I have been exploring a new AI tool that is allowing transcript creation while I edit the episodes. It’s not perfect, but it’s pretty great for those who prefer reading to listening. I plan on including transcripts of all episodes going forward.
Also: Apologizes that yesterday’s essay did NOT have more than 1-second of audio. I am still working through these tools. The audio should be live on that post now (I chose not to re-send it to your email)
In This Episode
Fader and Nevraumont discuss Elon Musk’s plan for charging $8/month for a blue checkmark (plus other benefits). What metrics should they use to know if it’s working? Can subscription revenue compete with advertising revenue? What are the different types of Twitter users?
Keep it Simple,
Edward
Full Transcript
Edward: So, Peter, do you have a blue check mark?
Peter: I do. I'm so fortunate. Of course the question is how long will I keep it and what will I have to pay to do so, and what benefits will I get associated with it?
Edward: How did you get it? Was there a process you went through? Did the school help you do it?
Peter: No, it was actually through my previous company, Zodiac the one, we sold to Nike. That at that point the CEO said, You know, we ought to get blue check marks just to give us more credibility. It was a pretty simple application process, but you know, a lot of people who have been trying to go through it, who are at least as qualified as I am. It seems like there is, or at least was, something pretty arbitrary about it, but hey, I'm one of the lucky ones. ,
Edward: You're part of the in group. When I was at General Assembly, the, my head of PR came to me like basically on day one on the job, and she's like, We need to get you a blue check mark.
And I had to go and change my Twitter account was linked to my Gmail address and I had to switch it to my general assembly email address, and then she went to town and did her PR stuff to try. Get the blue check mark, but it never happened. Two years of trying it and never got the check, I even as a CMO of general assembly I was not renowned enough to get the check.
Peter: That's exactly my experience cuz I think you honestly, in a position like that, deserved it more than me. I think maybe the professor thing helps, but there's plenty of professors with the big followings and great content who don't have it either.
So maybe that's what the, All the musk nonsense will actually bring some order, some predictability to who gets a check or who gets which kind of check cuz there really should be more than one of them.
Edward: There kind of is. So I guess for those who... I imagine all of our listeners know what's going on right now, but just a really quick summary is that Elon, there was a rumor that went out. Was it Vanity Fair or The Verge? It was the Verge last weekend that talked about how all the blue check marks are gonna have to pay 20 bucks a month just to keep it. And then yesterday we're recording this on Wednesday, yesterday, on Tuesday, Elon came out and said, No, it's gonna be $8 a month.
And it includes not just the blue check mark, but a bunch of other kind of benefits, if you will. And then on top of that, really red down people like Joe Biden for example, will get a, not a blue check mark, but like an. A descriptor underneath them that says that they're authentic and real. Which was the original purpose of the blue check mark to begin.
Peter: Right, right, right. Yeah. Really a validation, not just a status symbol. But if you look at some of the benefits that they're talking about, some of those benefits make sense for creators. Some of the benefits make sense for readers, and I think it's important not to mash the two together.
That's why they really should be a different kind of subscription based on what you're using. Twitter.
Edward: I guess so, so big part of this, it's interesting. The last essay I wrote for for marketing BS couple of weeks ago was all about paying for status. And this, it feels initially like this is paying for status and a lot of that's what it is, right?
So you pay to get the blue check marks right now are primarily a status tool, although I know you have some features that us non-black marks don't have. But going forward this is going to replace that blue check mark you are paying for the status. But the benefits you get seem to be around production.
So if you, the tweets that you produce are more likely to be seen by other people you're, you get listed first in the mentions. You get move to the top of the replies. And so there's a bunch of features like that. So you, the stuff that you produce is more likely to be seen, I don't think.
And that makes sense. Yeah. And that's good for everybody in some ways too because it kills the spambots or if you're a spambot, you're not going. Verified, you're not gonna get the blue check. And so all the spam bot stuff gets pushed to the bottom. But so does everybody. So do all the non blue check mark.
People get pushed to the.
Peter: Now for me personally I, yeah, I'd pay something to keep the blue check, but I'd also pay something to improve my reading experience. I would love to have more control over the timeline. I'd like to get inside some of the curation algorithms and, tweak them to, to, to my benefit.
To me that that's more important as a Twitter consumer than a Twitter.
Edward: And, but now, so those benefits though, should, are those benefits that they should be charging for, because every social media platform has that, which is, hey, we want to show people the content that engages them, that they would enjoy.
