Exploring the Potential Shift from Ad-Supported to Subscription-Based Social Media Models

Inthe past few decades, social media has become an integral part of our daily lives. From connecting with friends and family to following our favorite celebrities and brands, social media platforms offer a wide range of services that have become almost indispensable for many people.

However, it’s important to remember that these platforms are businesses, and like any business, they need to generate revenue to sustain themselves. Up until now, the vast majority of social media companies have relied on advertising as their primary source of income.

But as the competition for users and advertisers increases, and as the costs of operating these platforms continue to rise, we may see social media companies start to charge for their services in the near future.

For example, Medium — This platform itself initially used an ad-supported model, but in 2019 it introduced a subscription-based model called Medium Membership.

Let’s explore the reasons why social media companies may consider transitioning to a subscription-based model and what this could mean for users:

Cost of operation💰

Social media companies incur high costs to maintain their platforms, including server and infrastructure costs, content moderation expenses, and research and development expenses. These costs become unsustainable if the companies cannot generate sufficient revenue through advertising.

Ad-supported models rely on advertising revenue to generate income, but these revenues can fluctuate and may not be sufficient to cover the costs of running the platform.

On the other hand, subscription-based models generate income from users who pay a monthly or annual fee to access the platform. This can provide a more stable source of revenue for the company.

Here are a few examples of social media platforms that introduced subscription-based services:

Twitter Blue, Telegram Premium, and Snapchat Plus.

• Twitter — On Dec 12, 2022, Twitter introduced a subscription-based service called Twitter Blue. The service offers features such as an “undo tweet” button, customizable app icons, and additional features.
• Telegram — On Jun 19, 2022, Telegram launched Telegram Premium. A subscription-based service that offers additional features like increased storage capacity, access to premium content or channels, and the ability to use Telegram on multiple devices simultaneously.
• Snapchat — In late June 2022, Snapchat released its premium subscription, Snapchat+, that offers users access to “a collection of exclusive, experimental, and pre-release features” in the messaging app.

I will provide further real examples in the article.

Increased competition⚔️

As more social media platforms have emerged in recent years, competition for users and advertisers has intensified.

This has made it more difficult for social media companies to generate enough revenue through advertising to sustain their platforms.

In order to differentiate themselves and attract paying subscribers, they may need to offer premium features or higher-quality content that can only be accessed with a paid subscription.

Few more examples of services that introduced subscription-based features:

LinkedIn Premium, WhatsApp Business Premium, and YouTube Premium.

• LinkedIn — LinkedIn introduced a subscription-based model called LinkedIn Premium in 2011 to generate additional revenue and differentiate itself from other professional networking sites.
• WhatsApp — According to the reports, WhatsApp will release a subscription plan called WhatsApp Business Premium. It will offer features and benefits such as advanced messaging tools, more detailed analytics, and the ability to create and manage a catalog of products and services.
• YouTube — YouTube introduced a subscription-based model called YouTube Premium in 2015. The service offers ad-free access to videos, access to YouTube Originals, and offline playback.

Changes in advertising industry🦧

The advertising industry is constantly evolving, and social media companies may need to adapt to changes to remain viable.

If third-party tracking becomes more heavily regulated or ad blockers become more prevalent, social media companies may need to find new ways to monetize their platforms.

Apple’s App Tracking Transparency

For example, in late 2020, Apple announced a new privacy feature for its iOS 14 operating system called Apple’s App Tracking Transparency. Which requires apps to ask for user permission before tracking their data, has the potential to greatly impact Facebook’s ad business as it relies on tracking user data to serve targeted ads.

This feature, when enabled, will make it more difficult for Facebook to target ads to iOS users, leading to lower ad revenues and affecting the effectiveness of Facebook’s ads for businesses.

This move is part of a trend towards greater data privacy and control, which is expected to continue to affect Facebook’s ad business and the wider advertising industry.

More examples of services that introduced subscription-based features:

Spotify Premium, Discord Nitro, and Prime Gaming.

• Spotify — Spotify introduced a subscription-based model in 2011 called Spotify Premium, which offered ad-free listening for users who paid a monthly fee.
• Discord — In January 2017, Discord released Discord Nitro, a paid subscription service. It includes added features such as animated emojis, higher resolution for screenshare, custom tags, and the ability to use custom emojis from other servers.
• Prime Gaming — Amazon first launched its gaming benefits in 2016 as Twitch Prime, then in October 2020, rebranded to Prime Gaming. It gives users ad-free viewing and additional perks for a monthly fee.

Final Thoughts🤔

Above formerly ad-supported platforms have introduced premium services. Can u guess, What’s next?

It is important to consider the potential consequences of social media companies moving to a paid subscription model. On the one hand, this could provide a more stable and predictable source of revenue for these companies, allowing them to invest in improving their platforms and offering a better user experience.

On the other hand, moving to a subscription model could also limit access to social media for some users. Many rely on these platforms to stay connected with friends and family, and a subscription fee could make it difficult for some individuals to afford these services.

In addition, a subscription model could disproportionately impact marginalized communities and individuals who rely on social media as a primary source of information and communication.

Overall, it is important for social media companies to carefully consider the potential impacts of any changes to their business models and ensure that they can provide value to their users while also staying financially viable.