Once upon a time, people speculated that Facebook (NASDAQ:FB) would implement a monthly subscription fee to access the service. Mark Zuckerberg quickly shot down the idea, and added some language to Facebook's sign-up page that proclaims, in no uncertain terms: "It's free and always will be." Yet Facebook's smaller rival Twitter (NYSE:TWTR) is now seriously considering the idea, at least for "professional" users.
Twitter is gauging interest in a subscription version of Tweetdeck, a previously third-party app that Twitter acquired in 2011 for $40 million. Tweetdeck's interface is a bit more powerful than the regular app, and the potential paid version would feature a "new, more enhanced version of Tweetdeck," a spokeswoman told Reuters. For an unspecified fee, users could access "more powerful tools to help marketers, journalists, professionals, and others in our community find out what is happening in the world quicker." Additionally, there would be no ads.
Twitter needs a subscription model more than Facebook
The possible move is notable on a few levels. For starters, it could be interpreted as an admission that the core advertising business is not performing well, which isn't really a surprise to investors, as there have been many signs of this already. Twitter has but a fraction of the active advertiser base of one of Facebook's subsidiaries, much less Facebook's core platform.
Twitter doesn't disclose average revenue per user (ARPU), a relatively standard monetization metric, but it's not hard to calculate manually. Dividing out the $638 million in ad revenue last quarter by the average number of monthly active users (MAUs) during the quarter (318 million) translates into about $2 in advertising ARPU worldwide. Facebook, on the other hand, does disclose ARPU metrics and posted worldwide advertising ARPU of $4.73 last quarter. In North America, Facebook's advertising ARPU is an incredible $19.28.
If you translate those quarterly figures into a monthly basis, Twitter generates a measly $0.67 in advertising ARPU per month, while Facebook's global advertising ARPU per month comes in at $1.58. In North America, Facebook brings in $6.42 in monthly advertising ARPU, which, notably, is greater than the theoretical $5-per-month fee that gets tossed around whenever speculation arises every few years that Facebook is about to implement a subscription fee. And no, copying and pasting a status update will not allow you to avoid this mythical fee that will never see the light of day.
Go for it, @jack
The disparity between each company's monetization capabilities shows why Twitter is considering this move. Without a doubt, social media has spawned an entirely new job category, so there certainly are professional social media users that could benefit from more powerful features and be willing to pay up (or have their companies foot the bill). A $5 per month fee -- or about 7.5 times Twitter's monthly advertising ARPU -- for an enhanced Tweetdeck could dramatically improve the top line if there's enough interest.
There's also no way that it's a coincidence that Medium recently introduced a $5 per month subscription fee that allows "members" to "experience a new layer of Medium." Medium was started by Twitter co-founder Evan Williams, who also started Blogger. Williams still sits on Twitter's board of directors, and disdains the prevalent ad-supported model of many online services.
At this point, Twitter has very little to lose from experimenting with new and additive revenue models, so it should go ahead and move forward with testing the waters. Facebook is trying to address the enterprise in its own way; perhaps this will be Twitter's shot at the enterprise.