Why if you're able to do that, if you're able to show people better content, they're gonna use your platform more, and you're gonna make more money on ads, at what point would you be like, Hey, you know what? We could make this person's experience better, but we're gonna put that behind a paywall and we're gonna give them a worst experience.
That just, it feels like that's not The Thing you want to be charging for.
Peter: That's a big philosophical question, but you're right. That, that this is how everybody does it. So presuming that a Twitter's gonna follow that mold, the most obvious one of all is if I pay a reader subscription.
Don't show me any ads, right? Just like with Spotify, give me, gimme the ad free version or maybe have, a new Netflix one where it's a lower price with some reader control but some minimal number of ads. So there should be something about that. But also if I'm gonna pay that I wanna have complete control over whether things are in chronological order or whether I want to trust their recommendations I'd.
Do my own curation like that.
Edward: That's fair. But you can do that now. It's Twitter's ability to produce things and new product features have been very slow. But right now I think your default is a algorithmic feed. But it's fairly simple to change that to a chronological feat if you want to. I don't think many people do but it, but the ability is,
Peter: I find that it still does chronology in a weird way and sometimes then jumps back a few hours in time and maybe it's just me, I don't know.
But they, they definitely can and should clean that up. But like I said, there, there should be different kinds of features for different kinds of users that would involve different kinds of subscriptions. And of course there'd be the grand subscription that would give. Everything for a super power user who's creating and consuming, get all those features.
Some, bundled price.
Edward: Nice. And so right now, I was I guess the question on everyone's mind right now are the screaming and shouting people on Twitter are talking about the fact that hey, the, like Steven King for example the writer. Went and posted something about how he's, there's no way he's gonna pay for this because Twitter should be paying him.
And in some ways he's right. Because if you look at right now the new Blue Check mark program is gonna be, the benefits are not for the readers. I guess the little bit they think he said something about half the normal ads that you would normally see, but majority of the benefits are, hey, the status benefit and a bunch of production benefits, like your content gets seen more often.
So it's producers that are gonna be charged for this, but at the same time, isn't it the producers that create the value for everybody else?
Peter: Of course that's true with all social media platforms. I don't think Twitter's any different in this regard. And I think a lot of people are making noise about it.
Because of who is in charge now. I think it's just a visceral reaction. Oh, it's Elon Musk. I think if Twitter had announced changes like this at another time, a lot of folks, I'm not gonna speak for Stephen King or some of the other celebrities would say yeah, it's about time that, that I get those extra boosts that I deserve.
And you know, what, eight bucks a month I'm paying more money than that for a lot of other content subscriptions that are used far less.
Edward: Fair enough. How what do you think, how, what percentage of Twitter's revenue then, if this, assuming this thing works and it's successful at all, like, how much revenue can you get from this subscription product versus the advertising model?
Peter: It's a great question. It goes right into my strike zone, which is we could look at the next year o over the short run. They're so reliant on advertising that there's no way that they could come close to matching it with subscription revenue. But in terms of long run customer lifetime value, if they start to ratchet down the ads and focus on bonafide benefits to creators and readers through a different well calibrated subscription services. You give 'em a couple years and they could completely flip it and make it almost entirely subscription based. And that's the direction they should be moving in. Not only would that be steadier income, you'd have a better sense of who's doing what you'd have much better metrics to use for internal and external guidance. Right now, everything they're doing with monthly active users and daily active users doesn't make a whole lot of sense. It's not easily tied to, to revenue so that they can really improve the stream of revenue, but also the predictability the understanding of it. And that's great.
Edward: So your prediction is, call it in three years, the majority, more than 50% of the revenue comes from subscriptions
Peter: If they play their cards right, and it's real hard. To be pro Elon. It's just unpopular position to take, but it's...
Edward: low status. It's low status these days,
Peter: ...and so I'm gonna avoid the personalities and I'm gonna avoid endorsing or critiquing some of the statements you've made. But just if you just look purely at the business decisions and the urgency that he's bringing to it, it's about.
Edward: The only other social network I can think of that has this both model where you can use the network for free or you can pay to get effectively a blue check is LinkedIn. Like LinkedIn, you can become an in member or something like that.
Peter: Yep, yep.
Edward: But I don't think LinkedIn makes much money off the in members, do they? It's not significant, is it?
Peter: I don't know. I don't know if they break that out, but I know I'm paying my $300 a year to, to get some of those benefits and so on. I don't use them all that much.
But but sometimes it's really really valuable whether it's for some of the companies I'm running or the books I'm writing. I do it without batting an eye. Now granted, it is covered under my university, research and teaching budget. But I do it with without even thinking. And that's, I'm paying I think a good bit more money than I'd be paying for Twitter, which I use a lot more than LinkedIn.
