How Much Would A Twitter Paywall Earn For Elon Musk?

The Key Takeaways

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Twitter is currently on fire. And we don’t mean on fire like they’re dominating their space. On fire, we don’t mean like an eccentric billionaire who has set the match on fire with dry newspaper and wood.

Elon Musk is more active than ever since he purchased Twitter on October 27th.

He fired a lot of employees, almost half of whom were Twitter workers. Some offices or divisions have had their staff reduced up to 80%.

Musk appears to have been working quickly to find revenue sources and a way to get rid of the HR disaster.

The problem for Musk is that he has made consistent comments about Twitter becoming the ‘free speech’ platform. Users are worried that there will be a decrease in moderation and an increase in hate speech, racist, or homophobic language.

Advertisers are understandably nervous of their brand being associated with this type of messaging and they’ve been leaving in droves since the Musk takeover. He has said on Twitter that there has been a “massive drop in revenue” as a result of advertisers pulling their campaigns.

Musk has said that it’s “extremely messed up” and has even gone so far as to threaten to “thermonuclear name and shame” advertisers who refuse to come back to the platform.

Yep, that’ll definitely work Elon.

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Elon Musk looks for new revenue sources for Twitter

Musk has come up with a number of ideas in order to replace lost advertising revenue. He initially proposed a revamp of the blue-checkmark verification system. It has been in use for years to identify celebrities and notable people, as well as verified journalists.

The platform allows users to distinguish real accounts from fraudulent or scam accounts.

For example, it means users are quickly able to identify whether the account claiming to be Elon Musk and offering 100 Bitcoin in exchange for your credit card details is the real thing or not (spoiler: it’s not).

The blue check mark will no longer be used to verify identity. It would become an upgraded version of Twitter. While the company had previously tried this in some markets using Twitter Blue, it would be replaced by this new system.

Musk originally suggested that the US price for the service would be around $20/month. However, other countries will adjust to account for purchasing power parity. This would give users priority when searching and across the platform. Users also receive half the ads that are available to them as free users.

This was the response.

Musk was quick to dismiss the notion. He even bargained with Stephen King, a horror writer famed for his high prices. “$20 to keep my blue check? F*** that, they should pay me!” King tweeted.

Musk responded with, “We need to pay the bills somehow! Twitter is not able to rely on only advertisers. How about $8?”

It’s not about the price, considering Stephen King is one the most popular authors and has a market value of around half a million dollars.

Twitter’s financial position

Now that Twitter is in private hands we’re not going to be able to see the books every quarter. While it would be fascinating to see just how much of an impact it is having on the business, for now we’re going to have to be content with ad hoc updates at the whims of Elon Musk.

So far all he’s said is Twitter was losing $4 million a day prior to the mass layoffs. While this may have stopped the bleeding, it is not certain how many of these costs will remain even after the reductions in staff.

However, we know for certain that Twitter’s revenue was $5 billion last year. Of this figure $4.5B came from advertisements on the platform.

That’s a tenuous position anyway, given that advertising revenues are under pressure with a slowing economy and the possibility of an upcoming recession. Meta also announced drastic layoffs to address the decline in advertising revenue, even though advertisers are not scared of moderation policies.

According to the latest gossip, Musk may be considering placing the whole Twitter platform behind an encryption paywall. So far it’s not certain how seriously this is being considered, but it would be an unprecedented move in the realms of social media.

What would Twitter make from a Paywall?

However, Musk could be crazy enough to do this. How much revenue would that generate? It’s fair to say that there would be a mass exodus off Twitter, but would the remaining users be enough in number to keep the platform viable and fix the companies finances?

Let’s take a look at some numbers.

Backlinko estimates that Twitter boasts almost 400 million users. Not all accounts are active. There are many fake accounts and spam accounts. Many more dormant accounts that were created by duplicate users or people who never opened regular accounts.

Twitter claims that the platform reached 238 million active daily users during Q2 2022. So that’s 238 million accounts who actively use the platform on a daily basis. Many of the accounts on Twitter are fake and paid to be there.

These accounts can either be spam, bot or both. They are used to automately promote different products or schemes and even attempt to fraudulently scam real users. The number of fake accounts isn’t known, and in fact it’s the disagreement over this number which led to Elon Musk attempting to pull out of the deal earlier in the year.

Musk signed off on the purchase before the matter could be brought to court. We can therefore only trust Twitter on the number of accounts that are fake. Twitter claims that less than 5% of accounts it has are bots or scams, according to an SEC request.

Is it possible that the hackers behind these accounts would charge an $8 monthly fee to remain on the platform? Probably, but if there is any form of ID verification then it’s likely that very few of them would be able to qualify.

So, we’ll be conservative and assume that none of them become paying members.

Also, the numbers of users must be adjusted to reflect the fraudulent accounts. Assuming they are all active on a daily basis (they’re probably not, but there’s no way to know), that means 20 million accounts coming off the 238 million daily active users figure.

So, we’re down to 218 million accounts.

If Musk managed to get every single one of those accounts to pay $8 a month to stay on Twitter, he’d be laughing all the way to the bank and could drop his “thermonuclear name and shame” without a care in the world.

The company would make almost $21 trillion in revenue annually, more than four times the amount it made in 2021 without receiving any advertising income.

But that’s not going to happen.

What number of users does Twitter have to maintain behind a paywall to supplement the revenue from ads?

An estimated 50 million.

Twitter could generate around $4.8 billion in revenue annually at this level, and it would cost $8 per month. Are you realistic about that? It’s probably a stretch. Twitter is the most popular social media site, however there are many free options available to users who want their attention.

It’s unlikely that they would be able to retain almost a quarter of their users behind a paywall that costs almost as much as Amazon Prime or Netflix.

This means that investors need to be aware of the implications.

The tech world is evolving. It’s always moving, but right now it’s Change. The proven revenue models that work are currently being evaluated, as economic conditions can reduce advertising revenue. Privacy concerns make it more challenging for platforms.

Twitter is not the only ad-reliant company. Meta, Alphabet or Snap also are looking to diversify their income streams.

It’s likely that the companies that perform the best over the next decade aren’t necessarily going to have the best product offering, but will find the most intelligent ways to monetize what they have.

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