Consumers are spending a record number of hours on social media, but the platforms have struggled to capitalize on their time lately. Long-booming online advertising companies, historically the dominant way social media companies make money, have plummeted this year thanks to a flagging economy and Apple’s ad tracking changes that have made it harder for platforms to prove advertisers’ ROI.
Meta Platforms has seen a crater in year-over-year revenue growth over the past 18-plus months, falling from over 45% in last year’s first quarter to a 4% decline in last week’s third-quarter report. Snapchat parent company Snap Inc.’s growth fell off a similar cliff, declining over 60 percentage points over the same period. Shares of major social media companies, including Facebook-owner Meta Platforms, Snapchat, and Pinterest, have fallen an average of 60% this year as investors largely lost faith in their first act. Suddenly, subscriptions have gone from being a theoretical purchase option for a secondary revenue stream to a must.
They increasingly charge for exclusive features or content. As of the end of the third quarter, more than 1.5 million people were paying for a monthly subscription to Snapchat, which grants them access to “exclusive, experimental, and pre-release” features, such as: B. Longer display time for their stories and essentials a Halloween costume for their Bitmoji. On Twitch, people shell out as much as $24.99 a month to watch others play video games with a digital “flavor”.
Why pay for it? The sheer amount of time people spend on social media platforms — streaming, gaming, messaging, dating — better puts consumer spending habits into perspective. Whether it’s for joy, attention, or status, we pay for things like a premium car, a custom paint job and license plate, or a turbocharged engine. Today, on average, we spend less than an hour a day commuting in the car, but almost seven on our top 10 social media apps.
Beyond traditional social media, expect the ability to check out pretty much anywhere you socialize and otherwise go online. On Alphabet’s YouTube — whose own ad revenue fell 2% year over year in the third quarter — you can already pay for subscription-based products like YouTube Premium (ad-free plus music) and YouTube TV (streaming TV service).
Dating apps like Grindr allow you to pay to see more suitors in your area. On Match’s Tinder, you can pay to see suitors elsewhere. Would you like to “express yourself better” on Discord, perhaps with an animated avatar? It could cost you as much as $10 a month. And soon it seems likely that you will pay to watch your favorite tutorials via TikTok LIVE.
A challenge for social media platforms is that subscriptions and ads are often mutually exclusive. But that hasn’t stopped all platforms from selling an ad-free experience. A major perk of Twitter’s Twitter Blue subscription, which the company is reportedly planning to charge nearly $20 a month for, is the ability to read select articles from major news outlets for free.
The model may not prove profitable for Twitter. As reported by The Washington Post, citing Twitter’s own data, the users who see the most ads — roughly the top 1% of users in the US — are the same people most likely to join a subscription service and risk cannibalization. Perhaps for this reason, Meta, which already offers subscription options for Instagram and Facebook to help its creators generate recurring revenue, says it has no plans to offer subscriptions that would allow people to remove ads.
Will the social platform with the most users (meta overall) be best in the subscription game? Or the one who spends the most time (TikTok by ByteDance)? Or maybe the one used for work rather than play (Elon Musk’s Twitter)? If the online dating industry has taught us anything, consumers will likely continue to dabble in many but choose to pay for the one or two that matter most to them at any given time.
That would suggest that total number of users might be less relevant than engagement. Sensor Tower data shows that the time spent on the top social media apps has increased in recent years, but some apps are more addictive than others. Time spent on TikTok increased 26% from Q1 2020 to Q3 this year, this data shows; while Meta’s Facebook and Instagram also posted double-digit percentage gains. During the same period, time spent on Snapchat and Twitter decreased by 26% and 6%, respectively.
Subscribers may never be as lucrative for social media platforms as their advertisers, but the sector will struggle to grow without them.
Write to Laura Forman at [email protected]
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