Edward: Yeah, fair enough. What, so what do you use the LinkedIn one for? So you're paying for the premium, like I've paid for it from time to time, mainly for recruiting purposes. What are you using it for?
Peter: So a part of it is to have a little bit more control to both the get a better sense of who's looking at my profile. To have more control about being the block who sees mine being able to send, not that I do a ton of these InMail messages, but again, just sometimes I do want to do a bunch of that.
I run a separate group and to have a little bit more control over there as well. So it's a bunch of little things. Again, any one of the things, the most important things I get out of LinkedIn would be far less significant than the benefits that I'd seek from Twitter. But I still do it anyway. I don't have a problem doing, so it's just matter of finding the right price point.
In LinkedIn's case, they have a bunch of different tiers. I'm not even sure which what I have, and that's the direction Twitter will go as well.
Edward: That's interesting. You're gonna pay for the Twitter check, and you're gonna expense it through your department?
Peter: That's a good question. Whether I, I could do that or I guess so. I mean it's in some sense no different than LinkedIn and I certainly spent a lot of time talking about my research, my teaching, the books that I'm writing on behalf of Wharton, including a new one that just came out this week, The Customer Base Audit.
Edward: So we should talk about That should be our topic next week. Next week our discussion gonna be your book.
Peter: I'd love to do that, but right now it's Blue Checks instead of Blue books. So yeah I think I would do that and I would encourage others to do the same.
Edward: That's an interesting point too. You got your blue check because of your work with your last company, you're gonna be able to pay for this next check with the expense it, I imagine the CEO of every company in America is gonna expense this and then the executive team and all the PR people.
Right now it feels like the blue check marks are disproportionately journalists and authors, but is in the new blue check mark world become people that can expense it will just take over.
Peter: And of course then there'll be a hierarchy of checks and there'll be clear criteria beyond money about what it takes to achieve one. You can't just purely pay for blue check. You have tweet enough. You have to show some credibility that there was. That application that you and I have both tried to fill out. And so if you start making it aspirational that in order to move up to, the next check you have to tweet a certain number of times, you have to engage and, do other things that are beneficial to the Twitter community. If we make it incentive compatible for people to, to lean in and participate, that's great. It's good for everyone.
Edward: That's interesting. So you're saying $8 a month is not gonna be enough, $8 is what it costs, but you still have to, You have to jump through some hoops in order to be allowed to pay the money.
Peter: That's right. Exactly. You have to, again, establish your credentials and you have to participate enough to really earn it.
Edward: It goes back to the, what I talked about a few weeks ago, which is here you're paying for status, but if it's only dollars, then there's no actual status involved.
So it has to be, you have to do a bunch of stuff. You have to be legitimate, and then you can pay for the status levels. It's, I did some math this morning. So right now if every single blue check mark on Twitter starts paying for it. And no, no one else does. Only the blue check marks pay for it, it's pretty minimal revenue. It's something like 50 million per year on a business right now is doing what, 4.5 billion? And so if that's all it does is he ends up milking the blue check marks. It feels like this is a bunch of noise for nothing. And so it only really works if he gets a significant percentage of the base.
I think it was something like, If 10% of the base start doing it, it gets can't remember what the exact number was, like half a million dollars or something like that. He has to get a pretty high number in order for it to be significant against his advertising, at least at this price point.
Peter: And that's exactly why it's a multi-year initiative. It, it's not gonna happen overnight. And again, with all these haters out there, whatever he tries to do, people are gonna declare it to be a failure a few months from now. But it is a behavioral change on the part of people to actually not only seek out the status and pay for it, but to change their Twitter habits to.
Be a better member of the community. So I think as he changes, not just check marks and basic functions, but as he changes the nature of the way that, that people use Twitter I think people will start to see more and more value, more and more urgency to start doing it. Instead of feeling that that he's holding a gun to their head.
Edward: What metrics should he be looking at? So he goes and pulls the trigger on this and some people sign up for it and some people stop using Twitter. What numbers should he be looking at to know whether or not this is going in the right direction of whether this is trending to the place where three years from now it's gonna be the majority of his?
Peter: It starts to become the things that we really can measure and manage effectively, customer retention. So we can say, how many new people have signed up for a particular status? Of all the people who signed up last year how many of them have retained it? Things that are very easy to measure.
You think about all these lawsuits, obviously the big one that more or less forced them to buy the company. There was another one last year that I was actually an expert witness on Twitter's behalf about measuring daily active users and monthly active users. It'll be great to move away from that to metrics that are harder to argue about and are more directly related to the health of the business.
