The new revenue path social media brands are forging

As the social media giants face disruption through a drop in media spending and cost-cutting across the business, they are seeking a new way to make revenue.

Enter the subscription platform, which has been adopted by Telegram, Snap, Twitter and most recently, Meta.

These paid options offer additional features like access to an undo button, larger uploads and customising profiles. The monthly cost of these subscriptions is between $4.99 to $22. 

According to the Business Research Company, the global social media subscription market size will grow from US$17.07 billion in 2022 to $21.91 billion in 2023 at a compound annual growth rate (CAGR) of 28.3 percent.

From these statistics, it makes sense that these giants are looking to subscription models to fill the void that ad sales left. 

Earlier this month, Facebook parent company Meta announced Meta Verified, a new subscription bundle on Instagram and Facebook for creators that includes “account verification with impersonation protections and access to increased visibility and support.”

This subscription model adopted by most social channels is a new way of diversifying their revenue streams, according to Amaury Treguer, co-founder of social media agency Bread Agency.

He said, “The problem is that this is counter-intuitive to what users are expecting from their preferred social channels. People join social channels to connect and follow their friends, favourite creators and preferred brands.

“In exchange, they tacitly agree to be marketed to as part of their experience. This has always been widely accepted as the experience is free and platforms are dependent on advertising dollars to survive.”

But the new subscription model flips the original social media script.

“Users are now asked to pay to be marketed to and that's a whole new story,” Treguer said.

“When you pay a subscription, as you would with your entertainment platforms such as Spotify or Netflix, you are paying for an ad-free environment - asking users to pay for ads might be received with some serious resistance.”

Beau Ushay, marketing specialist at Virtual Marketing Management said introducing payments fundamentally changes the dynamic that has existed with Facebook and its users.

He said, “From day one, you are the product, Facebook is monetising you as a user through serving ads. If it now changes tact and introduces a paid tier that is fundamentally different from the existing model.

“What will the experience be like if you're paying for a service as opposed to being the product that you're getting free and having your attention monetised? You are now paying for that service as with everything you pay for expectations are going to be vastly different?”

Subscription fatigue

As the subscription models are popular with streaming giants, Ushay said the social media organisations have taken advantage of their popularity, however, he said this will most likely cause “subscription fatigue”.

“Think of all the things you've subscribed to like Netflix, Disney Plus, creative subscriptions; they all add up. It was a “free product”, but because you were the product you were what the company was monetising. But going to subscription changes the fundamental nature of how social media became as powerful as it is,” he said.

Ushay said these giants have built a multi-billion-dollar industry around monetising attention which is clearly working.

“There are obvious benefits to the business around subscription models. It might be good for you as a business, but it's not good for the customer because you're not getting true value every time. It's hard to deliver that value over and over again,” he said.  

Treuger explained that social channels have always followed each other's moves and this is just another example of that copycat nature.

“From a user perspective, I seriously doubt that this will take off as much as Meta and the other platforms envisage. People are deserting traditional social apps, taking their conversations and social sharing to more private environments such as messaging apps,” he said.

“This pay-to-play element will only entice users to exit the platforms faster; especially considering the current economic context and the rising cost of existing entertainment subscriptions, for example, Netflix, Spotify or Disney Plus.”

The rise of monthly recurring revenue

As the social platforms use a subscription model to add to their revenue, Taz Papoulias, head of media at marketing agency Murmur said expect to hear the term monthly recurring revenue (MRR) more.  

MRR is the predictable total revenue generated in a business from its subscriptions in one month.

Papoulias said these platforms are moving towards MRR because it's more stable and reassuring.

“It'll be set and forget compared to constant sales. I've noticed that [Meta] is giving you exclusive stickers as well as 100 free Facebook stars so you can tip creators, so you will be getting that as well as a Facebook currency.

“They’re moving along the lines where you'll be able to pay your favourite creator, that's going to create another revenue stream. From Facebook's point of view, they're trying to justify and give as much value as they can,” he added.