With Ad Revenue Tanking, Twitter Will Soon Test Subscription Model

3 min read
Jul 24, 2020
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Facing a sharp drop in ad revenue, Twitter is looking for ways to replace that money. One way that it’ll try to do so is by testing options for subscriptions by the end of the year. The hope is that the revenue from subscriptions will offset the lost advertising income while also diversifying its overall revenue.

The company announced the news, along with its most recent quarterly results, in a call with investors Thursday. Those results were less than great. Despite growing its user base at a record-setting level, it now has 186 million daily users, the company also saw a dramatic drop in revenue and profits. Specifically, ad revenue dropped 23% year-over-year, and overall revenue dropped 19% during the same period. Ad revenue accounts for 82% of Twitter’s total earnings. 

Rumors have been swirling about paid subscription options since early July when the company posted a job for a full-stack engineer to help build a subscription platform. The post said the paid subscription platform is named “Gryphon.” Following the posting, Twitter’s stock made a dramatic jump of 8%. Likewise, Twitter’s stocked increased by 4% following its recent quarterly earnings call. Those increases show that investors are keen to see revenue from different sources.  

During the call, Twitter CEO Jack Dorsey said they’ll also look for other ways to increase revenue that aligns with its current business model.

"We want to make sure any new line of revenue is complementary to our advertising business. We do think there is a world where subscription is complementary, where commerce is complementary, where helping people manage paywalls ... we think is complementary," he said. "You will likely see some tests this year."

There hasn’t been a lot of good news for Twitter lately. COVID-19 has forced many advertisers to cut their spending on the platform. The social media giant has also seen advertising revenue plummet because of a social media ad boycott associated with the protests for racial equality in the U.S. As if that wasn’t enough, the recent security breach of some of its most popular users has left many wondering if the platform can be trusted.

Dorsey said he was sorry for the breach during the conference call.

"We feel terrible about the security incident," he said. "Security doesn't have an endpoint. It's a constant iteration ... We will continue to go above and beyond here as we continue to secure our systems and as we continue to work with external firms and law enforcement."

Despite the job posting and the announcement that Twitter will test subscription options, there are almost no other details on the move being offered by the company. Perhaps there will be a fee for certain actions or even a yearly fee to simply have an account. The fact is, only Twitter has any idea right now. 

Whatever the case, the company desperately needs to add different sources of revenue, so we can count on seeing a variety of options being tested in the near future.

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