A potential pricing model for account verification
After months of drama, Elon Musk finally closed on his acquisition of Twitter last week and is in the midst of making numerous changes to the platform. From the beginning, Elon has been adamant that his reason for acquiring Twitter is not to make money but to provide civilization with a common digital town square.
Even if we give Elon the benefit of the doubt regarding his intentions, the stark reality is that this was an extremely expensive acquisition and Twitter is going to have to generate much more cash flow than it has historically just to service its large debt burden. I would suggest reading this recent Twitter thread by Chris Bloomstran to get a sense of the formidable numbers:
Charging users to be “verified” by Twitter is an initiative that could bring in revenue as well as increase confidence in the platform. Historically, verification has been a non-transparent and difficult process. I have attempted to verify The Rational Walk’s twitter account on at least three occasions, each time being careful to fulfill all of the requirements, only to be rejected every time without any explanation. I am not alone in my frustration and Elon has said that verification is being completely revamped.
There have been a variety of approaches floated on social media and elsewhere, most centering on making verification a paid benefit of Twitter Blue which provides features intended to make the platform more pleasant from a content consumption standpoint. But this seems like the wrong place to monetize verification because a fairly small subset of all Twitter users are likely to care about this feature.
Verification is most valuable for accounts that represent companies, brands, or an individual’s professional identity. Such accounts are often widely followed, with tens or hundreds of thousands of followers, and at risk of “imposters” that replicate the look of the real account using a Twitter handle that is similar enough to fool people.
As far as I know, The Rational Walk’s twitter account has never had an imposter, but it would be easy to create one. The real account’s handle is @rationalwalk. An imposter could create an account with a handle such as @rationa1walk, replacing the first l with a 1, and this would fool many people. Scammers often do this sort of thing to find victims who are contacted through replies or direct messages. Verification places a blue checkmark next to the account name giving readers confidence that the account is genuine and making it more difficult for scam accounts to operate.
If I am correct in thinking that verification is most attractive for larger accounts representing companies, brands, or individuals seeking to build a professional identity, it follows that the verification feature could be targeted to those types of accounts outside of the Twitter Blue bundle of features.
In terms of revenue optimization, it is quite likely that larger accounts would be willing to pay significantly more than smaller accounts for verification. If Twitter charges a flat $20 per month for verification, this will be a steep charge for ordinary accounts that primarily consume content, but extremely cheap for a large brand.
In microeconomics, price discrimination refers to the practice of charging different prices to different customers, or groups of customers, for what is essentially the same product. Although this sounds nefarious, it is a legitimate business practice that is used all the time. For example, airlines sell seats reserved far in advance at discounted prices knowing that those who purchase seats well in advance are likely to be leisure travelers who are more price sensitive than business customers who typically learn about travel needs with far less notice. When you fly, the stranger sitting next to you is receiving the same service but is probably paying a very different fare.
If it is true that larger Twitter accounts are likely to derive greater value from verification than smaller accounts, it should be possible to capture at least part of this differential using a relatively straight forward sliding scale.
For example, there could be a minimum $5/month charge for verification which covers accounts of up to 5,000 followers. Beyond 5,000 followers, Twitter could charge an additional $1/month per thousand followers.
For example, The Rational Walk’s account would pay about $30/month since there are about 30,000 followers. But since Hershey’s corporate account has 297,600 followers, the charge for verification would be $297/month. Does anyone think that Hershey’s would balk at paying such a small amount to protect their corporate brand on Twitter?
There might need to be an upper limit because otherwise accounts with very large followings would end up paying very high prices for verification, but within a range of 5,000 to 1 million followers, it seems like this sliding scale could work.
Elon Musk isn’t asking for my advice regarding how to restructure Twitter, but providing unsolicited advice is a common pastime on Twitter. In this case, my idea needed a bit more room than a tweet or Twitter thread allows, and I thought that a post was justified since this is a good example of how price discrimination could work in a brief, real life microeconomic case study.
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