Subscriptions don’t change social media’s reliance on advertising

In many mass-market Internet services, a law of power is at work. A relatively small fraction of users often accounts for a disproportionate share of activity, whether it’s posting on social media or selling on eBay.

Finding better ways to balance the economics of the service with the interests of these users is a great way to increase profits. However, there is also a risk of upsetting the delicate balance that made the services attractive to large numbers in the first place.

This is a risk to keep in mind as social media companies look for new ways to generate revenue. Meta is the latest to join the hunt after Twitter and Snap this week announced new subscription tiers for its Facebook and Instagram services that will cost web users $11.99 per month.

The wide range of features companies have included in their subscription offerings underscores that this is a time for experimentation. They have yet to figure out what they should or shouldn’t charge for as they try to increase their profits while protecting the overall health of their networks.

One idea is to let paying customers see less ads, as Twitter has promised. This might be very appealing to some, but it boils down to an admission that the ad-filled experience offered to the majority of people is substandard — not a message welcomed by advertisers who bill most platforms pay.

The existence of an “ad-lite” or even ad-free tier also reduces the incentive to improve the experience of “free” users who don’t get that relief. There is an assumption that if they are dissatisfied, they can always switch to a subscription.

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A second common theme is building a higher level of security into subscription offerings. Meta says it verifies subscriber accounts and monitors them to prevent identity theft, while next month Twitter will only allow paying customers to use text messages for two-factor authentication of their accounts.

It is logical to give higher protection to power users since their accounts are most likely to be hacked or suffer from identity theft. But it leaves the impression that only subscribers deserve a decent level of security, and it again reduces the incentive to improve the “free” user experience.

The third approach is to grant some users special privileges that increase their influence – but this comes at the risk of spoiling everyone else’s experience. This trade-off isn’t new: LinkedIn has long allowed subscribers to send direct messages to anyone they want, a privilege not given to everyone, to discourage mass advertising.

Meta’s new algorithms will highlight subscribers for special attention, make their profiles appear more prominently in search results, and get their posts more popular. Twitter, which is doing something similar, says it will reduce “the visibility of scams, spam and bots” on its network – implying that all of its non-paying users’ results have been put in the same category of unwanted slag it’s hoping out remove from his network.

Aside from creating an us-and-them divide within services that have always prided themselves on their “democratic” nature, this approach risks undermining the quality of content most users see. Paying users are not inherently smarter, wittier, or more virtuous than others. The idea is reminiscent of the early days of internet search, when some search engines were looking for a way to mix paid searches with their “organic” results to make money.

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Beyond ideas like these, there is a class of services that would not give power users an undue amount of leverage, but which such users would nonetheless welcome. The most obvious are analytics tools that help people monitor the reach of their posts and how others are interacting with them, as well as tools that improve user experience or improve the quality of posts. For example, Snap subscribers have a variety of ways to customize their experience on the service, while Twitter Blue users can edit tweets within 30 minutes of posting them.

It is questionable whether any of these measures make sense. Before its acquisition by Microsoft, LinkedIn made just 17 percent of its revenue from premium subscriptions, although it was in a strong position to charge users due to its status as a professional network. Finally, there is obvious value in paying for features that help you build a professional network or generate sales leads. In mass-market consumer networks, subscriptions can add marginal revenue — but they’re not likely to significantly impact social media’s heavy ad-dependence.

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