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Social Media Companies Look to Customers to Diversify Revenue

Investopedia logo Investopedia 3/14/2023 Rob Urban

Meta follows Twitter's infamous blue check plan as ad revenue falls

Erik Tham/Getty Images © Provided by Investopedia Erik Tham/Getty Images

Mark Zuckerberg is going where Elon Musk stumbled.

Months after Twitter said it would charge for a blue check verification, Meta is rolling out a similar system for Facebook and Instagram users. While Meta Verified stands to generate just $2 billion in its first year, a fraction of the company's 2022 revenue of $116 billion, it may represent a new source of cash as the advertising market craters.

Businesses have long relied on advertising, but charging users directly is new to both companies. In a season where companies have made large staffing cuts, finding new sources of revenue is clearly on the mind of executives across the industry. Big tech cut 160,000 workers last year and more may be on the way.

Meta is also working on a standalone, text-based social network similar to Twitter, the BBC reported. "We're exploring a standalone decentralized social network for sharing text updates," a spokesperson told the BBC.

It's too early to say whether Meta will succeed in its search for a new revenue source, almost all of which now comes from advertising. Its net income fell about 40% last year, a decline of about $16 billion, and is trimming workers to save on costs. Meta said on Tuesday it would cut about 10,000 jobs over the next few months, its second round of layoffs after the company slashed 13% of its workforce, about 11,000 jobs.

Under new owner Elon Musk, meantime, Twitter's revenue is down 40%, according to Twitter insiders, and more than 500 of Twitter’s top advertisers have paused spending on the platform.

Key Takeaways

  • Social media giants are working to find new profits in the headwinds of an expected looming recession and advertising cutbacks.
  • Elon Musk’s Twitter began charging users for verification and other added features amid a 40% decline in revenue.
  • Meta, the owner of Facebook and Instagram, is following Twitter’s lead with a paid verification service.
  • Tech industry profits are in the spotlight amid waves of layoffs and other industry-wide struggles.

Meta Verified

Zuckerberg's Meta Verified product, for Instagram and Facebook, enables users to access exclusive features and improved customer support. Paid users will get a verified badge and increased visibility.

Meta shares are down about 8% from a year ago and little changed over a five-year period. The S&P 500 has performed similarly over the past year but returned approximately 45% over five years.

Meta also said it will implement changes suggested by an outside group related to its VIP service with a tool called “cross check.” It will fall short of implementing all suggested changes around content moderation transparency and measures to avoid political favoritism.

Twitter’s new paid service, Twitter Blue, costs users in the U.S., $8 a month or $84 per year when they subscribe on the web. It's a bit more expensive if users sign up with the iOS or Android mobile apps. It comes with a checkmark indistinguishable from the old program, the ability to edit Tweets, upload longer videos and create longer Tweets, and show up at the top of search results, among other benefits.

Twitter has long offered a blue checkmark to denote verified users, generally reserved for well-known politicians, celebrities, and journalists. Now, anyone can pay a monthly fee for that verified mark. The rollout, however, was far from smooth: Many longtime users promptly ditched the service. 

Twitter is hoping to generate $732 million of revenue in the first quarter, according to global sales and marketing chief Chris Riedy, the Information reported. That would be a drop of 39% from the first quarter of last year"

While Musk’s takeover is partially to blame, an expected economic downturn and other concerns with the platform are driving advertisers to use cash for purposes other than Twitter ads. Twitter, already operating with losses, has made deep cuts in its staffing, closed offices, and implemented other measures in an effort to break even. Twitter’s quarterly operating loss in the second quarter, its last as a public company, was $344 million.


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