Twitter Is Considering a Subscription Service; Shares Rise
(Bloomberg) -- Twitter Inc. shares rose as much as 12% Wednesday amid speculation that the social media company is building a paid subscription-based service.
Twitter is considering alternative revenue streams, including some kind of subscription offering, according to a person familiar with the company’s plans. A new group called Gryphon is still being assembled, and it’s possible that a subscription product never launches, the person added, asking not to be named discussing information that is not yet public.
The company recently posted a job listing announcing Gryphon, described as “building a subscription platform, one that can be reused by other teams in the future.” The new group of web engineers will work closely with the payments team and the Twitter.com group, according to the posting. News of the announcement prompted speculation on Twitter.
The stock rose the most intraday in more than three months, to $36.98. A Twitter spokesman declined to comment.
The idea of a Twitter subscription product has been discussed for years as an alternative to the company’s current advertising and data-driven businesses. Former Chief Operating Officer Anthony Noto said in 2017 that Twitter was considering charging for enhanced features inside Tweetdeck, the Twitter product for power users, though that never materialized. More than 84% of Twitter revenue comes from advertising, a business that was growing before the coronavirus pandemic swept the globe. Adding a subscription service could help it diversify. In the first quarter, Twitter’s sales rose just 3%, the smallest increase in more than two years.
Chief Executive Officer Jack Dorsey is also under pressure from activist investors to accelerate the company’s business, and it’s possible a subscription service that includes special features for the most frequent users could provide more revenue at a time when advertising budgets are pulling back.
Mark Zgutowicz, an analyst at Rosenblatt Securities, said Twitter is “highly unlikely” to consider paid subscription tiers for its service. Instead, there could be a subscription tier “for data and analytics that its power users may consider.” The initial total market may be fewer than 10 million users, he said.
Simply charging for Twitter’s core product was always seen as a potential bottleneck to user growth, which is important for a company that makes most of its money from advertising.
“We do believe that there is a real importance that Twitter is accessible to everyone in the world no matter what their economic stature is and where they are in life, so the general case has been to make Twitter free and open,” Noto said in 2017.
Facebook Inc. CEO Mark Zuckerberg has also been asked about offering a paid version of the social network over the years, but has argued that the platform should be free in order to reach the most people.
©2020 Bloomberg L.P.