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//Friday d. 12.08.22

Winds of change in the social media industry. Will adtech be replaced by subscription?

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Subscription POV #30

By Morten Suhr Hansen

Last year, when Apple launched a new function allowing iPhone users to exclude ‘ad-tracking’ from apps like Facebook, Instagram, Snapchat, Twitter, and TikTok, it sent shockwaves through the tech industry. It resulted in difficult times for the adtech business model.

Especially Facebook, which historically has made incomprehensible amounts of money selling information on users, from both the Facebook and Instagram app, had to take a beating on their revenue. Some believe that this caused the re-branding of the company as META, which signaled that the Facebook business model would not last forever.

Lack of ad revenue has led to new subscription services

Snapchat have experienced disappointing results, not just because of Apples new guidelines, but also because of a general decrease in the demand for advertising, as a result of rising inflation. Therefore, they’ve now launched a paid subscription service, Snapchat+, giving users access to a string of exclusive benefits. Features are currently limited to an exclusive app icon, the possibility to choose exclusive friends and early access to new features, at a monthly price of $3.99.

So far, the launch has been successful for Snap Inc. and during the first month, the service has secured them novel revenue of $5 million dollars. This is significantly better than Twitter’s premium subscription service Twitter Blue. Since June, Twitter has made around $4 million dollars on the service, however at the end of July subscription prices were raised from $2.99 to $4.99

Instagram and TikTok are also preparing new subscription services

Instagram has also been brewing a function that allows users to subscribe to their favorite profiles, which would significantly increase the potential income as a content creator. And Instagram is promising not to take a cut of the revenue – well, at least until 2023!

TikTok is working on a similar model with the wish to support creators more effectively and secure that popular content creators can make (even) more money on their content. However, I do suspect that their will be some sort of profit to recoup for Chinese ByteDance.

At the same time, the opposite is happening in the streaming industry!

Whilst all of the famous apps are moving away from commercials and into subscriptions, several streaming services (including Netflix and Disney+) are announcing ad-supported plans at a lower monthly rate. This is most likely a reaction to the increased competition and ‘streaming fatigue’ the industry is experiencing in 2022. As we know, it started with the first-ever Netflix quarter without growth and since then, consumers have also taken a critical look at their monthly expenses, including their streaming services.

Here, it’s not about offering a free product where the user pays with his information, but rather, about allowing lower-income groups to retain their relationship with their preferred streaming service

What can we learn from this development?

At Subscrybe, we have never doubted the fact that subscriptions are a far better alternative to adtech. And now, it’s a direct necessity for survival for some of the most succesful companies in the world. This acts as another sign that, if you wanna be like the greats – you better be a subscription company!

And it seems that consumers are slowly realizing that, very often, it’s better to pay a low monthly fee than selling your private information to advertisers. You see this in popular subscription offers like YouTube Premium that has recently reached 50 million paying subscribers and at Spotify, where almost half of subscribers pay for Spotify Premium.

Let’s be honest. Nobody likes commercials. At also, many have a relation to their favourite creators (or platforms) that is so strong that they will happily pay to get the content that they enjoy the most.

So, perhaps the subscription industry should be thanking Apple for taking the first shot against adtech back in 2021. Because it looks like we’re on the way back to a time where we’d rather pay with pennies and dimes than with our privacy. And this is not just better for the consumer. It allows subscription companies to take a fair price for their product and forces them to develop platforms that are designed to make the user experience better and not designed to satisfy advertisers.

What do you think? Is adtech slowly dying?

Read more Subscription POV here