The Internet has to be free, that’s the founding premise of it. But as the internet has evolved, this ethos is slowly taking a back seat. As social media becomes an integral part of our life, even free comes with a cost. Even though not in the traditionals sense of levying money from the users, the tech giants have been profiteering off of the users through the ad-sponsored revenue model (Li et al., 2022). And the result of this is an ad-driven internet which fuels a digital economy that runs on consumer data, with misinformation and privacy running abound (Garcia, 2021). This brings us to the question-would a subscription based model, which is currently on trial run among various social media platforms, help alleviate these concerns while ensuring returns for the business as well as a better experience for the users.
Social Media:The statistics
Like, share, tweet, retweet, etc. are too familiar terms for us because of their affiliation with Meta, Twitter, Instagram, platforms that have become prevalent in our lives. For instance, Meta, Instagram recorded 2.91 billion and 1.4 billion active monthly users in 2022 (Dixon, 2022). Twitter recorded 330 million monthly users in 2019 (Dixon, 2022). The active advent of social media began around the 2000s primarily with Meta (then Facebook) which was soon followed by other popular platforms. Most of these platforms let us sign up for free. So how do they generate income and profits?
The major source of revenue for the majority of these platforms is advertisements targeting the users. The platforms charge the companies for advertising on their sites, thus generating profits.
Meta’s advertising revenue in 2020 was USD84.2 billion with an average revenue per user of USD32.03 (Dixon, 2022). In 2021, the global social media advertising spending was around USD116 billion (Social media advertising spending worldwide from 2021 to 2028, 2022). As of 2022, Meta, Instagram, and Youtube reigned in popularity worldwide (Dixon, 2022) while also being the leading platforms among marketers (Leading social media platforms used by marketers worldwide as of January 2022, 2022). It has come down to the extent that the purpose of these platforms is no longer to increase our social connections as their name suggests but to facilitate greater advertising.
The hiccup begins
Recently, social media platforms have been subjected to a lot of backlash, thanks to the Cambridge analytica scandal and the netflix documentary The Social Dilemma. With consumers becoming more and more privacy concerned and tech savvy, many are rethinking how to modify their behavior on social media platforms. They are increasingly becoming conscious about the pernicious implications of letting social media operate unencumbered and ubiquitously in their lives (Flores, 2022). Their role in spreading misinformation, manipulating elections, instigating social dilemmas, are all concerns that have taken a front seat in driving user’s online activities nowadays. Above all, their ability to feed into the “attention economy” (Joy, 2021) that paves paves the way for a vicious cycle- the more the advertisements, the greater is the engagement which in turn generates more data which can then again be used for facilitating more targeted advertising– has resulted in widespread dissatisfaction and distrust amongst the users (Flores, 2022) reducing user engagement on which these platforms thrive. Here, the user becomes the product (Joy, 2021); the actual transaction occurring in the medium is not the free entertainment/distraction provided by the platform , as misconceived by many, but the garnering of our free data that is shared with the advertisers. These concerns coupled with the recent plummeting economy and Apple’s ad tracking changes (Gartenberg, 2021), online ads business have taken a major hit. The social media companies are unable to give adequate returns to their advertising investors. In fact, shares of most of them have cratered by an average of 60 percent in the past one year (Forman, 2022). As a result, many of them of them are forced to explore alternate options for ensuring revenue streams
Is the subscription model the solution?
The subscription model is gaining wide traction and is being increasingly adopted by many platforms. Youtube has so far been successful in that front. About 50 million people have subscribed or tried Youtube Premium and Youtube Music (50 million, 2021) which enables ad-free watching, offline as well as background viewing (Introducing Youtube Premium, 2018) . Now it is being followed suit by Twitter, Instagram and TikTok that are testing the benefits of the model. Twitter recently introduced Twitter Blue, a paid subscription that provides features that are otherwise unavailable such as a verified checkmark, preview a tweet before its posted, and read news articles without ads (About Twitter Blue, 2021) . Instagram is also testing it out with few content creators in the US by adding features such as subscriber lives, subscriber stories, subscriber badges (Introducing subscriptions: Helping creators earn recurring monthly income on Instagram, 2022). This feature would facilitate deeper engagements between the influencers and their followers while also ensuring a recurring monthly income for the former. In fact, it is the major reason for the success stories of subscription based platforms Substack and Patreon. These platforms ensure a more personalized experience for both the content creators as well as the audience; it ensures direct feedback (Fischer, 2019). For instance, if a patreon is unhappy with the content of the creator, then he will be less inclined to pay. On the other hand, in the case of a social media platform, the chances of us ditching it despite the poor content quality is close to nil as it is free.
Subscription model, therefore, enables greater control by the user. Platforms would no longer be invested in maximizing the clicks and views but in increasing the user satisfaction (Flores, 2022). The monetary incentive would ensure better quality over quantity, which inturn would bring about greater user engagement . Also, the ad-free engagement would guarantee a better user experience and with that comes greater engagement, thus benefiting the business (Ye & Chua, 2022). Now with the users paying for content generation, platforms no longer have to worry about sharing data with advertisers. The model can therefore go a long way in slowly eradicating the distrust that has developed around social media platforms.
The way forward
In the current ad-driven social media world, users are overwhelmed with sheer amount of content, some of which are relevant while most are spam. Therefore, in order to ensure quality content and a healthier experience, users in all likelihood would be happy to pay a nominal fee. This is evidenced by the rise in subscriber rates in subscription companies across all industries particularly in the case of streaming platforms (Subscription impact report, 2020). However, for the social media platforms, that have been free, to attract subscribers, have to identify their marquee feature, that would entice the users, to which others perks can be gradually added. It is the philosophy that has aided Youtube in driving its subscription model to success. Social media platforms should take their cue from it.
References
Dixon, S. (2022, July 27). Meta’s (formerly Facebook Inc.) advertising revenue worldwide from 2009 to 2021. Statista. https://www.statista.com/statistics/271258/facebooks-advertising-revenue-worldwide/
Dixon, S. (2022, July 26). Most popular social networks worldwide as of January 2022, ranked by number of monthly active users. Statista. https://www.statista.com/statistics/272014/global-social-networks-ranked-by-number-of-users/
Dixon, S. (2022, July 27). Number of monthly active Twitter users worldwide from 1st quarter 2010 to 1st quarter 2019, 2022). Statista. https://www.statista.com/statistics/282087/number-of-monthly-active-twitter-users/
Fischer, W. (2019, August 11). ‘Ad models break everyone’s brains’: How Patreon and Substack are trying to make the internet a better place with membership and subscriptions. Business Insider. https://www.businessinsider.in/tech/ad-models-break-everyones-brains-how-patreon-and-substack-are-trying-to-make-the-internet-a-better-place-with-membership-and-subscriptions/articleshow/70632957.cms
Flores, K. (2022, February 07). Shifting social media incentives with the subscription model. https://www.openthoughtblog.com/shifting-social-media-incentives-with-the-subscription-model/