Twitter Paid Service Model: What is it And How Does That Work Out For you?

Will Twitter cease to be a free service? Details yet to emerge as the company explores alternative sources of revenue.

Twitter has said it is exploring additional ways to make money and is planning to test a subscription-based model sometime later this year. Understandably, the move is part of a bid to boost its revenues and offset the losses that it has been incurring lately. Twitter reported a decline in revenues in the second quarter amid a global marketing retraction as advertisers pulled back on spending.

Advertising makes up for more than 80 percent of Twitter's total revenues and much like other companies, the pandemic has been hurting the social media giant. However, the company said that the subscription model is still in the early stages and will notify users on further development over the next few months.

Twitter Explores New Revenue Options

Twitter's sales declined 19 percent to $683.4 million from a year earlier despite a second straight quarter of record user growth Kacper Pempel/Reuters

Twitter is exploring new options to make up for the revenue loss it has been incurring over the past couple of quarters. The company's CEO Jack Dorsey said that Twitter is planning to run a few tests of different approaches this year including a possible subscription offering. It is in a bid to supplement advertising, which makes up for more than 82 percent of its total annual revenue.

However, Dorsey also made it clear that the explorations are in very early stages and the company doesn't "expect any revenue attributable to these opportunities in 2020". Like most other social media networks, Twitter is a free service that makes most of its revenues from advertising but a subscription model may now become an alternate source of revenue generation for the company.

Dorsey noted that he has "a really high bar for when the company would ask consumers to pay for aspects of Twitter. We want to make sure any new line of revenue is complementary to our advertising business."

However, it's still unclear what type of revenue-generating models and subscription services Twitter is planning. One could be an add-free monthly subscription that most video-streaming services offer but nothing is clear as of now.

Pandemic Batters Twitter

Jack Dorsey, CEO of Square and CEO of Twitter, speaks during an interview
Jack Dorsey, CEO of Twitter, said that the explorations are in very early stages and the company doesn’t “expect any revenue attributable to these opportunities in 2020” Reuters

Twitter's plans of introducing a subscription-based model come after it reported ad revenues of $562 million in the second quarter, down 23 percent from the year-ago period. Also, the company's sales declined 19 percent to $683.4 million from a year earlier despite a second straight quarter of record user growth, as more people joined the service for news and entertainment during the pandemic.

Twitter reported 186 million daily users for the period ended June 30, a 34 percent jump compared with the year-earlier period, and its biggest year-over-year increase since first reporting the metric in 2016. However, even that couldn't save the company.

The dismal second-quarter result follows Twitter's major hack last week that saw scammers manipulating the company's employees to gain access to Twitter's internal system resulting in the hacking of many high-profile people accounts including Donald Trump, Joe Biden and Elon Musk. Twitter, much like, other social media companies has been suffering due to declining ad revenues following the coronavirus outbreak but it needs to be seen if a subscription-based model will succeed in salvaging it or result in users migrating to other platforms.