Musk’s aim to convert all X users to paying subscribers deemed ‘risky strategy’

The statement reinforces what many of Musk’s decisions since acquiring the platform have hinted at: a shift away from an advertising-based model and toward a subscription-driven business. The change most representative of this goal has been the reimagination of the platform’s user verification mechanism – the app now allows any user to pay a monthly fee for a blue checkmark and a handful of additional perks through its X Premium service. Only around 0.3% of X users, however, have signed up for the service. Now, it seems Musk is looking to ramp up subscription revenues.

And Musk is in dire need of an influx in revenue. His lax approach to content moderation and frequent right-wing provocations on the platform created major brand safety concerns and spurred an advertiser exodus in the months following his October acquisition of the app. Musk said in July that the platform had lost around half of its advertising revenue and was operating at a loss.

Though the company has made efforts to re-engage brands and bolster its advertising business – through moves like appointing ad veteran Linda Yaccarino as chief executive, reinstating an advisory council of ad execs and expanding its creator ad revenue-sharing program – the changes have presumably not remedied X’s revenue woes in their entirety.

X’s shift toward subscriptions represents a departure from the way the platform has historically operated and is at odds with most social media business models, which provide free platform access to users and monetize through targeted advertising.

The potential value to be gained

Social media and advertising industry experts aren’t entirely taken aback by Musk’s statements Monday. “Elon telegraphed this move for a while, so it shouldn’t be a surprise,” says Joe Pulizzi, an entrepreneur, podcaster and author of various marketing books.

In Pulizzi’s view, this “might be the right business model” for X in light of the platform’s declining ad revenues and Musk’s “polarity” among advertisers. He says that the app could take a page from the New York Times, which effectively transformed its digital business through a hybrid advertising-subscription model in the early 2010s.

For X, Pulizzi suggests, this could simply look like an expansion of its existing freemium model. “Non-paid users wouldn’t be locked out entirely, but would only get so many looks or tweets before the paywall goes up.” It’s unclear whether this is the kind of model Musk has in mind at this point.

But an uptick in paying users could be just what the platform needs, Pulizzi suggests. “Let’s face it, X users haven’t shown signs of growing for a long time. The users that are there are loyal and use the platform. A smaller, more active, paid community might work.”

‘A risky strategy’

However, many industry leaders view the potential change as a surefire blow to X’s business success.

“It’s a risky strategy for Elon Musk,” says Matt Navarra, a leading social media consultant and industry analyst. “Given that less than 1% of existing users are Premium subscribers, he needs to find a way to convert a large percentage of the people who use X to pay for the platform … The big question is: can he convince people who use Twitter to part with their money – even a small amount of money – for an improved, healthier platform (according to his beliefs) and maybe with a few additional perks? I am doubtful.”

A key reason for Navarra’s skepticism? The fact that most users simply won’t find the tradeoff worthwhile. A large swath of the platform’s users are considered ‘lurkers.’ In fact, 49% of US adult users have posted fewer than five times a month since starting their accounts, according to 2022 data from Pew Research. “The majority of people who use X don’t create any content for the platform … and to find a paywall in the way of their lurking will not inspire many people to pony up and pay.”

Further, Navarra points out that users across the globe in lower income brackets are unlikely to buy in, “especially when there are limited additional benefits” promised with the subscription.

As a result, he predicts that just a “small percentage” of users will pay a monthly fee of the kind that Musk is envisioning – a development that will prove negligible in terms of revenue lift, in his estimation.

And while requiring users to pay for access – and identity verification – via X Premium could, in Musk’s telling, help eradicate bots from the platform, it could also repel everyday users. “A subscription model is likely to be universally unpopular among a user base which has been accustomed to using the service for free,” says Ed East, global chief executive officer and founder of influencer agency Billion Dollar Boy.

User backlash, he says, combined with the proliferation of X competitors, will only hasten X’s downfall. “One notable beneficiary could be Meta’s Threads, which experienced a surge in users upon its initial launch this summer,” says East. “Although engagement has since declined, disaffected consumers may once again revisit the platform. And they might be pleasantly surprised, as Meta has been diligently working on improving the user experience.”

The impact to X’s advertising business

If users leave, so too will X’s remaining ad dollars, East predicts. “A mass exodus of users will further hasten the departure of brands from X. Ad dollars tend to go wherever the most consumer eyeballs are.”

East’s marketing agency Billion Dollar Boy, for its part, is encouraging brands and creators “to explore alternatives to X, starting with Threads.” Early adopters of competitors like Threads, he says, will be best positioned to capitalize if X sees more users and brands jump ship.

But even if users don’t abandon X and instead decide to pay monthly subscription fees for access to the app, the company’s advertising business will still be hamstrung by the change. While a large portion of paying users could potentially, in advertisers’ eyes, indicate an audience willing to spend – and an audience worth marketing to – it’s more likely that advertisers will be concerned about limited reach. “For the majority of advertisers, [this change] would give them concerns about reach, engagement and long-term growth potential for the platform, which will be massively inhibited by making it a pay-to-play platform for everybody,” says Navarra.

It’s a point echoed by Shiv Gupta, managing partner at U of Digital, a digital marketing education firm. “It would significantly hurt the ad business, given many advertisers look at reach as a key metric – fair or not – and advertising is still X’s lifeblood.”

Nonetheless, he points out that “Elon has never been shy about taking a major hit on revenue in order for what he perceives to be ‘the greater good,’ so [the change] not out of the question.”

Despite Musk’s headstrong leadership style, Gupta and others express doubt that the proposed change will come to fruition. “It’s not going to work and most likely not going to happen – it will impact the business negatively, way too much,” Gupta says. He predicts instead that the company will continue to operate a hybrid ‘freemium’ model while trying to “more aggressively” incentivize subscriptions by making a greater amount of content and features available exclusively to paying users.

In the long run, Gupta says, “They have to find a better way to thread the needle between eradicating bots and reaching as many users as possible and recreating a strong ad business.”

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