Twitter exploring subscription service amid drop in ad revenue

Twitter exploring subscription service amid drop in ad revenue
© Greg Nash

Twitter is considering building a subscription service as it explores other revenue sources amid a marked drop in advertising revenue spurred by the coronavirus pandemic.

Twitter CEO Jack Dorsey said on an earnings call with investors on Thursday that the company was currently in the early stages of exploring a subscription option on the platform. The comments came as the company reported that its advertising revenue, a core part of its business, suffered a year-over-year decline of 23 percent, which it attributed in part to the rapid scaling-back of ad spending caused by coronavirus lockdowns. 

"First and foremost, we have a really high bar for when we would ask consumers to pay for aspects of Twitter," Dorsey said. "And, you know, this is a start. And we’re in the very early phases of exploring."

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Dorsey went on to note that Twitter has a small team exploring other potential revenue sources, including subscription and commerce. He said that the team is currently hiring and that he expected initial tests of a subscription product to be performed later this year. 

"Most importantly, we want to make sure any new lines of revenue is complementary to our advertising business," he said. "We do think there is a world where subscription is complementary." 

The possibility of a subscription service on Twitter gained attention earlier this month after the company posted a job listing associated with the product. The job notice said the company is looking for a senior full-stack software engineer to work with a team dedicated to building a subscription platform.

Like other social media platforms, Twitter offers its app for free and makes the majority of its revenue through ad sales. 

During its call with investors, Twitter said it earned $683 million in the second quarter, marking a 19 percent year-over-year decline. The company attributed the decline in advertising and overall revenue to the mass shuttering of businesses amid the coronavirus outbreak and ongoing protests in response to the death of George Floyd in after a police officer knelt on his neck. 

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However, the company also reported a 34 percent increase in daily average user growth between April and June, its highest ever quarterly year-over-year growth rate. The company said the coronavirus and anti-racism protests were likely linked to the surge in usage. 

Shares for the company jumped following the earnings call, which was held just a week after Twitter experienced the worst security lapse in its history. In a bitcoin scheme, hackers breached the accounts of several prominent CEOs and politicians, prompting concerns in Washington about the possibility that hackers accessed those figures' direct messages.

Dorsey said Twitter has "taken additional steps to improve resiliency against targeted social engineering attempts" since the hack. Twitter on Wednesday also released a statement noting that the hackers were likely able to read the direct messages of 36 accounts, including those of an elected official in Netherlands. 

"To date, we have no indication that any other former or current elected official had their DMs accessed," the company said.