Elon Musk wants you to pay for Twitter. Good luck with that.

Charging users for an ad-free Twitter experience may be harder than it seems.


Twitter currently generates the vast majority of its revenue with ads.

Image: Protocol

We don’t know much yet about Twitter’s future after Elon Musk takes control of the company — heck, we can’t even be sure that the deal will get regulatory approval — but we do know two things: Musk wants to double down on free speech, and he wants to reduce the company’s reliance on advertising.

A closer look at Twitter’s financials reveals that the latter is a tall order, and any attempt to do so could actually make things worse for the company.

Twitter currently generates the vast majority of its revenue with ads, with a small sliver coming from data licensing deals as well as direct-to-consumer subscriptions. In Q4 2021, advertising made up roughly 90% of the company’s overall revenue.

Twitter didn’t break out how much of the rest came from its nascent Twitter Blue subscription service, but the company admitted that it’s not a whole lot. “While very small as a percent of revenue today, we believe Twitter Blue and other subscription-related revenue represents a significant opportunity for Twitter over time,” it wrote in its Q4 2021 shareholder letter.

Third-party data also suggests that Twitter Blue hasn’t exactly been a home run. Twitter has generated a total of $2.5 million with iOS in-app purchases worldwide to date, according to estimates that app analytics specialist Sensor Tower shared with Protocol. These revenues include both Twitter Blue subscription fees as well as fees generated with Super Follows. (The total amount of Twitter Blue revenue is likely higher, as people can also subscribe on the web, as well as via the company’s Android app.)

One reason for these lackluster results: Twitter Blue’s value proposition is a bit murky. A $3 per month subscription plan gets users access to advanced features and ad-free articles from a number of third-party websites, but it doesn’t actually remove ads from their Twitter feeds.

In a series of recent, since-deleted tweets, Musk suggested that he wants to revamp the company’s subscription program. Among his ideas: lowering the price to $2 a month, giving every paying subscriber a blue checkmark and removing ads from their feeds. “The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive,” Musk wrote.

The problem: Under this plan, Twitter would actually make less money per user than it currently does. The company doesn’t break out ARPU in its quarterly results, but a bit of back-of-the-envelope math suggests that the average ad revenue for each of the company’s 217 million monetizable daily active users was around $6.50 in Q4 2021, which comes to $2.17 per month.

There’s something to be said about using daily user metrics in this context, but high-propensity users are more likely to pay. Plus, again, this is merely a back-of-the-envelope calculation. Still, pretty close, right? Well, not exactly. Ad revenues vary widely by location, with Twitter generating 56% of its ad revenue in the United States in its most recent quarter, despite the fact that the U.S. is only home to 17.5% of its daily active users. In absolute numbers, U.S. Twitter users generated about $6.90 per month in ad revenue for the company.

The number of people willing to pay $7 or more per month for Twitter may be a lot lower than the number of people open to paying $2 per month, but there are other challenges. Chief among them: If Musk somehow manages to convince a significant chunk of Twitter’s power users to sign up for paid subscriptions, he’s also removing advertisers’ ability to target the service’s most valuable audience, potentially driving down ad rates across the service.

The flip side to all of this is that Twitter may not have a choice, thanks to Musk’s plan to turn Twitter once again into the “digital town square” where free speech rules supreme. In 2020, a number of major advertisers halted ad buys on Instagram, Facebook and Twitter over their role in spreading hate and disinformation. Twitter responded by expanding its hate speech rules, and more than doubling the number of accounts it took action against. If the company were to roll back any of these measures, it might also become a place that’s a lot less welcoming to advertisers.


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