An interesting and revealing thing happened on Twitter in recent weeks. The infamous blue check mark, once a status symbol among people in the media and others who spend too much time online, has taken on a negative connotation. There are also hashtags shaming subscribers of the new fee-based “Twitter Blue”. On the face of it it is not clear why; There should be no shame in paying for a better Twitter experience – especially if you spend many hours consuming it.
The play exposed many of our behavioral biases and why they are a challenge to an economy in transition. The tech economy bets on a business strategy that offers free services as a lure to build a network that they can one day monetize. That day has come, and it turns out that the network may not be able to turn into a profitable model. In fact, charging money now could completely destroy their current money-losing model.
The Twitter glitch is a special case in some ways. New owner Elon Musk is a polarizing figure. The blue check mark started off as free and was only given to confirm the identity of people who had some public notoriety, or in my case, people who worked for a media company. It provided status and made your tweets more visible. Now you get a blue check only if you paid for it — or you’re extra-special notable like LeBron James.
It’s like buying your way into nobility, except worse because most of the old nobility lost their status at the same time. You don’t need to read much Regency-era literature to know that there is nothing more abhorrent than buying your way into position, especially if the position of the original position holders felt precarious. Never mind that subscribing to Twitter Blue has some useful features and provides a better user experience. The check mark now brands you as an imposter or worse. The reaction to the Twitter Blue rollout put our most tribal and hierarchical tendencies on raw display. It was a sight to behold.
Hands down I spend more time on Twitter than any other website, including websites that cost me more than $8 a month. Twitter is a very useful tool. It’s where I get breaking news, promote my work, follow economists who understand the latest data, and share their research. I probably get more value from Twitter than from any other website or social media company. Still I have no plans to subscribe. Nothing against Musk. Nor because I would be ashamed to pay for the check mark.
I tell myself I won’t pay, because as useful as it is for work, I don’t think Twitter is good for me. I blame it on my current, low-grade resentment that so many people are racist, anti-social or don’t understand economics. Subscribing to Twitter is like buying a carton after years of lighting up for free.
The other reason I don’t plan on subscribing, which I think is a bigger issue, is that it’s hard to pay for something that used to be free. Check-mark Twitter was previously a free service and paying for it now seems like a rip-off. If someone told me that I could get all those useful professional services for $8 a month when I joined, I’d happily subscribe. But paying for something that I’ve always received as a free service is a far cry.
It’s not just me, and it’s not just Twitter. Many of the tech firms that are part of our lives got by by offering their services for free – and now they’re starting to charge. Social media consumption tool Hootsuite is ending its free alternative, Amazon.com Inc. Will start charging for some returns. I only pay for a subscription to one streaming network, but watch them all because I share streaming passwords with my family. Once Netflix Inc. starts cracking down on password sharing, and I expect other streaming networks to follow, I don’t see myself subscribing to all of them. Not because I don’t watch, but because I didn’t pay before and won’t start now.
Apparently a lot of people are thinking the same way. Netflix lost more than one million users in Spain in the first three months of 2023 after it started charging for password sharing. Who knows what’s next? Fee for Gmail or Google Maps?!
All this was brought about by a business strategy that was essentially a big bet on the value of network effects. These services were valuable if everyone, and in the case of Twitter, notable people, used them and talked about their experience. But not charging people anything to use the product or allowing a subscription to cover friends and family.
No surprise, many tech firms didn’t make much profit, if any at all. The thinking persisted: If you have such a large piece of the market that many people use and access frequently, there must be some way to monetize it, either by selling your data, or with advertising, or Ultimately by charging for it. Low interest rates enabled this kind of thinking because money was cheap and always available. But now advertising revenue isn’t always substantial and can be unpredictable, and data collection is becoming as regulated as it is useful.
So with those two strategies at the same time high interest rates are not crushing the flow of easy money, it looks like we need to start paying for the once free services.
What tech firms fail to understand is our human behavioral bias. It’s one thing to charge for a service and raise the price, but we have a weird psychology around free things. Going from paying $0 to $4 is a much bigger hurdle than going from $1 to $5. Perhaps the tech firms were counting on the endowment effect – that once we have something (or a service) we will value it so much that we would rather pay for it than lose it. But this can backfire if people feel cheated, or are just angry that something is being taken away from them.
Perhaps this will change with time. I don’t see myself leaving Twitter and if the customer experience is really that much better, maybe I’ll eventually get over my reluctance and one day just decide to go paid. Or if Netflix has a show I should watch, maybe I’ll subscribe to watch it, then procrastinate and forget to cancel my subscription. Or… maybe I’ll get used to doing without the services they want me to pay for.
If tech firms don’t want to bet their future revenue on that kind of serendipity, they need to offer a better value proposition or clearly better services that make their customers feel like they’re making a fresh start. have been With something new that is worth paying for.
(Allison Schrager is a Bloomberg Opinion columnist covering economics and author of ‘An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.’)
Disclaimer: The views expressed in this article are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV assumes no responsibility or liability for the same.
(This story has not been edited by NDTV staff and was auto-generated from a syndicated feed.)