Edward: And measuring the growth of this thing is easy, right? So you can, How many people signed up and are paying $8 a month? What's your arr? How much revenue are you making on this new product? How many people are signing up per month? How many are churning out and canceling after one month? That feels like the upside, the revenue side is easy to measure. The downside of "Hey, because this is there, I'm Steven King and I'm gonna stop producing content on Twitter'" how does he know how much damage he's causing because of this?
Peter: That's a great question, and of course we'll never know for sure from what people are saying. You have to run the experiment. You have to try it. Again, maybe with multiple tiers. I think Musk, I think to his credit, look, the fact that the rumor started at 20 and now he's saying eight. I think he's finding out what the market will bear. Both in terms of price and in terms of what features and functionality needs to offer.
I think they're gonna find a pretty comfortable middle ground where serious producers will be compelled to stay with it, but will feel that it's worth their while.
Edward: But what's, the metric? does he take number of tweets written by non-paying customers and track that on a day to day basis. Is he doing like an individual customer level model where he takes all his producers, everyone who's producing tweets and tracks them over time and. Use, almost like almost treats like a tweet, like a transaction to try to measure if someone's, if a transactor, a transactor, a producer is churning off rather than buying a product.
Peter: I would love to see that. And if we think about that kind of behavior we see very commonly in, in different kinds of settings, like even for a lot of different non-profits. A museum will look to see how many people are going to the museum and how that relates to whether they renew their their membership. Companies are doing that kind of thing all the time. Again I've seen some of the insides at Twitter and they have not managed that well. They've had a lot of really ad hoc measures, some of which have been around spent, time spent on the timeline tweets post and so on. But they haven't come to agreement on it and partially cuz these measures they've looked at haven't been directly tied to revenue, which is engaging with.
Edward: But it's interesting though, cause there's two parts of it. There's the producers and for them, whether they look at ads or not is almost not relevant. It's whether not they creating compelling enough content that's keeping other people engaged on Twitter? Because where the revenue's coming from is all those people who are just reading the tweets and seeing the ad spending to me it's being a daily active user and a monthly active user and time spent on site. That's the metric that's determining how well they can monetize is not?
Peter: And, but I love the way a company like Spotify is doing this sort of thing. And now again, we can't call them necessarily a paragon of business success just in terms of raw profitability, but I think there's a lot of respect for what they do and how they do it in these terms, having the advertising based model, the subscription based model.
And they know that when they're bringing a new artist on board they will look to see. Not only how often that music is listened to or downloaded, but the value of the customers who engage with it. And so they can actually start to put a price tag on an artist based on the value they're bringing to the platform. Of course, that's something that, that's negotiated, but they're doing it in a data driven way. No reason why Twitter can't be doing very similar kind of thing.
Edward: Got it. So yeah, so they can put up like, Hey what, how much value is is Donald Trump bringing to our platform? How much value is Taylor Swift bringing to the platform in terms of driving other people to engage in that content and keep them on the site longer so that they can sell the ads?
Peter: And staying with the Spotify or even Sirius XM model, there might be cases where it makes sense to pay someone, especially as other micro blogging platforms arise. And we hear a lot of talk about them, usually for political reasons. Sure. We might have bidding wars about about content creators. That would be a very healthy ecosystem, and at that point, they really have to deliver meaningful value to the creators and the consumers.
Edward: It's interesting. Spotify is doing the reverse right now, and so everyone's getting paid to be like all the music, all the musicians, all the, every time a song is played, the musicians are paid, but they're allowing musicians to basically bid to have their songs played more often on playlists and so on. And effectively the musicians don't have to pay themselves, but they're basically bidding in lower. Lower royalties. "Hey I'll take a lower royalty in exchange for being played more often". And I think it's almost like Twitter's doing the reverse of that. If everyone's gonna need, everyone's gonna need to pay. But now, once I know the lifetime value, once I know that Taylor Swift is worth a lot, I can go and take that $8 that she's paying and I can discount that to her.
Peter: Love it. I love it. Now, of course, Spotify has it much, much tougher. It's a much more competitive market and dealing with all those royalty issues dealing with the music industry. Oh the cost, the complexities, the limitations. Twitter has it easy. They really do, at least right now. And yet they still can't, punch their way out of a paper bag. I think if they really start to look at some of these other business models and practices and emulate the good ones, the ones that they can really capitalize effectively, I think the skies might be very blue for Twitter.
Marketing BS Podecast #3: Bluecheckmark Metrics (Now with Transcript!)