Subscriptions may be the key to the future of social media companies | Techy Kings

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Consumers are spending record hours on social media, but the platforms have struggled to monetize your time lately. Long-thriving online advertising businesses, historically the dominant way social media companies made money, have cratered this year thanks to a weakening economy and Applepp

ad tracking changes that have made it more difficult for platforms to demonstrate return on advertisers’ investments.

Meta Platforms has seen its year-over-year revenue growth over the past 18 months, down from over 45% from the first quarter of last year to a 4% decline from last week’s third quarter report. Snapchat parent Snap Inc.’s growth fell off a similar cliff, down more than 60 percentage points over the same period. Shares of major social media companies, including Facebook owner Meta Platforms, Snapchat and Pinterest,

has fallen an average of 60% this year as investors have largely lost faith in their first act. Suddenly, subscriptions have gone from a theoretical call option on a secondary revenue stream to a must.

They increasingly charge more for exclusive features or content. At the end of the third quarter, more than 1.5 million people paid Snapchat for a monthly subscription that gives them access to “exclusive, experimental and pre-release” features, such as extended viewing time for their stories and what is essentially a Halloween costume for their bit emoji. On Twitch, people shell out up to $24.99 a month to watch others play video games with digital bits of “flair.”

Why pay for any of it? The amount of time people spend on social media platforms—streaming, gaming, messaging, dating—puts consumer spending habits into better perspective. Whether it’s for pleasure, attention or status, we pay for things like a premium car, a custom paint job and license plate, or a turbo engine. These days, we spend an average of less than an hour a day in our car commute, but nearly seven over our 10 favorite social media apps.

Even outside of traditional social media, expect the ability to pay virtually anywhere you might socialize and otherwise socialize online. On the alphabetpp

YouTube — which saw its own ad revenue fall 2% in the third quarter compared to last year — already lets you pay for subscription-based products like YouTube Premium (ad-free plus music) and YouTube TV (streaming TV service).

On dating apps like Grindr, you can pay to see more suitors in your area; on Matches Tinder you can pay to see suitors elsewhere. Want to “express yourself better” on Discord, perhaps with an animated avatar? It can cost you up to $10 a month. And soon, it seems likely that you’ll be paying to watch your favorite tutorials via TikTok LIVE.

A challenge for social media platforms is that subscriptions and ads are often mutually exclusive. But that hasn’t stopped all platforms from selling an ad-free experience. A big benefit of Twitter’s Twitter Blue subscription, which the company reportedly wants to start charging nearly $20 a month, is the ability to read select articles from major news outlets without prompts.

The model may not be profitable for Twitter. As the Washington Post reported, citing Twitter’s own data, the users who see the most ads — roughly the top 1% of users in the U.S. — are the same people who are most likely to join a subscription service, risking cannibalization. Perhaps for this reason, Meta — which already offers subscription options on Instagram and Facebook to help its creators earn recurring revenue — says it has no plans to offer subscriptions that would allow people to remove ads.

Will the social platform with the most users (Meta, collectively) best the subscription game? Or the one that enjoys the most time (ByteDance’s TikTok)? Or perhaps the one used for work rather than play (Elon Musk’s Twitter)? If the online dating industry has taught us anything, it’s that consumers will probably continue to indulge in many but choose to pay for the one or two they care about most at any given time.

That would suggest that the total number of users may be less relevant than engagement. Sensor Tower data shows that while time spent in popular social media apps has increased in recent years, some apps are more addictive than others. Time spent on TikTok has increased by 26% from the first quarter of 2020 to the third quarter of this year, data shows; while Meta’s Facebook and Instagram have also logged double-digit percentage increases. During the same period, time spent on Snapchat and Twitter decreased by 26% and 6%, respectively.

Subscribers may never be as lucrative for social media platforms as their advertisers, but the sector will struggle to grow without them.

Write to Laura Forman at laura.forman@wsj.com

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