How can Twitter win in the longform content? By killing its darling!
Exploring Twitter's route to power in the newsletter space
I assure you that there is no violence in this post. At least not the type its title suggest.
On Thursday, August 19, Revue, a newsletter service owned by Twitter, announced it is testing a feature that allows people to subscribe to a Revue newsletter directly from the Twitter profile of its creator. This feature is available to all Revue users immediately, but it is being rolled out slowly on Twitter.
A tight integration like this was expected once Twitter acquired Revue in January 2021. This feature adds to a growing creator-focused feature suite on Twitter that lets creators monetize their content, including:
Super Follows that allows creators to charge users for accessing additional content on Twitter (Similar to Patreon)
Tip Jar that lets users make one-off payments to the creator (much like buy me a coffee)
Ticketed Spaces where users can buy tickets to any workshop or conversation hosted by a creator on Twitter Spaces (a clubhouse competitor)
This latest salvo is different from the existing features in one crucial way. All the existing features allow creators to monetize the content they create on Twitter itself. This move is a distribution play as it gives Revue (and by that logic, the creators on Revue) access to Twitter’s distribution by taking away significant friction from newsletter signups. But this works only for Revue newsletters (for now), and one could argue that by introducing newsletter signup natively in creator profile, Twitter is trying to expand Revue as a newsletter platform and in the process, capture more value from the creator ecosystem.
Currently, Twitter is the proverbial Top-Of-The-Funnel for newsletter discovery. Creators will put links in their bio, create pinned tweets, tweet threads, etc., to drive their followers to their newsletter.
However, the sign-ups happen outside Twitter, and the economic value created in the subscription transaction is captured by the newsletter platform (such as Substack) and the creator. The newsletter platform also gets Network Effects value as the subscriber's card is on the file, and her taste in newsletters is understood. It can now be used to signup for other newsletters without friction.
In this scenario, Twitter at best gets the digital exhaust of user’s interest data which it can use for fine-tuning its ad targeting, but overall it loses significant value.
One way Twitter can get out of this losing proposition is to integrate Revue into the Twitter platform deeply. This can make Revue more attractive to newsletter creators and significantly increase the number of newsletter creators on Revue. This means that the number of paid newsletters will also increase, and as Revue takes a 5% margin on subscription fees, Twitter captures the value that it was otherwise losing. Of course, just a profile page integration will not accomplish this, but I am certain that there are more feature releases on the way to make this integration deeper.
The assumptions of growth
There are two key assumptions in Twitter’s move.
Twitter believes that if it can make a deep multi-feature integration between Twitter and Revue, the latter’s growth will explode, allowing Twitter to unlock significant value.
Twitter believes that driving Revue’s growth is the best way to capture value in the long-form creator economy.
Let's unpack these further.
The issues with the first assumption are twofold: risk-reward asymmetry and switching costs.
If you are a creator with thousands of followers on Substack, making more than thousands of dollars monthly, the risk-reward for moving to a new platform doesn’t match. Even if Revue gives you a concierge migration, there is still a huge operational risk in moving an engaged subscriber base to a new platform with the reward of saving at best 5% in platform fees (Susbtack charges 10%, revue 5%, Ghost does not charge any platform fees).
For creators who are still paddling hard in the water to figure out how to grow (like me), the risk of moving to a new platform is not monetary. But any switch is going to cause pain. It could be a feature they use (for instance, I use Susbtack's native podcast feature a lot), or they may not like Revue's profile page or signup process. There could be several reasons that can make the switch painful even for emerging creators.
That said, if Twitter continues to add features to Revue integration, the dynamics may change. I can think of features such as
Reading Revue newsletters on Twitter
Paying for subscription inside Twitter
A feed of newsletter issues like a Twitter feed
I would still argue that none of these features will provide long-lasting power to Twitter in the true Hamiltonian sense. These are like wedges (as explained by Nathan Baschez here). Twitter is providing a wedge of distribution to Revue, and it is not very strong right now.
Capturing value in the content economy
The 2nd assumption needs a more serious deep-dive.
Platforms such as Patreon and Substack make money by charging a fee (as a percentage of revenue) from creators for providing them tools to publish content. Another group of platforms charges creators for distribution, such as YouTube and App Store (distribution-focused platforms).
One could argue that Twitter and Revue combination is at the sweet spot in this mix, with Revue providing tools and Twitter providing distribution. But if you look closely at the other distribution-based platforms, they don't care what tool you have used to come to their platform. You can make videos in Adobe or Canva, YouTube doesn't care. Similarly, you can create your iOS app in React Native or Swift, Apple doesn't care, as long as it meets the app store requirements.
Distribution-focused platforms commoditize the tools creators use to create content for posting on the platforms (more on commoditizing the complement here). The implication for Twitter is to let creators using any content publishing tool such as Revue, Substack, Ghost, WordPress, etc., become tightly integrated with Twitter's distribution. This allows it to capture value from the entire universe of long-form content, rather than just taking a slice of the pie through Revue.
Through APIs, Twitter can enable one-click payment, one-click subscription, subscription payments, newsletter preview, newsletters in DM, etc. Such API-based integrations would not be too complex for a company of the size of Twitter to execute.
This allows Twitter to capture value in three ways.
Twitter can build a payment layer on top of one tap subscription and charge a cut, similar to the fee charged by App Store. As most newsletter subscriptions work on a monthly payment, this provides Twitter a monthly recurring revenue that compounds (it has the card on file, so the 2nd subscription will always be more seamless)
It can ink page -views-based deals with business publishers (such as Vox Media, Vice, etc.) for the newsletters read inside the Twitter app.
It can also capture value by enabling content creators to be easily discovered by potential readers by showing ads. The one-tap newsletter subscription feature can be integrated with ads making the click to sign-up process almost seamless.
This also provides Twitter a route to achieving the power of switching costs. By adding the payment + consumption + discovery layer on top of the distribution layer, Twitter can create a strong lock-in for the content creators on any newsletter platform, provided it moves aggressively and onboards the newsletter creators quickly. This is a reasonable assumption as many (if not all) newsletter creators are already using Twitter for driving traffic.
But for this, Twitter will need to open up its platform to all newsletter platforms (and not just Revue), which brings us to the post's title - Twitter will need to kill its darling to capture a bigger chunk of value in the long-form content economy.
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