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In 1972, Petula Clark sang ‘the other man’s grass is always greener’. Decades later, the chartbuster seems to be speaking of OTT and social media platforms that are planning to adopt each other’s business models. Besides advertising, which has forever been their sole business model, social media platforms are now toying with the subscription model for users. On the other end of the spectrum are OTTs, largely dependent on subscriptions, that are now considering adding advertisements to their videos – a strategy to open new sources of revenue.
Twitter set the precedent for subscription on social media. One of the major announcements that Musk made after taking over Twitter was to monetise the ‘blue tick’. Soon, TikTok joined the party with its ‘live subscription’ with access to perks like a subscriber-only chat, creator-specific emotes, and badges that differentiate them from non-subscribers. Recently, Meta too introduced a verified feature for Facebook and Instagram, emphasising that it is aimed at enhancing authenticity and security across its services.
However, Over-the-Top (OTT) platforms that traditionally ran on subscriptions are gradually moving towards ad integration for added revenue. Platforms such as Hulu, Peacock, Voot, Zee5, and Disney+Hotstar now provide both subscription-based and advertisement-based models. Users can access a limited category of content for free with a few advertisements thrown in, but to access premium content like international TV shows and movies, they must pay for the ad-free premium plan.
What’s more? Even AppleTV plans to monetize its original video content with advertising – and so is Netflix.
Driving Force Behind OTT’s Transition
In India, subscription video-on-demand (SVOD) platforms are experiencing a slowdown in paid users with many turning to advertising-based video-on-demand (AVOD). In order to hoard subscribers, some platforms are offering free or ad-supported versions of their service to attract new users who might not want to pay for subscription.
According to media consulting company Ormax Media, India has over 423 million OTT users but the number of paid users still remains low. Less than 10% of Indian OTT consumers go for subscription, as per a report by EY.
Kishore AK, chief technology officer at Zee5, told AIM, “Our content is very localised. So, while OTTs like Netflix are moving towards ads, we always knew that the audience would prefer both ads and subscriptions.” This ad-based approach of OTT platforms is supported by users as well. There has been a shift in user behaviour with consumers willing to choose ads over paying a higher subscription.
According to a survey by Future Today, a majority of consumers prefer ad-supported TV (67%) over an ad-free subscription (33%). About 60% of consumers, who saw relevant ads, enjoyed their viewing experience.
Source: Future Today via BusinessWire
So, OTT platforms are diversifying their revenue streams by incorporating ads with subscriptions. Meanwhile, social media platforms are following OTT’s traditional formula of subscription.
Subscription for Social Media
Users may be okay watching ads on OTT platforms, but they have a low tolerance for ads when it comes to social media. As per a CMO survey, nearly 74%, that is, 3 out of every 4 users think there are way too many ads on social media, while 44% find them irrelevant. The same users are attracted to social media platforms because it is free – it is like a big playground for everyone to unleash their creativity.
Social media platforms have two markets: the audience market and the advertiser market. The audience market is where individuals use the platform, while the advertiser market is where advertisers use consumer insights for targeted advertising. The connection between these markets is user data.
“Regulatory measures like the Banning Surveillance Advertising Act in the United States and the EU’s Digital Services Act are making it harder for platforms to use personal information for advertising, causing a revenue slowdown. Platforms are exploring new revenue streams, including pricing services in the traditionally non-priced audience market,” The Dialogue’s founding director Kazim Rizwi told AIM. The Dialogue is a think-tank working on technology policy.
Social media has traditionally relied on revenue from ads and selling user data, but with increasing competition and ad blockers, they are turning to subscription models to offer personalised experiences and foster customer loyalty. This allows for predictable revenue and premium content for subscribers.
Mohan Gupta, senior director of product at Moj, told AIM, “With a secondary revenue stream and exclusive content, subscriptions deepen interactions and cultivate loyalty between creators and followers. As advertising streams prove unstable, subscriptions offer a unique differentiation and help platforms stay relevant amidst the influx of new players.”
Developed by the Indian social media platform ShareChat, Moj app lets users create and share short-form videos with various visual effects and filters.
Not just social media, subscription models are becoming a popular way for publishers, authors, and content creators to monetize their offerings and retain ownership of their content while offering exclusive member-only content.
“One of the main advantages of this model is predictable revenue, independent of factors such as ad placement or user engagement. Subscription-based businesses can rely on a steady stream of revenue from loyal customers, leading to increased customer lifetime value,” said Sumit Ghosh, chief and co-founder, of Chingari, a social media platform that offers short-form video content in Indian languages, in conversation with AIM.
Chingari has also started a subscription model for its users and creators to withdraw the daily income they generate through the ‘Gari mining program’ which has now become an integral part of their revenue stream.
Another benefit of the subscription model is the ability to make it more personalised. Companies can collect data on subscriber usage habits, preferences, and behaviours, allowing them to tailor their offerings to each individual subscriber. This not only enhances the customer experience but also helps companies to retain subscribers over the long term.