Aug 15, 2022

New users are still flocking to social media, but advertising headwinds are placing pressure on some platforms’ revenue. We take a look at the challenges and responses from Twitter, Snap and Microsoft.

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The number of social media users hit 4.62 billion at the start of this year according to figures from Statista, a rise of more than 10% compared to 12 months prior. But with advertising spending knocked lower, how are different social media giants faring so far in 2022?

Twitter (NASDAQ: TWTR) provides online social networking and microblogging service, offering users the ability to follow other users' activity, read and post tweets. It might be one of the planet’s major players when it comes to social media, but the business has had a rocky ride over recent months.

The company’s second quarter saw average monetizable daily active usage rise by 16.6% on the same period in 2021. Even so, revenue actually dropped over the same period, falling from $1.19bn to $1.18bn, which the company said reflected advertising industry headwinds.

However, this was not the only cited factor, with the company also blaming the drop on instability associated with the rollercoaster journey of Elon Musk’s $44bn takeover bid.

In fact, Twitter is now suing the enigmatic South African billionaire in an effort to force him to follow through on the accepted bid.

Long and drawn-out legal wrangling could hurt the business further, but Twitter are unlikely to let the matter drop quickly as Musk’s bid, which equated to $54.20 per share, represents a premium on the current share value of around $44.

These difficulties may have contributed to the company’s decision to increase the price of its Twitter Blue service, an offering which is jumping from $2.99 to $4.99 per month for new subscribers.

With advertising revenue likely to dip, other industry peers also seem to be on the lookout for new or enhanced revenue streams. For example, Snap (NYSE: SNAP) is trying out the subscription model for size.

The business provides technology and social media services, developing mobile camera application products and services that allow users to send and receive photos, drawings, text, and videos.

This company, which runs the Snapchat platform, has switched up its executive team in the wake of advertising troubles but appears to be having great success with its new monetization efforts. The business is offering users a ‘premium’ service in the form of Snapchat+, which is available for a monthly subscription fee of $3.99.

This allows users the chance to access exclusive, experimental, and pre-release features such as Snapchat for Web.

It seems to have been a bit of a hit, with Snap confirming that it had brought in more than 1 million subscribers less than six weeks after launch.

Even without the potentially major impact of this subscription service, Snap reported revenue growth of 13% in its most recent earnings update.

CEO Evan Spiegel commented:

"We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth."

But when it comes to social media subscriptions, there is one offering that really leads the way.

Microsoft (NASDAQ: MSFT) offers applications, extra cloud storage, and advanced security solutions, serving customers worldwide. It might not be the first company you associate with social media, but the software giant’s business networking oriented social media offering, LinkedIn, looks to be going from strength to strength.

Microsoft acquired LinkedIn for $26.2bn in 2016, with the aim to grow the site and integrate software such as Office 365. Since then it has achieved significant growth and become something of a money spinner.

In the company’s most recent earnings, which covered the three-month period ended 30 June 2022, LinkedIn revenue jumped by 26% compared to the same period a year prior. This increase came even as Microsoft’s platform was impacted by a general downturn in advertising spend.

The company has long operated a premium subscription service for users, which allows them to access in-depth statistics about their profiles, better visibility in messaging and access to training courses.

Microsoft is also pushing ahead with the integration of LinkedIn with its huge library of software applications, with one of the latest updates including integration with video chat software Teams.

The software giant will be hoping that its multiple revenue streams and powerful synergy with other applications will mean that LinkedIn can continue to rake in the revenue despite an advertising slowdown.

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